Just a short post to say that I’m off on a vacation for about a month as two of my cousins are getting married and I have a lot of traveling to do.

In the past I’ve written posts in advance and invited guest posters but this time I just decided to take a break and write only if there is time and there is a topic I am thinking about at the time.

So expect very few posts in this month, and a fair bit of delay in answering comment as well.

From time to time I get emails about an announcement of a buyback, merger or a policy change with a question if it’s a good idea to invest in that particular stock or sector.

In general, I avoid taking decisions like this and I have a few simple reasons for that.

1. The event is already priced in: If you find out about something from a mainstream news media source which millions of people have access to then they will already act on that information and jack up the price.

I think infrastructure stocks and mutual funds from a few years ago are a good example of this. Everyone was convinced about the infrastructure story, and they were constantly mentioned in the media. How could people not buy into it? But if you look at their track record – they’ve done as badly if not worse than other sectors.

If you’re doing what everyone else is doing – where is the edge in that?

2. I may not fully understand the offer or policy change: This happens a lot in buyback offers where it’s easy to miss a detail like the buyback will only be a limited percentage of the shares outstanding so not everyone’s offer will be exercised or that the promoters will buy the shares from the exchange and not from shareholders, or in some cases they simply announce that they will carry out a buyback but later on change their mind!

If you don’t fully understand these things then it’s better to stay away from such offers. Do you really back yourself to play a game whose rules you don’t fully understand?

3. This strategy seems penny wise and pound foolish to me: Normally, you can’t expect a lot of gain from these kind of things – maybe 5% or so and to make that count you have to put in a large sum of money in the investment. Listing gains on stocks and bonds is a good example of this. The trouble with this kind of strategy is that while you do make money from time to time – one bad loss can wipe out all the gains you’ve made in the last year. This doesn’t appeal to me at all – it consumes a lot of time and effort but the risk – reward ratio is often skewed against you. While this kind of punting may be rewarding for brokers and traders who are glued to the market and have some sort of an edge as far as information is concerned – I don’t see how a regular retail investor can consistently make money doing these things.

These are some simple things that have guided my decision making over the years, and I don’t see it changing anytime in the near future. I know this is boring, but I’m happy seeking excitement in other areas of my life and leaving investments boring.

This post is slightly adapted from a comment in The Suggest a Topic page.

Kish had suggested this topic in the Suggest a Topic section, and I had it in drafts for a long time because I wasn’t quite sure how to approach this topic, and after a few re-writes I’ve decided to just pen down some thoughts I’ve had in the last few months.

When I think about the global economy – I think mainly of the US, China and Europe and India’s position with respect to these countries. That’s not because Saudi Arabia or UAE is less important but just because there doesn’t seem to be any big changes taking place there right now.

Let’s start with the US – in the last couple of months or so the data coming from the US has been largely positive and that’s different from how things were in the past few years before that. This is great news for the US, and the rest of the world because a lot of countries run trade surpluses with the US and depend on them for their own growth. More and more it looks like Warren Buffett’s prediction of a recession being very, very unlikely will come true. That is a positive for everyone.

Moving on to China – I think the question in the last few months has largely been how well China can manage it’s slowdown. No one seems to believe that property prices will start rising steadily again, or that major infrastructure spending will continue, but the main concern has been whether the Chinese financial system be able to withstand the slowdown and real estate losses and whether the authorities will be able to manage it such that there is no chaos.

I think their massive reserves will help them manage the losses and not let that spill over to the real economy too much. China is India’s third largest export market, and the largest import partner so any troubles in that country will be felt in India too but somehow from an Indian perspective – China doesn’t seem to be on the radar of many people. I don’t know why that is.

While Europe has not been getting as much coverage as it was in November or even December, none of the things there have fundamentally changed. The issue has been pushed down to deal with later, and that later usually arrives sooner than most people expect.

As far as Greece in particular is concerned – it is a very small export market for India and has shrunk by about 40% in the last year without anyone noticing it. The problem however is that the issues with Greece could spill over to the bigger economies and drag the whole of Europe with them. That has already happened, and it looks like it will continue to happen, and be a drag on global growth. The sooner the issue gets resolved – the better it is – but based on what has happened – I think this will continue to drag on for some more time.

While these issues have lingered for some time – I think the domestic problems in India are far bigger than the global headwinds of the last year, and that to my mind is a much much bigger threat to India’s growth than anything going on in the global economy. For a long time, we’ve just assumed that the economy will continue to grow at 8 or 9% but we’re finding out that it’s not the case. You can’t take this growth for granted and expect it without having sound policies and infrastructure in place.

Those steps have to be taken for India’s steady growth and at least the silver lining there is that those are within India’s control and the first wave of liberalization has shown that they yield positive results when taken and that should be the focus for everyone going forward as well.

Anil Kumar Kapila who is a regular commenter here for a long time now left a lovely comment in yesterday’s post with some do’s and don’t's for the new year and I took seven of my favorite ones to share them for this new year post.

I’ve experienced all of these emotions myself at one point or the other and I thought it’s a good idea to take some time to go over them and remember when you last experienced such a feeling yourself, and in hindsight – wouldn’t you have much rather not yielded to the temptation or avoided it altogether.

Here’s what he wrote.

With these great thoughts, here’s wishing everyone a very happy new year, may 2012 bring you great wealth and prosperity!

And thanks to Anil Kumar Kapila for sharing these with us!

New year resolutions are fun to make and even if you carry them out for a month – I guess that’s a lot better than not doing anything at all.  A few of us can actually make lasting changes and that of course is great and what we should aim for.

With that in mind, I contacted a few folks who OneMint readers should easily recognize, and asked them for their new year resolutions or what they thought other people could benefit from.

I got some varied and interesting responses, and I think they are very sound ideas and most of us have given them a thought at one point or the other – this might be just the chance to adopt some of these or come up with a money resolution of your own.

Furqan’s response was the most amazing, and you will see in a minute why that is but before that here is a summary of everyone’s thoughts.

I had to shorten a few things which people had to say because I wanted to fit it all in one image, so here is the whole version of what some of these people said.

Furqan’s note to me was actually quite inspiring because I had written to him sometime last month, and not only did he plan on something – he actually lost 5 kilos and executed on some of that plan as well!

Here is Furqan:

At the start of each year I take resolutions, many of same types as previous year and
wonder, with a sense of bewilderment, how I end up in the same situation once again.

This time your email made me ponder and thought of making this year different. I
decided to take time to think about what I can do differently in 2012, so that at this time
next year, I will look back with a sense of accomplishment and pride.

As a first step, instead of waiting for the new year I took the immediate personal
resolution to change to a healthy life-style. Met my family doctor who ran some tests
and based on the results embarked upon improving my health. Met this dietician, took
wife into confidence, started regular morning walk and meditation. You will be surprised
to know that I lost 5 Kgs in a month and half. I feel great, healthier and energetic.

On the professional level I chose my 3 loyal clients who were simply investing without
a Financial Plan and did their Financial Planning free of charge. This resulted in, one,
a better understanding of their financial health by the client and second, a sense of
accomplishment for me.

To go ahead in the same direction, I’ve made a list of 5 New Year’s Resolutions. Small
things that can help make better, smarter decisions, for me and my clients, for the
coming year and the years ahead.

My New Year Resolutions on professional front are:

1) Do an FP for atleast 1 client a week.
2) Help clients make more money that will help me progress.

3) Invest in myself (Education is Empowerment).
3) Learn one new thing about Investing/Finance every month.
4) Take action and apply what I learn.

My New Year Resolutions on personal front:
1) Continue Daily Walk/Exercise
2) Write a Gratitude Journal
3) Self Coaching Questions
4) Meditation

I was very impressed by what Furqan had to say and it inspires me to carry out my own resolution firmly and throughout the year.

Now, here is Hemant:

Budget is the “”numero uno”" step of financial planning & it is also the only panacea for good financial health. With technological enhancements, every day it we face new ways to spend our money without realizing its long term impact.

When you don’t have budget everything looks important & necessary. Biggest problem of not having budget means you are likely suffering a financial disease called “”I NEED IT NOW”". It looks so good so… I NEED IT NOW, there is good discount so… I NEED IT NOW, my friend bought it & I am suffering without it so…. I NEED IT NOW & the story continues. Are you a kid?? Remember the most insane reasons we gave to our parents just to own a stupid looking toy. Don’t feel guilty you still have time to improve it. Just do it!!”

The size of these responses vary because my request was a little vague, and thanks to Adi, Hemant, Furqan, Shiv, Bemoneyaware, Shabbir  and Manish for sparing their time, and sending these in.

Your turn now – what’s your new year resolution?

I’m extremely happy to be able to wish everyone a Merry Merry Christmas. I hope you’re having a great time with your friends and family, and I wish you joy, peace and prosperity for this coming year and the time ahead.

I want to share something that happened many many years ago while I was still in school, and I was reminded of that incident when I saw this tweet from Liz Danzico a few days ago.

Taxi driver on the holidays “I celebrate everything. I believe in everything and everyone.” Yes.

— Liz Danzico (@bobulate) December 18, 2011

What a wonderful message, and how timely it is.

I’ve heard a variation of this myself many many years ago when I think I must still be in primary school. A teacher asked me if my mom was a Christian from Kerala, and my dad a Hindu from Benaras, then what festivals did I celebrate?

And then without hesitating, she answered the question herself, “everything, you celebrate everything, of course.”

For all the things that we have got wrong, we have got many important things right, if there is a country more diverse in the world, I don’t know of it – and in this great diverse country where we speak more languages than the whole of Europe – we celebrate everything and we believe in everyone.

Merry Christmas and a Happy New Year!

I’ve read a number of articles talking about paid financial advice lately, and I get emails from readers asking about some services as well, and I’m writing this post as a result of those questions and what I’ve seen here over the years.

My general impression is that good financial advise is rare, and when available it is not easily affordable.

I have interacted with a large number of people who call themselves financial advisers in the course of writing this blog, and my perception is that a lot of them have no clue of what they are talking about.

There are people like Shiv, Hemant, and Furqan who are extremely knowledgeable, and also unbiased, but for a lot of others – I wouldn’t take their advice if they paid me, let alone me paying them.

If  you end up with one of these advisers then you are screwed out of your money because most often, the folks who know little are also guided by fat commissions and will suggest only those products that will fatten their wallets the most.

I also think that you need to figure out a lot of this stuff on your own. If you really want to be financially successful – you have to have some things figured out like the importance of having no credit card debt, value of term insurance over other plans, benefits of diversification, asking about risk when someone talks about returns, and other such important things.

They are simple concepts if you are willing to give the time to learn them and there is a lot of information already available for free in the public domain about these topics.

If you understand these things then you are already quite ahead of the game and if and when you do take financial advise – you will be able to extract the maximum out of the consultation and really benefit from it.

You don’t need paid advice to tell you that you should have zero credit card debt or that you should have some money in equities or the benefits of diversification, but if you don’t know about these things then your adviser will need to spend time to explain these things to you and that’s time taken away to move on to more advanced things like planning for goals and all that good stuff.

This is not to mean that there is no value in financial advise – I truly believe there is and that’s best showed by a comment Deepak left here some time ago. Let me reproduce that here:

Hi Manshu,

I would like to take opportunity to thank you for giving Nisha a really wonderful gift
(comprehensive financial plan by “Hemant Beniwal”), this is just not worth Rs 15000, it is really undervalued b’cos this is a gift for the lifetime.

I must tell you that Hemant is really a true professional to work with, he has immense knowledge in the field and his concepts are really very clear, he has given very clear paths to achieve our goals. He got so involved in the plan..I felt that my elder brother was teaching me the way of taking financial decision in life..thank you Hemant for great advice and i’ll always remember ‘if you can have honeymoon in manali don’t think of goin to Mount everest.’

I would once again thanks “One Mint” for giving our life a great direction. I wish you both all the success in life.

Kind Regards
Nisha/Deepak

Clearly shows the benefit, and in my view you will benefit from it when everything falls into place – you meet an adviser who is knowledgeable, has a long term approach, most likely such a person will have a good fee, so you should be able to afford to pay the price, and finally you should have a lot of the basic and important stuff figured out already so you can make the most of your consultation.

Last weekend I read Mark Cuban’s short book How to Win at the Sport of Business, and loved it.

It’s really a collection of his blog posts strung together in a manner that tell the story of how he rose in the world.

The most important message that I took away from that book was to work really really hard. There were plenty of other things too but this one resonated the most with me.

Then this week I came across this interview of Mayor Bloomberg and he pretty much said the same thing.

Here is what he said:

I am not smarter than anybody else but I can out work you – and my key to success for you, or anybody else is make sure you are the first one in there every day and the last one to leave. Don’t ever take a lunch break or go to the bathroom, you keep working. You don’t ever know when that opportunity is going to come along.” He continues, ”every opportunity I ever had, it was I think an awful lot of them was because I was there at the time. And that is the one thing you can control. You can’t control your luck, but the harder you work, the luckier you get.

Here is the video:

Pretty amazing stuff!

Every once in a while I like to take a break from money related topics and discuss something else, and today I’m going to discuss about some blog related things that have been on my mind lately.

Email

I’ll start with the topic of email – a lot of you reply to the daily emails, and that’s not a very good way to ask questions or engage in a discussion because of the heavy volume of email and difficulty in handling them.

I try to respond to most emails but if I didn’t respond to your email the moment I read it – chances are it will get buried in more email and you will never get a response.

I read all the emails so if you don’t expect a response then sending one is fine, but it’s a lot better to post comments if you expect a response because I can look at all comments consolidated in one place from the blog dashboard and reply to them one by one quite easily. So, please leave comments instead of emails as far as possible.

Suggest a topic posts

It normally takes me about two weeks or longer to get to a topic suggested in the suggest a topic page, and I know this is too long a wait in this world of instant gratification.

As things stand today, there’s not much I can do about this – I like to do one post every weekday and write one post in a sitting. Some posts take a lot longer than others, and when I know something will take more than a couple of hours, that usually gets pushed to later.

To be clear, no one till date has complained about this, and I really appreciate that but at the same time I want you to know that it’s on my mind that these posts shouldn’t take so long, and although I don’t have a solution now – something might come up in the future.

Bloggers and advisers interested in getting featured here

There is a very simple way to get featured here, and that’s to leave helpful comments and answer reader’s questions. That’s all you have to do. Please don’t write in to me to get featured here – it will not happen. The only way to get a profile page is if you have left helpful comments on the site. And the reason behind that is there is no other way for me or others to judge the quality of your work. Leaving a few comments on the site easily gives a window on what you’re interested in and whether it will be a good fit with the audience here. If it will be, then I’ll reach out to you and if it doesn’t, then well, it just doesn’t.

Guest Posts

I’m very very reluctant in accepting guest posts because of more or less the same reason. If you just offer to write a post out of the blue – I don’t have any idea of what the post is going to look like and it’s quite difficult to say no if I’ve already invited you to write it. Even if you do send me a link to your blog it’s hard for me to go through it and arrive at a conclusion at what the future post will look like. If we don’t know each other already, it’s unlikely that your guest post will be featured here.

Anonymous Commenters

There are occasional emails from people who want to know if it’s okay to use their blog / company name instead of their real name or comment anonymously, and that’s totally fine. You are free to use whatever you want.

These are a few behind the scenes things that I have to deal with on a daily basis and I wanted to share them with everyone because in my early days of blogging I have felt some of these frustrations myself.

I used to wonder why bloggers reject free guest posts or never bother to respond, but having worked on this for some time gives me a better perspective on some of those decisions, and I hope it gives you a new perspective on some of these things also.

I’ve encountered three too good to be true offers this week in some shape or form. I have personally seen one of them, have been told about one by a friend, and a third one by a reader here.

The easiest to identify among these was the one that my friend came up with. He is looking to buy a used car, and a popular way to do that in the US is to go to Craigslist and search for cars.

He came up with one that he really liked a lot and from the low price and good condition it was immediately clear to me that it is a scam of some sort.

I asked him to send an email but not give out his phone number or anything else. Within a matter of minutes, the other person responded saying that he was an Oceanographer and out at sea, and if my friend wired him the money, he will have the car shipped to him immediately.

It’s an obvious and old scam that Craigslist themselves warns everyone about.

The second one was one that I faced myself, and it went like this. I have subscribed to a website for some financial information and they sent out an email last Thursday saying that they have this stock pick that will definitely go upwards from Monday, and they will reveal this stock to their subscribers on Friday.

Now, this is not a paid subscription, I am a free subscriber and these people have never sent an email earlier so I was really surprised to see that and I thought this is ridiculous – you are sending me an email to tell me that you will send me an email?

Then the next day they did actually send the email and name of a penny stock with the promise of a quick buck. I ignored that as well.

Then on Saturday, they actually called to tell me about the stock pick and for me to make sure that I don’t miss the opportunity to buy the stock. I missed the call so they left a voice mail.

I then observed this stock on Monday and it went up by quite a bit, then again on Tuesday when they sent a reminder email.

My curiosity was really piqued by then and I’d be lying if I said I didn’t consider buying a little of it, but good sense prevailed and I left it at alone. Then yesterday the stock fell 6%, and today it fell by 17%!

I can see that this penny stock has still jumped more than 100% in the last 5 days, but I really don’t know if anyone has really benefited from this or if it just hits the circuit without allowing anyone to really buy into it, or even worse whether it will come down like a pack of cards in the days to come.

This is a curious situation and I’m happy to view this from the sidelines. It’s a too good to be true offer and it looks like a pump and dump situation where things end badly for the guy who owns the stock last, and I don’t want to be that guy.

I can’t think of how someone can have such concrete information of daily movement of stocks unless they are manipulating prices, and I want no part of such a risky and what appears to be shady business.

The third incident is of a reader leaving a comment on the suggest a topic page about companies that offer very high returns for your investment, and one in particular that offers a 36% annual return.

This is just way too high to be reasonable and common sense and even historical experience shows us that usually these schemes end badly. There is normally no easy way to prove them before hand and even when you do present proof like in Madoff’s case – where Mr. Markopolos sent detailed information to SEC at the beginning of the decade that Madoff was a fraud – no one took notice for a long time!

I think people fall victim to their greed and ignore the warning signs by taking comfort in numbers, or by looking at the credibility of the person who is attached with the scheme even when history tells us that only people who can muster a lot of credibility can run such frauds and are most typical of doing something like this in the first place.

After all, Madoff ran NASDAQ once, and if there are a large number of people who fall for something – then that means a large number of people lose money along with you, just that – it doesn’t protect you from any loss.

I’ve personally avoided every offer that looks too good to be true that I have ever come across, and I just wish and hope that everyone else is as skeptical about these type of offers as well and remembers that a fool and his money are soon parted.

This post was from the Suggest a Topic page.