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Avoiding Financial Pitfalls: Lessons from the Tulip Mania In our complex financial world, one thing remains crucial: knowing how to handle your money. Whether you’re living in the past or present, managing your finances is a skill you can’t ignore. It’s like having a superpower that can secure your financial future.  Before we jump into our history lesson, let’s talk about why managing money matters. Imagine it’s like having a map to know where your money is going. It’s essential because it can make a big difference in your life, whether you’re walking through a 17th-century Dutch town or making decisions about your money today.  Our story takes us back in time to a fascinating event known as “Tulip Mania.” It’s a tale of financial excitement and some valuable lessons. But here’s the secret: those lessons are still incredibly relevant today. They remind us that being smart with money can protect your wealth, no matter when you live.  So, get ready for a journey through history and finance. By the end of this story, you’ll have some valuable tips to manage your money wisely in today’s world. We will cover: ● The Complete Unravelling of the Tulip Mania Dutch Republic’s Golden Age Growth of Tulip Mania The Tulip Bubble Birst ● Is there a parallel in the Modern World? ●Protection Strategies that you can apply Let’s kick off this thrilling journey with a three-part tale. Part 1: Dutch Republic’s Golden Age (1600-1720) Picture this: The Dutch Republic in the 1600s, experiencing its golden age, much like India’s golden era before British colonialism. It was a time of remarkable progress, covering politics, economics, and, most importantly for us, finance. The Dutch Republic was the birthplace of the world’s first-ever stock market and the originator of something we’re quite familiar with today – futures contracts.   Now, if you’re not entirely sure what futures contracts are, let me break it down for you. Think about it like this: imagine you’re eyeing a hot investment, like Bitcoin. You believe Bitcoin’s price will soar, but you’re not ready to dive in just yet. You don’t want to miss out, but you also don’t want to take a hit if prices skyrocket while you wait. Enter futures contracts. In simple terms, a futures contract allows you to lock in today’s price for an asset, say, Bitcoin, with a small premium payment. This way, you secure the price and can monitor its performance over a few months before making your move. Part 2: Tulip Mania in the Dutch Republic Now, let’s fast forward to the fascinating world of tulips. Yes, you heard that right, tulips! Back in the 1600s, Dutch people adored tulips the way we’re glued to our mobile phones today. They revered these delicate flowers, particularly one called the “Viceroy Tulip,” which sold for an astonishing 3,000 to 4,000 guilders. But why, you might ask, would anyone buy a flower instead of a house? Well, there are two reasons. First, tulips represented opulence and elegance – the equivalent of owning a luxury car today. Second, tulips were notoriously tricky to cultivate and had a long growth period. With demand soaring and supply limited, tulip prices skyrocketed. People started speculating, and the race for tulip futures contracts began. Buyers and sellers entered the market, all convinced that tulip prices would continue to soar. By 1634, tulip prices were skyrocketing, and by 1636, tulips were among the most exported commodities from the Dutch Republic. Part 3: The Tulip Bubble Burst Here’s the catch – speculative bubbles can only inflate so far. When an asset fundamentally lacks value, the bubble is doomed to burst. This is exactly what happened with tulips. People were trading their homes for tulips! Eventually, reality hit, and the tulip market came crashing down. So, what about those futures contracts? When the market collapses entirely, contracts become meaningless. There’s no rule of law or value left to uphold them. It’s a bit like the current situation in a certain part of the world – when there’s no order, contracts are just words on paper. Do we have such a situation in the Modern Economy? Now, you might be thinking, “Okay, interesting history lesson, but what’s the modern parallel?” Well, it’s cryptocurrencies, particularly Bitcoin. But here’s the twist – Bitcoin isn’t necessarily a speculative asset. Unlike tulips, Bitcoin has a small market cap, and as it matures, it will become more stable and valuable. It’s not just about price fluctuations; it’s about the underlying value. But what truly fits the bill of a speculative asset today?  In my view, it’s fiat currencies. Yes, the mighty US dollar, Indian Rupee, and others. Why? Because there’s a fundamental flaw in the current economic system – endless printing of currency without backing it with real value. This isn’t a short-term prediction; it’s a long-term view of a fundamental problem in our currency systems. It’s why I’ve taken a few bets in cryptocurrencies. Protecting Your Wealth In a world where financial systems can be unpredictable, it’s crucial to consider ways to protect your wealth and investments. Here are some key steps to keep in mind: ● Diversification:  Don’t put all your eggs in one basket.  Diversify your investment portfolio across different asset classes like stocks, bonds, real estate, and cryptocurrencies.  This spreads risk and can provide more stability. ● Financial Education:  Invest time in understanding financial markets, investment instruments, and economic trends.  Educated investors are better equipped to make informed decisions. ● Long-Term Perspective:  Avoid getting caught up in short-term market fluctuations.  Think long-term and focus on your financial goals. ● Asset Protection:  Consider assets like precious metals (gold and silver) as a hedge against currency devaluation and economic uncertainties. ● Emergency Fund:  Maintain an emergency fund for unexpected expenses.  This ensures you won’t have to sell your investments during market downturns. ● Professional Advice:  Consult with financial advisors or experts for personalized guidance based on your financial situation and goals. By applying these strategies and keeping an eye on historical lessons like Tulip

Why Money Making Can Be Challenging: And What You Can Do About It Introduction: In today’s fast-paced world, making money can sometimes feel like a wild roller coaster ride. Whether you’re a student with dreams of financial success, a seasoned professional, or a hopeful entrepreneur, the road to riches can be riddled with twists and turns. This holds especially true for those of us in India, where the money-making game is evolving rapidly. So, hop on board as we explore: 10 Practical reasons why MONEY MAKING is getting harder in India What can you do to overcome these challenges and achieve Financial Freedom? 10 Reasons Why Money Making Can Be Challenging: 1. Making Money Requires Money: There are typically four active options to make money: • Get a High Paying Job: Securing a high-paying job in India is increasingly challenging due to a lack of white-collar positions. The number of high quality jobs are not large enough to keep up with the demand in the country [1] .   • Start a Small Business: While this was a popular option for previous generations, the current cost of capital (borrowing rates) has risen significantly [2]. This has  made it increasingly expensive to establish such businesses . • Start a Big Business: Establishing a large business in India is extremely difficult due to existing monopolies [3]. Capital-intensive businesses have high entry barriers and are often unsustainable, except for the tech industry. •Invest Your Money Properly: Identifying good investments today is becoming more difficult.  Previous generations saw significant wealth generated through real estate investments, but this avenue is now less straightforward [4]. So, what can you do to navigate this situation? • Build a strong personal brand: If you’re at a young age, focus on this aspect.  Attend a reputable college, maintain good grades, and gain experience at established companies.  This will increase your chances of landing high-paying jobs and building wealth through active income. • Being a founder and securing funding isn’t a guaranteed path to wealth: The odds of becoming wealthy by founding startups are slim. Even if you create a successful company, substantial profits often come only when the company goes public.   • Start an Asset-Light Business: When you lack heavy capital, consider ventures like digital businesses, content creation, blogging, consulting, or courses.  These endeavors can offer higher profit margins if they gain traction. Domestic Demand in India is high for the services sector and can be utilized [5]. 2. Money Making Isn’t Taught as a Focus Subject: • In Indian culture, discussing money openly is often taboo.  Schools primarily focus on academic performance and neglect practical money-making skills.  As a result, students receive little exposure to concepts such as building businesses, money management, tax knowledge, or sensible investments. • Furthermore, mentorship and apprenticeship are uncommon in India, unlike countries like Germany, which glorify these concepts.  Germany even has initiatives to promote and maintain apprenticeships [6]. This lack of guidance leaves people in their 30s and beyond clueless about money making and management.   Now that you recognize the issue, what can you do? Upskill and learn about business and income generation. Engage with content that aligns with your interests and can be replicated. Educate yourself about money management and sensible investing. If you’re interested in investing or learning more about investment concepts, you can join my YouTube community, where I cover various topics and provide stock-specific commentary on the Stock Market. 3. Money Making Requires a Combination of Different Skills: • Money making demands proficiency in multiple skills. This may include anything from generating passive income and investing sensibly, to entrepreneurship and recognizing new opportunities.  This applies not only to business owners but also to employees. • It has become common for people to resist acquiring such skills because they are comfortable in their primary job roles.  For example, many individuals shy away from sales-related opportunities, even though sales is a critical skill for boosting income. Therefore, focus on: Gaining experience across various roles and opportunities. Adopting a broader mindset and taking a long-term perspective. 4. Money Making Is Influenced by Circumstances: Income and wealth inequality are increasing not only in India but also globally.  The chart below [7] clearly shows that the top 1% earners in India used to control 11.87% of the total wealth in 1961, and as of 2020 they control almost 31.55%. Similarly, top 10% earner wealth control has gone up from 43.18% to 63.68% However, the bottom 50% have gone lower and lower from 12.29% to 6.12%. This suggests that the next two decades in India will be marked by intense competition and wealth concentration. To thrive in this competitive environment, build a wide range of skills: Learn more about money-making strategies. Explore different asset classes for income generation. Learn how to start and grow a business. 5. We Are Spoilt For Choices: • Sensible investing has become increasingly challenging with the availability of numerous investment options [8]. This includes anything from direct stocks and mutual funds to ETFs, gold, real estate, bonds, and many more.  The sheer variety of choices can be overwhelming. This abundance of options extends beyond investments: Choosing from thousands of courses and videos when learning something new. Selecting from a vast array of books when you want to start reading. Deciding on the type of business to start with numerous possibilities. To overcome this situation: Focus on mastering one skill at a time. Take action on what you learn; don’t just consume information without applying it. Recognize that your time is precious; treat it as your most valuable asset.   6. Access to Productive Credit Is Limited: • Obtaining a personal loan for non-productive consumption, such as buying a smartphone, is easier than securing an educational loan. While educational loans require more capital and may require collateral, they offer greater benefits to individuals and the nation by promoting productive debt. From 2015-19, the number of education loans disbursed went down by 25% [9]. This number has gone up in

HNI explains why RICH Indians are leaving India (and 5 wealth trends!) Take a look at these 3 FACTS: 1. Flight tickets in India are more expensive than in Singapore [1]. Flight ticket from Delhi to Hyderabad (~1500 kms) costs around INR 4500. Flight ticket from Singapore to Bali (~3000 kms) costs around INR 8700.  On a per km basis, Singapore is cheaper. 2. Portuguese Villa in Goa costs way more than an actual Villa in Portugal Portuguese Villa in Goa costs around INR 5 crore. A villa in Portugal would be 30-40% cheaper! Portugal even has a golden visa program [2] 3. An imported car in India attracts up to 100% taxes [3]  These 3 facts to a High Net-Worth Individuals (HNIs) simply says that to avail luxury and higher standard of living in India, you are paying exponentially more than what you have to pay in some other countries. This has led to more than 6500 HNIs leaving India in 2023 [4]. This number was 7500 in 2022. China is the only country that shows a higher HNI migration than India in 2023.  In 2022, India showed the 3rd highest HNI migration after Russia and China [5]. Who are HNIs? HNIs have no specific referees to people that have an investable wealth of more than INR 5 crores.  They can also be categorized by the following [6]:  There are countries such as the UAE who have 0% direct income taxation [7]. In this blog, we will discuss the following key points: Major Wealth Trends to keep in mind if you are rich or are on the way to becoming rich. Why are HNIs leaving India? How will these changes impact YOU? Wealth Trends in India: 1. Massive Wealth will be generated in India: Why will India become richer with time? There are 3 critical reasons: • The informal sector is getting more organized [8]: This will lead to more white money movement in the economy. This will in turn lead to accelerated GDP growth in India.   • GDP growth rate is faster: India is an emerging economy and has a GDP growth rate of 7% as of 2022 [9]. Also higher demographic dividend and a hungry workforce.  • Growth of Credit Economy is higher: Loan taking has become mainstream, leading to excess consumerism. The Household Debt (in % of GDP) has been growing significantly over the last decades [10]. As consumerism increases, there will be a growth acceleration in the economy. So, does this mean that we are all going to get rich? For this, we have to ask a question: What type of wealth is going to be generated in India? The type of wealth that will be generated in India will be consumer driven and not innovation driven. Taking the example of Apple: Apple recently opened more stores in India [11]. But are Indians actually really benefiting directly from this? Are Indians getting better jobs from Apple from this? Maybe a few in the manufacturing and service sectors, but these are very average jobs. These jobs are not very elite when compared to the jobs offered by Apple in the US. But from a consumer market point-of-view, Apple sees India as major consumers. All this revenue from India will eventually just go back to the company in the US.  So, in an economic sense the wealth that is generated in India will be repatriated back to the US.  The core point is that wealth will be generated in India, but this wealth will benefit other countries more than it will for India. Further, generating this wealth via jobs for the Indian Middle Class will be very tough. High quality jobs in India are very less while the demand for the same is significantly higher [12]. So, now the next key question would be: Can Indians generate wealth through Businesses? There are primarily two types of businesses:  • Physical Debt-Heavy Businesses: Big businesses and strong connections will help you grow (Debt-driven) given that the credit economy in India is growing.  • Digital Businesses (Ed-tech, Fin tech etc.)  (Asset Light): Domestic Demand in India is high and can be utilized [13]. You will face a lot of competition, but bridging this gap efficiently and effectively can help grow your wealth. • Small scale businesses  Scaling such businesses and generating wealth is getting very difficult. One other final way to generate wealth is by creating a good amount of wealth and then investing your wealth sensibly.  But unfortunately in India, this is also getting harder.  Indexation benefits in India have been withdrawn [14], Real Estate Investing is getting tougher and more expensive [15] etc. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market. 2. Wealth Gap will rise with time. This is not just an India specific issue, it will be seen all over the world. The chart below [16] clearly shows that the top 1% earners in India used to control 11.87% of the total wealth in 1961, and as of 2020 they control almost 31.55%.  Similarly, top 10% earner wealth control has gone up from 43.18% to 63.68% However, the bottom 50% have gone lower and lower from 12.29% to 6.12%. Why is this happening? There are 3 primary reasons: • Access to Credit:  This is a lot easier for the top 1 and 10% than for the bottom 50%. They can then use this credit to grow their businesses and take further debt. This will help them keep growing their wealth faster. • Value Capturing by Tech has become easier: Digital Businesses are able to build big businesses by starting off with smaller budgets and smaller teams thanks to the impact of tech. This was seen in Instagram, Canva etc. This new wealth is more easily capture by the top 1 and 10% than the bottom 50%. • Incidence of Tax: Incidence of

8 Key GOALS you’ll need to achieve for financial freedom All of us have these priorities always in mind: Not having to stress about money Having free time to spend with your friends and family Freedom for passion projects, traveling the world etc. To achieve these goals, we are focusing on 3 main aspects: Money Freedom Time Freedom Location Freedom We all understand that focusing and having control of these aspects would make our life that much more enjoyable. But we struggle to subdivide these goals into a series of more attainable and achievable steps. Doing this makes your chance to complete these goals easier and doable. Why should you trust my words? I graduated from INSEAD in 2015, which is one of the top MBA programs in the world. I further completed a few years in the corporate world with top tier consulting firms and then proceeded to quit my job to then create a series of profitable digital start ups. At 35, I am semi-retired. And, live in South Goa with my family. I work only for 3-4 hours a day, and spend a lot of time with my family. I also get to pick the type of projects I wish to work on given my money, time and location freedom. This blog will try to highlight 8 Key goals that you will need to achieve financial freedom: Step 1: Have a good high paying job. This point applies to the majority of the working youth in India. (If you have family wealth, run established businesses, or running start ups, then this does not apply to you) Having a good job early on in your career gives you: Confidence Discretionary Income: You have left over money after taking care of your expenses. Discretionary Income helps you save more, invest more, and build upon your skills and knowledge (by taking courses or getting real experiences). However, this is not an easy task for the majority of youth in India. The youth unemployment rate has gone up significantly over the past 20 years, currently sitting at almost 24% [1]. Now,as per the article below, if you are INR 25k per month (3 Lakhs per year) you come under India’s Top 10% income earners [2]. This news is more shocking when contextualized with the fact that the average cost of living in India for a single person is around INR 28k and for a family of 4 it’s almost INR 96k [3]. Yes, this number does not consider exactly which city you are living in, but to be in the top 5-10% earners you will most likely need to be in one of the metropolitan cities, and the cost of living in these areas will be somewhat similar if not more. Gold and Silver standard jobs are higher tier companies (Tier 1 and Tier 2 respectively) who pay well and have good opportunities. Unfortunately in countries like India and China, where the population is very high and competitive, there is a mismatch in the supply and demand of well paid jobs.  The number of high quality jobs are not large enough to keep up with the demand in the country [4] . So, what can you as a young individual do: Look for gold or silver standard jobs. Upskill to match the requirements. Go abroad for better opportunities. More opportunities but shifting could be expensive and painful. Aim for industries that pay well (Tech, Finance, Consulting etc.) [5] Step 2: Manage your Debt. Taking debt has become a popular opinion for the young working class. It has become hassle-free and more of a fashion than a need-based system. Taking a loan, be it personal loans, car loans, home loans etc., have become extremely easy. Taking credit just because it’s easily attainable and it meets your short term goals is not a good choice. They will have severe repercussions on you in the long term.The Household Debt (in % of GDP) has been growing significantly over the last decades [6]. Unproductive debt which could lead to defaulting or over utilization of your credit limit, will cause your CIBIL score to take a massive hit.Now, later on in life when you have to start taking productive debt (education loans, home loans etc.), your EMIs will go up exponentially due to your bad credit score. Avoid taking debt when it’s not required. As a rule of thumb: Only take productive debt (education, home etc.) Keep your credit utilization less than 30% of your total limit and your total income. Only take loans that meet this criteria Step 3: Create a Baseline. This is a method for you to protect your downside. If you have sudden needs or unforeseen circumstances, you should not be hit to a level that you can’t get back up. One easy way to do this is to create an Emergency Fund. Create a pot of at least 6 months, or if possible 12 months of your monthly expense as your emergency fund. Create an FD out of this. This is not an investment, it’s just to protect you. This helps create a buffer during the unforeseen situation. The second way is to have health insurance as well as term insurance. To deal with an uncertain circumstance like COVID, having health and term insurance is extremely important. As per a study from Forbes [7], just 37% in India are covered under a health insurance scheme as of 2021. Keep in mind: The earlier you buy health or term insurance, the lower your premiums will be. If you are taking health insurance for your family, remember that it is based on the eldest member of the family. So, don’t mix the insurance with your parents and your family. Step 4: Wealth Building. Once you have the above 3 steps figured out, your new goal is to save 5-10x of your yearly expense. For eg: if your monthly expense is 1 Lakh (i.e. yearly expense is 12 Lakhs). So, your goal is

2024 Elections and Its Impact on the Stock markets: The Stock Markets in India are shown to do fairly well 1 year before the elections.In the last 25 years, this trend has played out almost every time (sparing some unforeseen cases) [1]. For eg: When Shri Atal Bihari Vajpayee took office as the prime minister of India, the 1 year return of the stock market prior to the election was close to 51%. Similarly in 2004, there was a 98% up move in the market in 1 year.And again a 16.6% return in 2014. So therefore the data tells us that on an average the stock market gives an up move of close to 30% before the election year. In this blog post, we will be discussion about a few critical points that you MUST know about the relation between the elections and the stock market returns: How have Stock markets performed in the past before elections? Why the governments have the incentives to keep the stock market alive What are the actions taken by the government prior to the elections (Driving forces, specific actions,  ? What are some key points to keep in mind during such a situation as a sensible investor? (should you invest in the stock market today, what does the current market dynamic look like) What will the situation look like post elections? (How to prepare your portfolio, Actions going forward, Debt problems, Alternate options, what should you buy and sell) How have Stock markets performed in the past before elections? Let’s take a deeper look at the performance of the stock market prior to an election year. The cases seen in 2009 was an anomaly since this was post the 2008 Financial Crisis in the US. This crisis rippled across and affected the Indian Stock Market returns as well. Similarly, the case in 2019 had not played out a similar 30% return could have been witnessed in this period as well. Hence in a data driven sense, it looks like it’s a good time to invest before an election year. Now let’s look at why the stock market gives good returns around 1 year before the elections. What incentives do the governments have to keep the stock market alive before elections? Let us break down what an election is primarily about. For a political party to win the elections, they need to secure votes. What would be the best way for these parties to secure these votes? What drives people to vote? While this answer could be development, projects etc., but a broader more likely reason would be the broad sentiments in the economy, more specifically the market sentiments. So if it were to happen that the market sentiments before an election turns positive, this in turn would lead to an increased number of votes for the existing ruling party. Therefore it would make sense for the state governments to do everything in their power to support the stock market during this period of time. What are the actions taken by the government prior to the elections? (Driving forces, specific actions) As it stands, the current interest rates in the Indian Economy is around 6.5% [2]. Higher interest rates lead to lesser liquidity and slower growth in the economy. So, the best method for the government to boost the market sentiments is to decrease the interest rates in the economy, This will likely play out not just in India but also in the US, since they are also edging closer to their election cycle (which will be next year). If the interest rates are cut, this will lead to increased flow of money in the economy, more specifically there will be an increase in the flow of money into the stock market. Lets understand this through a simple example:If you are given an Fixed Deposit at an interest rate of 7.5%, you are likely to keep your money fixed in FD. This leads to decreased liquidity in the market. Now if the interest rate of the FD is cut to 5%, you are less likely to put new money into an FD. This liquid money is more likely to be redirected into other asset classes. This will lead to an increase in the market value of these assets. If you are a serious investor and are looking for more deeper commentary on concepts related to Macroeconomics and Stock Market, you can join my Youtube Member Community where I give more such insights. What are some key points to keep in mind during such a situation as a sensible investor? (should you invest in the stock market today, what does the current market dynamic look like) As of 14th September 2023, the market is already standing at around 20100 levels. Now, let us take a look at how the broader sub-indices have performed: 1. Large Cap: Nifty 50 (which is the combination of top 50 large cap companies in India have given a run up of almost 19% in the last 6 months [3]. 2. Mid Cap: Nifty Midcap 100 (combination of the top 100 midcap companies) have given a run up of almost 38% in the same time period [3]. 3. Small Cap: Nifty Smallcap 250 (combination of the top 250 small cap companies) have given a run up of almost 43% in the same time period. So, the data above tells us that in the short term (pre-elections), large caps are more likely to go up.Small caps and Mid caps have already done pretty well and additionally the broader market sentiments are primarily driven by the Nifty 50 and Sensex, which comprise of Large cap stocks. So a more likely scenario where market sentiments will be raised will be driven by the outperformance of the Large Cap stocks. Now, what are the expected growth levels of Nifty 50 pre elections? As per the chart below, a cup and handle pattern is being created, so if this technical pattern plays out, the likely target

HEAVY TAXES, But we get NOTHING in return? Introduction: Median Entry Salary offered by IT firms in 2012: 2.45 Lakhs Median Entry Salary offered in 2022 : 3.55 Lakhs This is a 2.5-3% growth in salary every year. At the same time, the fees for schools have gone up exponentially in the last few decades, significantly outpacing the salary growth. As per a study done by Economic Times on Private Schooling in India [2], Primary School fees: INR 1.25 – 1.75 Lakhs/year. Middle school fees: INR 1.6 – 1.8 Lakhs/year. High school: INR 1.8 – 2.2 Lakhs/year, + Separate extra fees College fees: Even more expensive Parents are finding it hard to even save up for their children’s education and even opting for loans to ensure the same. These salaried individuals pay hefty amounts in taxes. And at the same time, they struggle to take care of their critical expenses. Does this mean that the Tax Culture in India is TOXIC? In this blog, we will be looking to answer 5 key points on What is the Current Taxation Regime in India What do you get in return after paying taxes? Why is the tax burden rising in India? How the taxes could be lowered? Future of Tax Culture in India? PS : Try to read this blog taking a more economic stance than a political one.  What is the Current Taxation Regime in India? 1. Old Tax Regime  2. New Tax Regime (Default) 3. For Domestic Companies: What do you get in return after paying Taxes? This ROI on taxes can be calculated by understanding two things:  The taxes you pay   What you get in return. Let us do a deep dive across Swedish vs Indian taxes. Of course, this is not an apples-to-apples comparison, but it allows you to understand an important concept: return on taxes. Income tax in Sweden vs India: Case study From the tax chart below, you can see countries like Sweden have an even higher taxation structure than India (India has an effective highest tax pay of roughly 40-45%) [4]. But does this mean that India’s taxation structure is better than Sweden’s? The simple answer is NO. Working through the Swedish example we can see that while 57% is the highest effective tax rate [5], but as per a study done by VOX as shown below: So, the majority of the Swedes pay less than 27% taxes. In India, we would be paying somewhere around 20% as direct taxes. Now in Sweden, they get the following facilities: Free Healthcare: It is well maintained, and majority of people avail the same, unlike the situation in India. Free Education: You also get a stipend for housing and other facilities as well. 3. Social Securities:  Provides financial support when it is needed [6]. Therefore, Sweden is getting a lot of facilities for the taxes that are paying to the government. But the situation in India is the opposite. Most taxpayers are not able to avail any of the benefits from paying taxes (due to poor maintenance and feasibility) Doing a Cost-Benefit-Analysis in India, would show that the Tax structure in India is punitive. Now as an Indian citizen, try to answer these questions: Do you use the health services provided by the government? Do you send or want to send your children to a government school? Do you avail rations from public distribution schemes? As a middle class individual in India, your answer to these questions are most likely a NO. But you are the one who is paying the majority of the taxes in India. In fact, you might be paying additional tax on luxury products which would mean you are paying even more taxes than the average person. Let’s look at some data to back up our claims: The data below tells us that less than 33% of the rural population and 26% of urban population depend on government hospitals [7]. Similarly, as per the article below, the number of students using government school facilities is also coming down [8]. These data tell us that most taxpayers in India are not getting an direct return from paying taxes to the government and that the trend seems to just be getting worse Why is the Tax Burden rising in India? It can be clearly seen from the chart below that the tax rates in Sweden are being brought down [9]. However, the opposite is happening in India [10]. Both direct taxes as well as indirect taxes (such as GST) are also rising. India’s GST rate is one of the highest in the world at a maximum rate slab of 28%. Similarly in terms of investment taxes, indexation benefits have been removed and long term capital gain taxes are also rising [11][12][13]. Now let’s look at the tax base in India (the number of people paying taxes). Let’s break down India’s population to focus on this part: India’s Total Population – 140 crores Average Life Expectancy – 70 years Assume, 50% population are eligible to pay taxes (ideally between roughly 20-60 years of age) Therefore, the rough tax base should be around 70 crores So, is this the actual tax base of people paying taxes? It’s not even close. The actual amount of people paying taxes is around 8 crores. This is not even 15% of the population that should be paying taxes. While in Sweden, around 6.7 million people out of the 8 million taxable individuals are paying taxes [14]. Therefore in India, the Tax Incidence (measure of who ultimately pays or takes on the tax burden) comes out to be the middle class. There are 3 main factors: 1. Increase in unproductive spend:   i. Productive spending: When the government uses its funds to invest in projects, programs, or services that have long-term benefits for the country. These investments usually help boost economic growth, create jobs, or improve the overall well-being of citizens. Examples of productive spending include building infrastructure like roads, bridges, and schools,

How to Achieve FIRE in a HIGH INFLATION world Why Should You Listen to Me? Just a very quick background:  At 35, I am semi-retired. And, live in South Goa with my family.  I came from a middle class family: studied well, did corporate jobs, dabbled with entrepreneurship. Many things worked, many didn’t.  Investing my money well, allowed me to gain better control. And, now I get to pick the type of projects I wish to work on.  In simple words: I worked to get time, money and location freedom.  In this article, I will share my roadmap & key lessons I learnt on my journey to this F.I.R.E (Finance Independence Retire Early). Demystifying FIRE In this blog, we will be looking to answer 6 key points about FIRE: What exactly is Financial Independence or FIRE or Retirement? What are the Three Pillars of FIRE How Much Money Do You Need to Retire? What are the Challenges that you face on the road to FIRE. Wealth Preservation and Growth Strategies that you can implement. Actionable takeaways to help you achieve Financial Freedom. What Exactly is Financial Independence or FIRE or Retirement? Financial Independence; Retire Early (FIRE) is more than just a catchy acronym; it’s a lifestyle, a mindset, and a well-thought-out financial plan. At this stage: You no longer HAVE TO WORK FOR MONEY, i.e your financial concerns are no longer your primary driver. You have the choice to work on what you’re passionate about, not because you have to but because you want to. In simple words, it means: Building a large enough savings (i.e a nest) Investing those savings to cover your expenses Aiming to achieve all of this at a fairly young age. The Three Pillars of FIRE Let’s delve deeper into the essence of FIRE, which is built on three key pillars: Save Money:  Saving aggressively is the foundation of FIRE. Aim to save a significant portion of your income, ideally between 50% to 70%.  Invest Sensibly:  Once you’ve accumulated savings, it’s essential to invest wisely.  Consider options like Fixed Deposits (FDs) and Index Funds, aiming for returns that at least match the inflation rate. In India, this is around 7-8%. Live Frugally:  Living below your means is a core tenet of FIRE.  Strive to live comfortably on only about 4% of your total retirement corpus that you aim to generate annually.  This frugal lifestyle ensures your savings stretch further, accelerating your journey towards financial independence. How Much Money Do You Need to Retire? The question on every aspiring FIRE enthusiast’s mind is, “How much is enough?” The truth is, there’s no one-size-fits-all answer.  It varies based on your lifestyle, goals, and where you choose to retire. Instead of arbitrary numbers like 5 crores or 50 crores, let’s approach this differently. Step-by-Step Method to Estimate Your Retirement Corpus Step 1: Assess you current lifestyle and Estimate Your Monthly Expenses: The first step is to understand your current and future expenses.  Consider a range of expenses and gauge your desired quality of life. With age, these expenses will go up (commonly referred to as Lifestyle Inflation). Step 2: Determining Your Retirement Corpus:  If, for instance, your monthly expense is 25K, your annual early retirement expense is 3 lakhs.  Employing a conservative 3% withdrawal rule, you’d multiply this number by 33, giving you a 1 crore corpus.  This should ideally be the size of your portfolio, allowing you to withdraw 25k per month for 40-50 years. Now you might have a very natural response: that inflation (price rise) happens every year. Yes, that is true.  To mitigate that your corpus should grow at/around the rate of inflation (how to grow your corpus at/above inflation? This has been explained subsequently in the article). Let’s work through the example meanwhile:-  This can be better explained with a simple example as shown below: In this example, our monthly expense is 25000, Retirement Corpus = 25000 x 12 (yearly) x 33 = 1 crore If you earn INR 40,000 per month, then having a savings rate of  Step 3: Save a good percent of your income (Ideally 70-80%): I myself save around 95% of my salary (reason: my earnings have grown substantially over time. And, I have not taken a massive lifestyle inflation)  If you are able to save 70-80% of your salary for 10 years, then you can safely retire assuming that you don’t incur a lifestyle inflation (Increase in quality of life which in turn incurs more expense) Taking the same example as the one shown above, if let’s say you earn 1 Lakh per month: If you have a savings rate of 80-85% (how is this possible? Maybe you have a partner who earns; or you are not incurring major expenses like spending on rent – you might be living with your parents) (In case not, let’s still work through an example) Then, you can build your nest of 1 crore in just over 10 years. Retirement Portfolio : 83000 x 12 x 10 ~ 1 crore. Step 4: Track your spending: It’s not about how much money you earn, but more about how much money you save. When you add some type of recurring expense like an EMI, this in turn can make your retirement portfolio take a hit. Step 5: Decide at what age you wish to retire: Decide when you want to retire. The earlier you wish to retire, the longer you will need to plan your expenses from your portfolio Step 6: Exploring the 4% Rule:  A famous study by Trinity College suggests that if you have a 1 crore portfolio and you withdraw 4% every year, you can sustain this for 30 years.  The study assumed a portfolio allocation of 60% in equity and 40% in debt. As per the same example used previously, With a portfolio of 1 crore, And the 4% withdrawal rule, You will have around 4L every year, i.e ~33000 every month for your expenses. The math somewhat adds

US Debt Market Collapse – Impending Crash? In 2020, the Chinese housing market started to show signs of weakness. In the following year, these seizures reached Europe, where some of the biggest European banks, such as Credit Suisse, started witnessing a collapse. Fast forward to the present, and these signs have spread across the US, resulting in the complete collapse of banks such as the First Republic Bank, Signature Bank, and the Silicon Valley Bank. So, what triggered this series of events? It simply relates to the US debt market, more specifically due to the record amount of debt that the governments have taken on. So, the simple question arises: How long can this situation continue? Fitch, an American Credit Rating Agency, has downgraded the US Debt Market.  Could this initiate a ripple effect on the economy? Let us begin by breaking down this study into 2 main segments: Impact on the Equity Market Impact on the Debt Market Before we delve into the impacts, let’s examine how the stock market has performed over the past 30-40 years. From the year 1988-2000 (up to the Dot-com bubble, consider this as Phase-1), the stock market gave a return of around 582%. Similarly, from 2009-2020 (consider this as Phase-2), the market gave a return of around 400%. This has created a false notion that if you just invest your money and forget about it, you will naturally make good returns. Ask yourself a simple question: Why did the market give such a run up in the two scenarios that we mentioned above? The answer could be that during phase 1 this was the period when technology was adopted at a massive scale. Like phase 2, the reason could be the adoption and extensive use of Quantitative Easing by the government (QE in simple words is when the central bank prints extra money to help boost the economy). To avoid 1930s type of depression, the government decided to opt for the easy method of printing money since it was no longer backed by gold. This method of Quantitative Easing is typically carried out through the Debt Market. Fitch’s rationale for downgrading the US Debt Market is their belief that the interest rates, current standing at around 6%, will not return to the near-zero levels seen before. So, what does all this information tell us? It simply means that it’s HIGHLY possible that the older format of a secular bull run (Long period of bull run) will not continue going forward. Therefore, it becomes even more crucial for us to educate ourselves than ever before. With this, let’s jump into the Impact on the Debt Market / Bond Market. Fitch was not the only one to downgrade the US Debt Market. Back in 2011, S&P had also downgraded the Debt Market from AAA to AA+ just as Fitch did. Now the immediate question is whether the US Debt Market will be affected. And the answer is most likely YES. A more important question is whether there will be an impact on the Indian Retail Investors. As mentioned previously, we are likely moving on to a period of higher interest rates (IR will no longer go back down to the near 0% levels).  This will have a direct impact on the Cost of Borrowing in the Bond Markets. This cost will increase in the long run.  Now, does it really matter if the interest rates no longer go down to 0% and stay at somewhere around 3%? YES, there definitely is. Let’s try to understand the gravity of this situation.  Previously, the governments used to be able to borrow at close to 0%. This in turn allowed them to run a Fiscal Deficit within their country (Fiscal Deficit runs when the government spends more than it makes, Expenses > Revenue), This increased expenditure because of the low cost of borrowing allowed them to accelerate the growth within the economy. This helps improve the credit flow in the economy which ultimately pushes the GDP of the country. This game worked well for the government from 2008 up to 2020. In 2020, the whole world faced an unforeseen event: the COVID outbreak. This forced the government to spend more on critical needs, which pushed the Fiscal Deficits out of proportion. This outstanding debt will eventually need to be paid over the next few decades, and this is where the cost of borrowing comes into play. (Source: https://tradingeconomics.com/india/government-budget) To pay off the debt they have two choices: Increase Taxes (Revenue) which is already very high or reduce Expenses. If let’s say the new interest rates revolve around the 3% mark, they can no longer spend like they used to previously since the cost of borrowing will have gone up substantially. This reduced spending and borrowing could start creating a SLACK in the economy in the long term. Now, let’s look at how the same situation will Impact the Equity Market. For this let us rewind back to 2011, when S&P downgraded the US Debt Market. This news was followed by a sharp fall in the stock market and then a subsequent rise over the next few months. Will something like this play out now after the Fitch re-rating? This seems unlikely because of 2 main reasons: a. One is that since this has happened before, smart investors are better prepared for such a scenario.  b. The second, more fundamental reason has 2 further time lines: a short-term view and a long-term view.      i. From a short-term perspective (less than 2 years):  In a growth economy there is a clear inverse relation between the bond market and the stock market.  This can be seen from the period of Oct 21 – Dec 22, where the bond market in India (e.g. : Fixed Deposits) were going up while the stock markets were on a decline.  So taking this scenario, it is likely that in the SHORT TERM the debt market may go down leading to a rise in Equity

JioFinance – Multibagger Finance Stock: Jio Financial Services Ltd was listed at Rs 261 per share on 21st August and experienced a correction of around 23% in the following 5 days. Since then, it has already gone up by 21% in the subsequent 6 days. Investor sentiments have turned positive for this stock, and it is already valued as the second-largest Non-Banking Finance Corporation in India. Could Jio Finance be the next big Multibagger Finance stock? Where does the competitive advantage of Jio Finance lie? Simply put, it can achieve results (reach you) by spending only 1/100th of what its rivals require.  Let’s delve deeper into Jio Finance by examining Reliance’s typical business-building approach.   Reliance Strategy Business Model: 1. Form Strategic Partnerships and Procure Capital:  In August 2022, Reliance Jiomart partnered with Meta to offer grocery shopping on WhatsApp.  A similar story is unfolding with Jio Financials as they partner with Black Rock, one of the largest global Asset Management companies. 2. Price Wars and Undercutting competition: This strategy was evident in the telecom sector where Jio became one of the largest telecom players by capturing market share from other competitors. 3. Eliminating Competition: Taking the same story of Jio in the telecom sector, they wiped out numerous players, leaving only large conglomerate players in the market. 4. Profitability Stage/ Price Increase: Jio in telecom began with free resources and low prices to attract customers. Once they secured enough market share, they aggressively raised prices. Their strategy is also currently in play in Jio Cinema (Streaming Service) where they are in the price cutting stage, with plans to increase prices once they start dominating the markets. Now given their strategies and previous business models, where will Jio Financial’s focus lie? Key Verticals for Jio Financial Services: 1. Mutual Funds: Reliance’s strategy of cutting prices will help in this segment since people pay attention to the commissions that they pay. Hence if Jio Financials can offer low commissions they can start gaining market share relatively quickly. A similar story played out with Navi Mutual Funds where they grew their Asset Under Management (AUM) mainly by taking smaller commissions (expense ratio etc.). 2. Aggregator Platform: Aggregator Platforms normally works as an all-in-one service platform that hosts a bunch of functionalities (like PayTM). Jio Financial’s interest in aggregator platforms is backed by the announcement in 2016 by RBI which mentioned that NBFCs can become aggregator platforms. 3. Sell Insurance: Jio Financials can directly sell insurance to consumers through their aggregator platform. 4. Consumer Loans: Jio Financials will also start providing consumer loans to the public using their aggregator platform. 5. UPI: Why would Jio Financials start working towards having their UPI business? Even companies like NAVI are taking steps towards the same. Why? This is simply because as these companies focus on building platforms, their goal will be to ensure that they can increase the Daily Average Users (DAU). Therefore, incorporating UPI into their platforms will significantly increase their DAU and, more specifically, boost their revenue from the other aforementioned verticals. Will Jio Financials be Profitable? To assess this, we we will consider 3 main segments: 1. Target Market:  Jio Financials will target users that have higher discretionary income (ie: top 3-5% in India). With significant growth in the Indian economy this number could go up to the top 10% in India. It is important to note that this top 5-10% market would be the most profitable market, ie: it is better to target someone who earns 1 Cr instead of someone who earns 5 Lakhs. So their target market will help them raise their earnings tremendously. 2. Financialization of India: Incorporation of UPI, banking facilities, and discretionary income are all on the rise, showcasing positive growth trends.  Therefore, they are competing in a growing industry as opposed to the story of Jio Telecom where they were in a stagnating/slower growth industry. Growth of the Indian Economy will most likely be fueled by a growth in Indian Finance and Banking Services, so this becomes a very lucrative industry to enter into.   3. High Return on Invested Capital (ROIC): ROIC can be illustrated with a simple example: Let’s say the ROIC of Jio is 5%. If we invest INR 100 in Jio, then in one year it will grow to 105. Typically, Financial Services businesses enjoy a higher ROIC business. For instance, for every INR 100 that Jio Financials invests in the company, they could potentially grow it to INR 115 – 120 due to their higher ROIC. Reliance’s journey began in the capital-intensive Oil industry, which yielded a low ROIC. They then transitioned to Telecom, characterized by a medium ROIC. Now, their entry into Financial Services promises a substantially higher ROIC. Now that we have an idea of why and how Jio Financials could turn out to be profitable, we will look into which companies will Jio Financials start directly impacting? Jio Financial’s Competitors: For this discussion, let’s look into what constitutes an NBFC? Jio Financials will most likely enter into the Consumer Lending, Aggregator Space and Asset Management space from the above model. Lets create a heatmap on some of the prominent NBFC businesses: 1. Consumer Finance/ Durables: Bajaj Finance has a monopoly in the area of consumer durable and automobiles (mainly 2 wheelers). They already have a large distribution and risk management system. They also have a strong and proven business model which has grown with time. So it looks unlikely that Jio Financials will compete head on in this space. 2. Housing Finance: Mainly focused on giving home loans. Companies such as Aavas Financiers focus on this section. It also looks unlikely that Jio Financials will enter this area as their first choice. 4. Aggregator Platforms: Aggregator platforms are like a mass market product where you can sell loans, insurance, gold, mutual funds etc. This business is also fairly easier to scale up and so this becomes one very lucrative section that Jio Financials will mostly likely target.

How To Invest Your Salary?Build a Big Portfolio Even With a Low Salary Back in 2011, I worked with a non-profit and made INR 10000 as a salary. But, I could still save and invest. My savings rate was 10% By 2015, I was working with a consulting firm & made 1.5 Lakh/month. My savings rate was 30% By 2023, I make exponentially more, but my savings rate is 95% There are 2 key points: 1. How much you SAVE (& Invest) is more important than HOW much you MAKE.  2. Your savings rate should ideally grow with your salary levels.  So in this article, let’s discuss: How you can get this equation right.  More specifically, how you can SAVE & INVEST more sensibly, irrespective of your salary levels. Salary Level 1: You are earning an in-hand salary of 25-35K. At this level of income you should have 2 main objectives: a. Save up to 10-20% of your salary to invest so that you generate an investing habit. There can of course be exceptions: that you need to send money to your parents, or might have immediate needs. And, this savings rate could fluctuate. But the point is: try to save what you can. And, get into the habit of saving. Savings acts as a fodder to invest. b. Work on increasing your active income. Active Income: in simple words, is the money you earn by actively spending the majority of your time and effort. Eg: salary from a job, Income from your small business etc.. Passive Income: is money you earn without active involvement of time and effort. For Eg: Rental Income, Dividends etc.   Take a look at the chart below: Source: https://groww.in/calculators/sip-calculator With a monthly investment of INR 5000, you could end up building a corpus of 2.21Cr. Yes, we are discounting the fact that inflation would eat into this money. But, the point of this example is to outline the fact that even with a small amount, a fairly large corpus could be built. For example: with a Salary of 25K, assuming a 20% savings rate, it get us to INR 5000 as the investable amount. Now, the question arises on how to invest this 5K monthly. Our strategy in this salary level will include 4 main sections: a. Index Investing: This includes broad indexes such as the Nifty-50, Nifty-IT, Bank-Nifty. Investing in the index is a relatively safer way to invest, since your risk gets spread across a basket of stocks. But, it is also important to note: the price at which you are buying the Index. Blindly investing in the Index might lead to suboptimal returns. Similar to a stock, an Index should be intelligently bought. b. Pick indexes that are undervalued and build more positions there. For example: as of the 3rd of September 2023, NIFTY 50 (which is an index of top 50 firms in India) is just trading at 2.5% below from its peak. (Source: https://www.tradingview.com/) On the flip side, Nifty IT (which measures the performance of the Indian IT Stocks) is trading almost 20% from its peak which would make it a better purchase at current levels. So investing money in a safe (ish) instrument like Index, especially when the valuation (price) is low, could lead to better results. PS: Not a buying recommendation. (Source: https://www.tradingview.com/) c. Large Cap Stocks:  These are relatively safer blue chip firms. Most people make a mistake of buying these firms at very high valuations. A sensible investing strategy would be to buy blue chips at a discount. For example: (Source: https://www.tradingview.com/) HDFC Bank has gone through a time correction of over 2 years (giving almost 0% returns) and is currently trading outside its channel. Stock PE is at 18 as opposed to its median PE of 25 (Source: https://www.tradingview.com/, https://www.screener.in/) DMART has also gone through a time correction for over 2 years and is trading at around 30% discount from its peak.  PS: Not a stock buying recommendation. d. Small Cap or Mid Cap Stocks: These are more volatile and should take up a smaller percent of your portfolio.  These stocks are high risk- high reward type of investments. For an average investor: your portfolio should have almost 80% focus on wealth preservation (Index and Large Cap) and 20% on riskier growth assets (Small and Mid Cap; as these could give you growth). Salary Level 2: You are earning an in-hand salary of 50-75k. Take a look at the chart below: (Source: https://groww.in/calculators/sip-calculator) With a monthly investment of INR 12000, you could end up building a corpus of 5.3 Cr. Yes, we are again discounting the fact that inflation would eat into this money. But, the point of this example is to outline the fact that even with a small amount, a fairly large corpus could be built. For example: with a Salary of 60K, assuming a 20% savings rate, it get us to INR 12000 as the investable amount. Now, the question arises on how to invest this 12K monthly. In addition to the previously mentioned strategies from Salary level 1, our strategy in this salary level will include 3 new sections:   a. Bulk Investing: Now given that your investment amount is relatively higher, you should take this opportunity to invest in bulk when an undervalued asset presents itself. For eg: HDFC Bank and Nifty IT. PS: Not a stock buying recommendation. This will help grow your portfolio exponentially faster given your higher discretionary income and holding period. Just being able to grow your portfolio at 16% as opposed to 12% gives you corpus of 22.1 Cr as opposed to 8.82 Cr for a monthly investment amount of 25k for 30 years. (Source: https://groww.in/calculators/sip-calculator) b. Cash Flow Assets:  Focus on assets that produce cash flows.  For eg: Dividend Stocks, Debt or Real Estate. c. Growth Assets:  Take more sensible risks and adjust your portfolio for a larger time horizon. Switch to a strategy of 60-70% focus on wealth preservation (Index and Large