Real Estate versus Equity versus Fixed Deposit ?

Welcome to another new post, folks. In this post we will have a look at Asset Diversification.

A couple of months ago, I had a lengthy conversation with my economics professor regarding the golden rule to diversify assets, in order to get maximum profit. At the end of the conversation he said “I work from 7:30 am in the morning to 8:00 pm in the night and I would prefer to have my funds in a safe place, rather than blowing it all by investing in one single place.”

After coming home, I worked out a lot of permutations and combinations and the following were some of the results that I found out to lower risk and maximise profit.

Real Estate, Equity and Fixed Deposit all have their own pros and cons.

 Short Term Fixed Deposit : Your money will be safe to a great extent in this form of investment and you also get returns. But the question is, ‘Can you beat inflation ?’. Most of the posts I’ve read never had much affinity towards this form of investment but I feel this is still a cool mode because if you invest only the returns you receive from FD into equity and if your equity portfolio moves in the right direction, you can make profit and your principle is still safe since you invested only returns.

However, before investing you should ask the bank officials regarding the insurance amount that you get for your investment (just in case the bank goes bankrupt). I made the aforementioned statement because the newspaper is often filled with news related to non performing assets, bad loans, loan defaulters etc.

Real Estate : It needs huge capital and it too has pros and cons. I have a post coming up related to real estate in couple of days. In this post I’ll  talk only about investment. Real estate moves in two directions. One is the monthly returns one receives if she/he owns a commercial property and the second is rise in land value.

Some negative aspects are depreciation of construction value in the long run, tenant vacancy etc. (more coming up in another post).

With respect to returns, the returns one receives depends on the location and the type of property. Returns from commercial property could be used to buy new property (EMI) or invest in equity. However, I feel equity is better and the reason is one can go for a monthly systematic investment plan by allocating a small proportion of the monthly return to SIP.

When a person buys real estate she/he has to buy the entire property. There is no option to buy just one square feet or ten square feet. However, in equity one can buy just one stock or ten stocks. There is also option to buy small chunks of multiple companies in the form of Index Funds and ETFs.

(If you have trouble understanding any of the words kindly DM me. By the way I also have dictionary and it just costs INR 39. All the words added to the dictionary in the future will not cost extra. The passcode to future dictionaries too remains the same. Follow the procedure laid out in the Customer Charter to buy the dictionary.)

Stocks : They are volatile. But, if they were not so and remained stagnant then people would neither have made profit nor loss. Volatility is the beauty of stocks. If one learns how to play them then returns would be pretty cool. Some things you need to know before heading are,

You should only take such risk that you can handle. For example, if I save 100 bucks a day. I can invest INR 3000 every month. Looking at the other side even if I lose the entire INR 3000, it wouldn’t make my life miserable because I’ve got more money (“lol, not too much”). On the bright side if the companies that I invest today happens to be the next Amazon or the next Apple, few years down the line, then the returns would be pretty high.

Never borrow money for the sake of investment, because you never know what happens. I say this because, many people may talk about fundamental investing and then they might place a bet based on exit poll results, if the volume sold and bought is high due to such bets then it will change the technical indicators and this causes market fluctuation. But the truth is nothing would have changed in the intrinsic value.

Imagine it is recession and I had stock in FMCG stocks like tooth paste, chocochip cookies and nachos. Even during the recession people used tooth paste to brush their teeth. My favourite brand of choco chip cookies has survived a decade and half and has gone through the economic cycle that included recession. But if I had borrowed the money from someone and if the stock tumbled due to pop up notification from business news app, then it would scare the beep out of me, since I had to return back the money to the lender. Sometimes there can be more number of factors than just the balance sheet, that determines market movement.

The experience is similar to flunking in first semester of the exam but as one moves towards the last semester one would have caught hold of the pulse of examination and would ace it without any difficulty.

The most important thing that matters is the magnitude. If a person fails in just one subject he might still be able to get back on track but if the number of subjects is half a dozen, then it could be game over or the person should have some extra ordinary talent to make it back.

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Final Verdict : If you don’t own real estate you could save money in FD and then invest small amount of the return in quality stocks to get a better overall return. If you own real estate even then the procedure remains as already mentioned. If you prefer arithmetic returns there is no necessity to go into stocks. If you want the returns to move in partial exponential manner, you should show some love even towards stocks. At the end of the day all that matters is a peaceful sleep, so do not dump all funds in one place or one segment. Diversification is a function of magnitude. It can minimize losses if loss magnitude is less, it can maximise profit if profit magnitude is high. When both profit and loss is taken into account the one which has the bigger magnitude decides the sign (positive or negative) of the overall asset worth. Capital gain and taxes weren’t taken too seriously while arriving at the deduction. The recent tax benefits mentioned by the G.O.I. do help lot of middle class people, because you need not worry unless you make six digit profits.

Well folks, it’s a wrap for this post. See you next time, have a great day 🙂

Disclaimer : In the due course of time this information may change or become irrelevant. doesn’t hold any responsibility to any loss or gain caused to the readers of this post.

© February 2019




The Truth Behind Unemployment

Hey folks, welcome to another new post. In this post we will have a look at the reasons behind unemployment.

GDP : You might be wondering how GDP is affecting employment, aren’t you ? Well, GDP doesn’t cause unemployment but the ratio of a particular sector in the total GDP can say a lot about unemployment. For example, if majority of GDP is coming from a sector that requires less human resource, the jobs generated would be very less, even though the wealth generation is high.

Demographic Dividend : A huge number of working age population sounds pretty cool and it may reflect the prosperity of a nation but if the demographic dividend isn’t diversified and if it is concentrated only to few sectors then it would mean that there would be more people competing for few jobs. And the result of this takes us back to Darwin’s words “Survival of the fittest”. The best among the competent would get a job and the rest go unemployed.

Digital Inequality : The fruits of development is often concentrated only to urban areas. To those living in the foothills of a mountain range 50mbps data is still a distant dream.

Mental Construct : If an 18 year old living in a middle class family goes to her / his parents and talks about her / his ambition to become an entrepreneur, then the reply wouldn’t necessarily be a green signal and the standard reply would be to get a government job or get into one of those professional courses and get a decent paying job. Another important thing to note here is quite often one’s career is decided by one’s relative or neighbours. If relative’s offspring is getting into a particular course then there is some sort of pressure on an individual to get into the same course and this can happen with various other permutation. This leads to concentration of human resource in only few sectors and when the supply is more than the demand… You know what happens, don’t you?

Quality : Quality education is a luxury to many and on the other side there are people who don’t understand how fortunate they are and henceforth they miss classes and post stories such as ‘First day first show’. Deterioration in the quality doesn’t fetch anything. For example, people are ready to pay premium price for certain units of vegetable but nobody accepts vegetables of poor quality even if they are given for free.

Ease of Business : Red-tapism has been reduced in the recent years. However, e-tapism is the new buzzword. Keywords like server down, please try again later etc. are pretty painful for newbies and can slow down the adrenaline.

However, we are still in the beginning stage and in the years to come things might get pretty simple. This can be justified with the following example, few years back when there was no mobile banking or Unified Payments Interface stock traders had to rely on RTGS and NEFT and had to pay INR 9 for every transaction and it would take pretty long for the money to reflect in trader’s account. But today UPI payments are free and it just takes few seconds to deposit money.

Out of the Box Thinking : Most people lose this even before graduating from school. And one reason for this is lack of reward for out of the box thinking. Plagiarism is bad but if one doesn’t write the exact same thing that was written in her/his class notes during the exam, then she/he mayn’t fetch any marks for the answers. This often leads to behaviour wherein students end up mugging up class notes along with punctuation. And when this happens in a subjective subject the thinking capacity is hampered.

Gestation Period : It takes time for a firm to establish well and yield dividends. For those who wish to be entrepreneurs this can be a downside. This prevents them from carrying out their passion and makes them move towards the regular 9 – 5 job.

Cut Throat Competition : The outside world doesn’t work in the way we are thought in schools. The competition is red hot in every sector and when people forget to notice this, they get wiped out. People who understand this truth try to play safe and are often satisfied with under employment.

In fact the real problem that many face is under employment and not unemployment. For a person with fancy degree it is quite easy to get employment but the employment mayn’t be to the real potential of an individual.

To those who found it hard to interpret the above paragraph, here is a small example. Every day, I go to a particular tea shop. If I ask the owner of the tea shop regarding vacancy in his firm and if I furnish the details of my degree, there is a high chance that I might get a job. But my full potential is not realised when I decide to work in the tea shop and the reason is, Laplace Transform and Fourier Series mayn’t be of much use in the tea shop. Also I mayn’t get a fancy pay packet. This condition is called under employment.

Well folks, it’s a wrap for this post, see you next time. Have a great day 🙂

Asphalt 9 Game-play and Review

(Game-Play video is in the bottom of the post)

This is one of the good racing games that I’ve played so far on mobile phone. The other racing games I’ve played and liked are Real Racing 3 and Need for Speed.

Back in the days of Nokia N8 and iPod touch, NFS was one of the game that I loved playing. A year ago when I played NFS I felt that the game time was pretty short on mobile phone and the game ended just when the heat hit the threshold. Moving on to Asphalt 9, I found the game length to be decent, however in the initial stages, I felt that the game length was short.

This game feels decent when played using the tilt control for steering. I read some comments on the App Store, and in one of the comment someone mentioned that this game feels low when you use the default mode (on screen controls) for steering and the reason for this is the car doesn’t fall into the water body. However, when played using tilt control for steering the game feels pretty good and realistic.

The drifting part is something that this game needs to improve on.

Future expectations : New devices like 2018 iPad Pro are really powerful and have pretty decent memory. If game developers take this into consideration we might expect much better game and game duration.

I haven’t checked if this game is controller compatible. If it is so, then this game would be even more amazing. Moving on if devices like iPad provide better aspect ratio when connected to external monitor and also if Apple makes gaming controllers compatible for iPad, Apple TV etc. in the future, then things would be lit.

If you are a windows / android user and felt left out due to the above paragraphs, don’t feel sad because Asphalt is cool game even on other platforms. I also play this game on my windows 8.1 laptop and it is lovely. I use arrow keys and space bar for the controls and nitro respectively.

Well folks, that’s a wrap for this post. See you next time, have a great day 🙂