Poll results: How much money do you need per month to retire in India today?

In the last poll I had asked you how much money do you need per month to retire in India today, and 48% of you (190 votes) said between Rs. 20,000 and Rs. 50,000. To my surprise, the next biggest segment was the more than Rs.1,00,000 segment with 20%, and you can see the rest of the results below.

(click for bigger image)

How much money do you need to retire

In this post, I am going to be what I think is called a party pooper, and say that a lot of you believe that you’ll need lesser money than you spend today during your retirement, but you are probably wrong.

For starters, if you’re salaried and not in your forties yet, then you are probably far away from what is going to be your peak income. Your income might look like a reasonable sum to you today, but wait till you start making a lot more, and see Parkinson’s second law kick into effect:

expenditures rise to meet income

Now it’s true that you will have more responsibilities at that time than today, and a lot of those will not be present during your retirement, but it’s just as likely that there are some unforeseen liabilities as well; how is that percentage going to work out? How do you calculate something like that anyway?

Next up, when you think that you will need lesser money during retirement than today, that automatically implies that you need to save less today, and that in turn implies more money to splurge; think about it – aren’t you much more likely to lull yourself into making some assumptions that make spending easier today? After all, delayed gratification is hard, really hard.

That said, I believe that a lot of you are way ahead of the game just by thinking about retirement, and planning for retirement. Starting retirement planning early means that you develop a long term approach to retirement, think about various alternatives where you can invest your money, not fall in credit card debt, and give yourself the benefit of compounding which makes a huge difference.

As long as you are not looking at huge debt, saving a decent amount by being frugal (but not stingy), and making good investment habits, whatever your number is – you will be alright.

So don’t fret too much about the number, which is too far out in the future, and so variable that it’s hard to predict, and focus instead on developing good financial habits. And thank you all for your wonderful comments!

How to turn conversations off in Gmail and Microsoft Outlook 2010

I started using MS Outlook 2010 a few weeks ago, and one of the first things I searched for was how to turn off the conversation view in Outlook. It confused me a little in the beginning, and it probably still will, and I just had to get rid of it. It’s really quite simple to turn off the conversation view in MS Outlook, as it just takes a couple of clicks.

Turn off conversations in Outlook 2010

Just click on “Arrange By”, and then click on “Show as Conversations”, and your view will default back to how it was in the earlier versions.

I wasn’t surprised to see how easy it was to turn it off given the great options that MS Office usually has, and I had happily forgotten about this neat little feature until today when Google announced that they too will allow you to turn off conversations in Gmail.

My first reaction to this was who’d want to do that right? And my second reaction was we are such slaves to our habits. I have no need to turn off conversations, but if you’d like to do it then go to Settings –> General –> Select Conversation View Off

Turn off Conversation in Gmail
Turn off Conversation in Gmail

It never occurred to me that you’d want to turn off conversations in Gmail, but a quick Google search showed that people were signing petitions to get this feature! It’s amazing how worked up some people can get over this kind of thing, oh well, at least it worked.

A few details on the Daily Systematic Investment Plans

In response to my post about Perpetual Systematic Investment Plans (SIP), reader GKN inquired about Daily SIPs, so here is a brief post about them with whatever info I could find.

Daily SIP
Alarm Clock

What is a Daily SIP and who offers it?

Daily SIPs are intended to be schemes like SIPs, but invest a sum daily, instead of the usual frequency. The intention is to get to the bottom of the pyramid, and you can get started with a very small amount of money.

Sahara had filed a draft prospectus with SEBI for the Sahara Daily Fund last year, but since I didn’t find this fund’s information anywhere – I think it never took off. I did read that Sahara offers daily SIPs on its debt funds, but didn’t find a lot more information on how to get into one.

I found an application form for Bharti AXA Equity Fund from 2008, which allows a daily SIP, though I don’t know if this is still applicable or not. The document for this daily SIP said that this is only available from HDFC bank, Axis Bank and Bank of Baroda.

I also came across a few articles about IDFC offering a daily SIP, but didn’t find any concrete information about that, so I don’t know whether it was just a proposed idea, or if it did really take off.

I didn’t find information on any other fund offering a daily SIP, so from what I found, it appears to me that the options for getting into a daily SIP are generally limited, and even when you find a fund that you can consider investing into, other operational factors like the banks that offer one come in the way and might restrict you further.

How does a Daily SIP measure up against a regular SIP?

So considering you find a fund that allows a daily SIP, and a bank that lets you do it – is it a good idea to get into one? Personally, I don’t see a lot of benefit coming from this, and to me it takes the concept of regular investing, and stretches it a bit too far, and adds unnecessary layers of complexities.

FinWinOnline has this post where they compare the returns of a Daily SIP to a regular one, and come at a conclusion that you were better off with the regular SIP. If you were serious about this option, then you can check out that post, and see the number crunching for yourself.

If anyone has first hand experience with daily SIPs then please do leave a comment or send me an email to share your experience.

And keep the questions and ideas for posts coming!

Photo Credit Alan Cleaver

Is there an Oil ETF in India?

I got a slight variation of this question in a comment the other day. Right now there isn’t an oil ETF in India (see oil ETFs listed in USA), and I couldn’t find any mutual funds that track crude oil prices also. If you know of any, please leave a comment or email me, and I will include them in this post.

A few months ago I had written about the new fund offer of the ICICI Prudential Oil Fund, which could have been a candidate, but that fund never took off.

oil etf in india
Oil and Water

There are several mutual funds that invest in oil and energy related companies, so that is one way of getting an exposure to crude. But then again, there could be a situation where oil prices rise, and your mutual funds don’t, especially in India where the oil companies absorb some of the price rise from being passed on to the customer. So doing this may not be a good way of tracking oil prices.

I can think of two other ways of tracking crude oil in India, but I don’t have any experience in either one of them, so I don’t know how far this is feasible or what the pros and cons might be. If someone has a first hand experience in either of these then please leave a comment or send me an email.

1. Commodity Trading: The first way is by commodity trading, and buying Brent Crude Oil Futures or Crude Oil futures in one of the commodity exchanges in India. A lot of brokers allow this facility, but you have to request access to this individually, and on approval, this facility will be activated.

2. Buy overseas Oil ETFs: Some time ago, Indian brokerages opened up the facility to buy international stocks by opening up “Overseas Trading”, and this may be another way of getting exposure to oil. Get this facility open for you, and buy oil ETFs trading abroad.

Again, let me emphasize that I have no experience of either of these methods, and I don’t know how far they’re going to work, these are just ideas that I had, and if anyone has any practical experience with trading oil in India, then please share.

Photo Credit: …-Wink-…

A primer on the New Pension Scheme (NPS)

I’ve wanted to write about the New Pension Scheme (NPS) a lot sooner, but never got around to it. Reader Gaurav sent me some great material on it, and got me started.

The stuff that he sent me was an entire post in itself, but I thought I’d add to it, and create a comprehensive post on the New Pension Scheme.

First off, you can call it New Pension Scheme, National Pension System, New Pension System or NPS, anything you like. They’re all the same; I’ve seen different articles call them different names, so that might get a bit confusing, but you’ll soon get used to it.

Next up, some of the things this post will address, are:

  • What is the New Pension Scheme?
  • What are Tier I and Tier II accounts in the NPS?
  • What are the three categories in the NPS?
  • Fees and Expenses related to the NPS?
  • What is the minimum amount needed to invest in the NPS?
  • What are the tax implications of NPS?
  • How can I open a NPS account?
  • Why hasn’t this become popular?

What is the New Pension Scheme?

The NPS was introduced by the government last year to give people a way to get a pension during their old age. Employees of the government sector already get a pension, so this scheme was introduced as a social security measure that enables people from the unorganized sector to draw a pension as well.

The working mechanism is quite simple – you contribute a certain sum every month during your working years, which is then invested according to your preference. You can then withdraw the money when you retire, which is currently set at 60 years old.

When I say you invest according to your preference, I mean that there are a couple of different options that you need to select from. These options pertain to your preference on withdrawal, and asset allocation.

What are Tier I and Tier II accounts in the NPS?

The NPS is meant to be a pension scheme, so it is geared towards giving you a steady stream of income on your retirement.

That means that NPS makes it difficult to withdraw your money during your working years or till the age of 60 in this case.

Tier I and Tier II are two options under the scheme where you can invest your money, the primary difference between them is how they differ in allowing you to withdraw your money before retirement.

NPS Tier I

There is severe restriction on withdrawing your money before the age of 60, because it is necessary to invest 80% of your money in an annuity with Insurance Regulatory Development Authority (IRDA) if you withdraw before 60. You can keep the remaining 20% with you.

When you attain the age of 60, you have to invest at least 40% in an annuity with IRDA; the remaining can be withdrawn in lump-sum or in a phased manner.

Here are the details of how your money can be withdrawn in a NPS Tier I account.


Death is another way of getting the money, but that might come in the way of other plans you have.

NPS Tier II Account

The first thing about the NPS Tier II account is that you need to have a Tier I account in order to open a Tier II account.

The Tier II account makes it easy for you to withdraw your money before retirement because there is no limit on the withdrawals you can make from the Tier II account.

You need to maintain a minimum balance of Rs. 2,000, and you can transfer money from the Tier II account to Tier I account, but not the other way around.

There is a Rs. 350 CRA (Credit Record Keeping Agency) charge which is not present in the Tier II account, but the rest of the fees remain the same.

Asset Allocation and Categories in the NPS

There is an Active Choice option, and an Auto Choice option. If you select Auto Choice then your money is invested in a certain percentage in the various classes based on your age.

Here are the three investment classes:

Class Risk Profile Description
G Ultra Safe Will only invest in Central and State government bonds.
C Safe Fixed income securities of entities other than the government
E Medium Investment in equity related products like index funds that replicate the Sensex. However, equity investment will be restricted to 50% of the portfolio.

In the Active Choice you can select how much of your money will be invested in the different classes with a cap of 50% in Class E.

Now, there are pension funds that will manage your money, and in either of these options you have to select the fund manager who will manage your fund. So even if you select the Auto Choice, you still have to tell them which fund manager you want to manage your money.

Fees and Costs related to the NPS

I talk about expenses a lot here, and the expenses on the NPS are really low. The annual fund management charge is 0.0009%, which is probably the lowest in the world.

There are some other expenses associated with the NPS, but as you will see all of them are quite low as well. Here is a list of the other expenses.


What is the minimum amount needed to invest in the NPS?

For a Tier I NPS account you need to contribute a minimum of Rs. 6,000 per year, and make at least 4 contributions in a year. The minimum amount per contribution can be Rs. 500.

Minimum amount for opening Tier II account is Rs. 1,000, minimum balance at the end of a year is Rs. 2,000, and you need to make at least 4 contributions in a year.

What are the tax implications of NPS?

The revised Direct Tax Code proposes to make the NPS tax exempt at the time of withdrawal. Initially NPS was going to be taxed at the time of withdrawal, and that had put it at a disadvantage to other products like ULIPs and Mutual Funds. But the revised code proposes it to be exempt from tax, and that really adds to its lure.

How can I open a NPS account?

You can open a NPS account by going to the bank branches of the banks that are authorized to sell this.



This is quite a good option for people who wish to invest for their retirement, and the government has done good to come up with such an option. It is still early days for the scheme so there are going to be some teething troubles, and I am sure you have come across several articles that write the NPS off completely, or suggest major changes.

While it has not gained in popularity the way you would’ve expected with the low cost structure, a primary reason of that is there is no real incentive for anyone to push this to consumers, so it has not gained any real traction.

That being said, the scheme is a good initiative, and given enough time, the chinks should be ironed out in its favor.

As a final word – a big thank you to Gaurav who sent me all the material, and pushed me to write about the NPS. Thanks Gaurav!

Weekend Links September 2010

For me, the top two posts for this week are Rakesh Jhunjhunwala, and Sandip Sabharwal asking investors to be cautious. The markets have been booming lately, and you hear a lot of positive chatter on how this target will be breached, and that target will breached, so it is good to hear some cautious voices also.

With that said, here are some interesting links for this week: 

Risks to the market @ Sandip Sabharwal: Thoughts on the recent rally.

Jhunjhunwala turns cautious as stocks surge @ Bloomberg: Rakesh Jhunjhunwala sharing his thoughts on the market.

Marital Insurance: Protection from your better half @ Weakonomist: So there is this company that pays you if you get divorced! Not kidding, this is a serious post.

Eat your stocks @ Psy Fi Blog: A great read which tells you about an experiment to teach monkeys to trade, which showed how closely our thought processes really are.

China leads the clean economy race @ HBR: This post from HBR talks to how far China is ahead of other nations in terms of clean energy.

Getting a No @ AVC: A very good post from Fred Wilson about how to react when you get a no. This was a really good post, and I think a skill a lot of us need to learn. Personally, ever since I started blogging I’ve had to hear no a lot of times, and lately had to say no a lot of times as well. I am glad to see that I do the right thing according to Fred.

Should you pay off loans or invest your money @ Digerati Life: I’ve seen a lot of versions of this debate, the right answer really depends on your personality, but a good reminder of the factors.

Some surprising facts about India’s green energy

Countries and companies alike are focusing a lot of their attention on green technologies, and lately I’ve been reading up on what India is doing to generate power by green technologies. I am interested in this space because I believe that countries that achieve breakthroughs in green technologies will rule this century, and because I hadn’t heard much about what India was doing in this space, I was wondering if in fact India was doing anything at all. What I found surprised me, probably because I knew so little, but I bet as you read on through – a lot of these findings will surprise you as well.

Solar Power

First off,  I was surprised to read that India has got quite an ambitious target of generating 20,000 MW of solar power by 2022 under the Jawahar Lal Nehru Solar National Solar Mission. This plan is split out into phases and the target is to achieve a 1,000 MW of solar energy by 2013 (end of first phase).

I couldn’t find reliable stats on the current solar power generation in the country, but whatever numbers I found indicated that it is quite low  today. While solar power may not be too big right now – there are companies that are working on this like Azure Power which aims to generate 100 MW from Solar Power in the next 3 – 5 years, and Tata Power which plans to generate 50 MW from a solar power project in Gujarat.

How India compares to other countries?

This recent report by Deutsche Bank shows the break-up of renewable electric power generation of various countries.


The chart shows you that Wind and Biomass have the highest presence in India, and incidentally the recent IPO by Orient Green Power also  focuses on this segment.

I keep reading a lot about how well China is doing in this space so I was a little surprised to see that the major contributor for them was Small Hydro, and even they don’t have any solar power. The huge green bar in China also brings me to my next question – what the heck is Small Hydro?

Small Hydro

The other thing that jumps at you from the above chart is small hydro and how China is so far ahead on this. Small Hydro is hydroelectric power generation at  smaller scale of less than 25 MW.  These are classified green because they have low impact due to the minimum reservoir and civil construction requirement.  As you can see from the table below India has has been adding to its Small Hydro generation constantly, but there is still a long way to go as far as catching up with China is concerned.

Year Target

(in MW)

Capacity addition during the year

(in MW)

Cumulative SHP installed capacity

(in MW)

2002-03 80 80.39 1519.28
2003-04 80 84.04 1603.32
2004-05 100 102.31 1705.63
2005-06 130 120.80 1826.43
2006-07 160 149.16 1975.59
2007-08 200 205.25 2180.84
2008-09 250 248.93 2429.77

As far as states go, Karnataka is doing way better than anyone else as seen in the numbers below:

Sl. No.


Projects Installed Projects under Implementation
Nos. Capacity (MW) Nos. Capacity (MW)
1 Andhra Pradesh 59 180.83 12 21.50
2 Arunachal Pradesh 81 61.32 43 25.94
3 Assam 4 27.1 4 15.00
4 Bihar 12 54.60 4 3.40
5 Chattisgarh 5 18.050 1 1.00
6 Goa 1 0.050
7 Gujarat 2 7.000 2 5.60
8 Haryana 5 62.700 1 6.00
9 Himachal Pradesh 79 230.915 9 26.75
10 J&K 32 111.830 5 5.91
11 Jharkhand 6 4.050 8 34.85
12 Karnataka 83 563.45 14 85.25
13 Kerala 19 133.87 2 3.2
14 Madhya Pradesh 10 71.16 4 19.90
15 Maharashtra 29 211.325 5 31.20
16 Manipur 8 5.450 3 2.75
17 Meghalaya 4 31.030 3 1.70
18 Mizoram 18 24.470 1 8.50
19 Nagaland 10 28.670 4 4.20
20 Orissa 8 44.300 6 23.93
21 Punjab 29 123.900 2 18.75
22 Rajasthan 10 23.850
23 Sikkim 16 47.110 2 5.20
24 Tamil Nadu 15 90.050 4 13.00
25 Tripura 3 16.010
26 Uttar Pradesh 9 25.100
27 Uttarakhand 93 127.92 33 40.35
28 West Bengal 23 98.400 16 79.25
29 A&N Islands 1 5.250
Total 674 2429.77 188 483.23


To place these numbers in context you need to know how much does renewable energy contribute to the total?

The current installed base of renewable energy is 10.12% of the total installed base, which is a bit higher than I thought it would be, but as far as potential goes, it can be scaled up quite a bit.

I sure hope this percentage goes up in future, and as does the absolute value of total electricity generated. This is an area which deserves a lot of attention and interest from policy makers, private companies and general public alike, but unfortunately gets very little attention from anyone at all.

After all, how many of you knew about the Ministry of New and Renewable Energy ?

Orient Green Power Limited IPO

Check out the review on the latest Coal India IPO here.

Business of Orient Green Power Limited

Orient Green Power IPO opened yesterday, and will close on September 24th. The offer is priced between Rs. 47 to Rs. 55, and has been graded 4 out of 5 by CRISIL.

Orient Green Power Limited is the largest independent operator and developer of renewable energy power plants in India with a total of 213.03 MW installed capacity. Currently, this is split out between Wind and Biomass with Wind energy forming the majority.


In the future they plan to add a small component of hydro electric power to the mix and increase the committed and development project capacity to 836.5 MW. Orient Green Power also derives revenues from the recognition of carbon credits.

Here is the break-up of planned energy generation from various sources:


The company’s wind farms are present in Tamil Nadu and Andhra Pradesh, and in the future they’re going to expand to Maharashtra, Gujarat, Sri Lanka, Croatia, Czech Republic and Hungary. The customers for these wind farms are state owned electricity boards, and private customers who need to supplement their energy needs from conventional sources. The current wind farms are all acquired from third parties.

Financials of Orient Green Power Limited

The company had revenues to the tune of Rs. 104.47 million in 2009, and Rs. 441.58 million in 2010, and a net loss of Rs. 113.08 million and Rs. 122.41 million respectively. Because of the limited history, and the planned expansion these financial numbers don’t hold as much meaning as it would for a company for a much longer operating history.

The grading report by CRISIL also indicates that these numbers do not contain the profits from the wind business as the ownership of the wind assets was only transferred in Jan 2010, and the report says that they expect the financials to improve on profitability going forward.

Business Line reports the following about the pricing of this issue:

The price discounts the estimated FY-12 earnings 21 times. In terms of P/BV, other private power utilities enjoy valuations of over three times. Some discount is justified for OGPL due to the lower load factors likely for renewable energy, feedstock risks and the untested nature of the business. As their current portfolio of projects is small, investors need to hold on to the stock for a two-three year period to take advantage of the high earnings growth.

The company has a limited operating history, but has a lot of people excited because of the green energy space that it is in, and also because the market itself is relatively high, so more people are just generally interested in stocks and IPOs as well. However, at the end of the first day of opening there was hardly any retail interest, but that usually picks up as the end date approaches.

The IPOs this year have been a mixed bag, and it’d be interesting to see how this breed of green IPOs perform once they list on the market.

Click here to see how Indian IPOs performed this year.

Dead Zones and Dogbert

In a funny co-incidence Scott Adams published this Dilbert today, and Business Times published this story about wireless dead zones in the Bay Area – 83% of which belong to AT&T


To top it all – MG Siegler concluded his post on this story by wishing for two tin cans with a really long piece of string.

Prayers continue for a Verizon iPhone. Or a T-Mobile iPhone. Or two tin cans with a really long piece of string. All would be preferable at this point.

Not quite a wood block, but close enough. And you thought only cats were funny.

Is there any risk in a gold ETF?

Hell yeah!

End of post – all of you can go home now!

No, just kidding – I got this question in a comment yesterday, and I thought I’d do a quick post on it due to the immense popularity of gold ETFs, and the confusion that surround it.

ETFs are like mutual funds that also trade in the stock market, and you can think of gold ETFs as mutual funds that don’t hold stocks of other companies but rather hold gold deposits.

The price of mutual funds depend on the price of the stocks they hold, and the price of a gold ETF depends on the price of gold.

If gold prices fall then price of gold ETFs will fall, and there will be a loss on your investment. So, the fall in the price of gold is one of the main risks you need to worry about.

Now, it is quite likely that folks are telling you that gold prices never fall, it is an ultra safe investment, countries around the world are debasing their currency by printing money, the days of fiat money are over, this time is different therefore gold will never fall in value, and by virtue of that gold ETFs are risk free, but these are merely opinions.

Gold prices can continue to rise, or they can drop like a stone – no one knows for sure – remember that a lot of people thought that house prices never fall, but look what happened there.

There is risk in gold investment, especially now when retail investors are so keenly interested in it, and you should tread this with caution, you can make money, but you can lose money as well.

The original comment also had a question on how can you buy a gold ETF, which is answered here, and another one on how much profit should be expected, and I can honestly say that if I knew how much profit is to be expected then I wouldn’t waste my time writing this blog.