Are we into bull markets?

After a long gap, Iam writing to you from Arthabodhi’s desk. Hope you & your family are safe & healthy and Covid free.  

Year 2020 had been turbulent from the aspects of physical and financial health.  All the theory I was mentioning about market volatility turned into reality.  All of us who had been investing into equity directly or via mutual funds since last three years have experienced this market volatility in our portfolios.

Let us look at this Prediction made on March 25, 2020:

Now Look at this Prediction from the same institution on November 16, 2020:

I am not blaming or shaming out any institution here. All that I am trying to convey is NO one can predict markets and estimate where it will go by end of the year. This is the nature of equity markets. However if we understand the value of time in equity investments, we will not be getting into rude shocks of market behaviour.  

In early Covid days, markets crashed very rapidly and those who managed their emotions and stayed invested are seeing the better outcome wrt their portfolios.  Those who have exited and ran away had no time to realise & re-enter the market as the recovery was at rapid speed. Now the question again haunts is “ Is it the peak? Is it right time to enter equity mutual funds?”  

My answer always remains the same, If this equity investment is meant for a goal which is due after 10 years from now, this peak actually doesn’t matter.  Investing consistently and regularly is the key to wealth creation.

The stock market will go up and down. Just Accept it. This is an uncertain world, and no one knows what will happen the next day but there are 2 fundamental truths:

  1. The Stock Markets will go up and down.
  2. For a developing country like India, over the long term, the stock market trajectory is upwards.

I personally feel, this next decade is one time life opportunity to create huge wealth if we have right investment approach and investment behaviour.

Just think about it, If the Sensex goes to 50000 or 55000, will we stop investing? If the market goes down to 30000, will it stay there for the next 5 years? The point is that we should not allow anyone to come between us and our investment strategy. The only way for investors to make money in the stock markets / mutual funds  is by investing in a diversified portfolio (to manage risk) and then staying invested through all times (not to mention investing more if you have surplus during crashes). The real secret of the wealth creators is TIME.

Nassim Nicholas Taleb’s quote should keep ringing the bells in your head “Minimum exposure to the media should be a guiding principle for someone involved in decision making under uncertainty – including all participants in the financial markets”.

This new year let the resolutions be these questions to yourself

New YearWishing you a very happy & peaceful new year and a prosperous new decade to come.  May this journey brings you to your financial goals and financial independence.   Usually all of us, knowingly or unknowingly end up making new year resolutions.  This new year start by asking these questions. These questions help you to be in right direction towards your financial independence.

1. Am I saving at least 25% of annual income?

2. Do I have at least 15 months of expenses amount as emergency funds?

3. Am I paying off credit card payments completely on time?

4. Do I have sufficient health cover?

5. Is my life insurance coverage equal to at least ten times my annual income?

6. Do I have a budget for expenses?

7. Have I followed the budget or exceeded the budgets last year?

8. Have my life goals changed?

9. Are nominations done for all my investments? Does my family or nominee know where investment & insurance documents are?

10. Are you confident that your investments are in the right asset allocation?

*If you have answered No to more than 5 questions, you require immediate financial health checkup to be done.



Sensex, Nifty at all-time high. What you should do?

Indian main indices touched all-time high yesterday – Sensex at 41,000, Nifty at 12,000.

Is your portfolio valuation at an all-time high level? Ours is not and most probably you are also witnessing the same.

Is this normal? Have you invested in the right schemes? Have you been advised correctly by your advisor? Is it time to do something now?

These are common questions, you must be grappling with now. Before we go ahead to find answers, let’s see some data points –

While Sensex and Nifty made new highs yesterday, a reasonably broad-based index BSE 500 had touched its all-time high in the month of August 2018 and is currently 2% lower than its highest mark.

NIFTY Mid Cap 100 index (an index of 100 medium size companies) had made its all-time high in January last year. Right now, it is 22% lower.

Similarly, NIFTY Small Cap 100 index had also made its all-time high in January 2018 and currently, it is 40% lower.

Clearly, Small and Mid Company indices have underperformed. If you have your investments in schemes, which have a majority of small and mid-size companies in their portfolios, obviously you would not have witnessed an all-time high portfolio valuation.

A temptation to think of course correction is natural in these circumstances. You may call your advisor and ask him to do something. It will sound logical to switch your investments from your existing underperforming schemes to those schemes, which have large companies in its portfolio.

Some of you may also think otherwise. You may argue that large companies’ valuations have gone up so small and mid-size companies will have a catch-up phase. Hence, it is time to aggressively step up investments in Small, Mid Cap oriented schemes/stocks. Opinions supporting this theory are already floating around.

Both can be fatal.

Mid and Small-cap indices are underperforming the main indices – Nifty and Sensex, because of two main reasons :

(a) Mid and Small companies’ valuations had reached absurdly high levels in January 2018 and they were not sustainable. Hence prices have corrected.

(b) There is a serious slowdown in the Indian economy as well as in the global economy. Mid and Small size businesses find it hard to grow during slowdowns. Markets note this.

Indian GDP growth rate has fallen to approximately 5%. World trade is also contracting due to increased regionalization and falling globalization.

As per the data released by CPB Netherlands Bureau for Economic Policy Analysis last week, world trade for September month again witnessed negative growth. This is the fourth consecutive year-on-year contraction and the longest period of falling trade since the financial crisis in 2009.

If you see the chart below, the last 10-11 months, this data is exhibiting negligible to negative growth. What should be more alarming is that major central banks have infused an unprecedented amount of liquidity (their last weapon), brought down a large portion of bonds to negative interest rates, yet world trade has refused to revive. US-China trade war is also a major contributor to this slowdown, so closely watch the tweets by President Trump.


Data Source: CPB Netherlands Bureau for Economic Policy Analysis

Coming back to Indian markets, while in 2017, there was surely an investor frenzy towards Mid and Small size companies; in 2019, similar behavior is being witnessed towards Large Companies. 2017 phase was unsustainable so even 2019 will.  Hence, a switch from underperforming schemes to schemes with major allocation into large companies is not a great idea.

So, what should you do?

First, don’t get over-excited by these all-time high levels and strictly stick to your previously charted out plans. Globally as well as locally, the equity momentum is robust but heavily polarised. This is uncomforting and any act of over-allocation may backfire. Do not withdraw from equities. Continue with your SIPs, if you have any. Maintain some cash levels, have some gold and debt in your portfolio.

In a soaring market, not doing anything is the most difficult thing to do. Cash, gold, debt hardly earns anything meaningful. However, it keeps you prepared to handle sharp corrections to your advantage.

To create meaningful wealth, your investment has to pass through the phases of corrections, consolidations and temporary underperformances. Never forget, it is your discipline and patience over a long period of time, which creates wealth and not the smartness of the fund manager or an advisor. We at Arthabodhi say the same to our clients. We attempt to shape financial behavior while keeping a sharp eye on their portfolios.

An ever-growing equity market in an era of falling growth is a perfect set up for strong corrections. Corrections are healthy. It should have already happened but central banks have not allowed it to happen. These new highs are on the back of unprecedented global liquidity and not backed by economic growth. Economic and Business growth are non-negotiable in Equity investing. There is a belief that central banks will keep supporting the markets. Similar beliefs were prevalent in 1929 as well.

Some smart investors globally are cautious.

Mr. Buffet had said once “Be greedy when others are fearful and be fearful when others are greedy.”

He continues to remain invested in good quality businesses. But he is also increasing his cash pile which he earns via business profits. His current cash plus short term holdings are worth $128 billion (Yes, Rs. 9.1 Lakh Crores).

He has patience. He is participating as well as prepared. What about you?

10 Budgeting mistakes & how to avoid them


Most of us often make these resolutions to create a budget and stick to it but only to end up in more mess than before. What are the most common mistakes that we do in making budgets?

  1. Keeping the same budget every month.

Typically when we start making the budgets, one of the common mistakes is made to stick to a fixed budget every month. As we all know some months are expensive than the others may be due to anniversaries, birthdays, travel, weddings, etc.

Solution: Keep different budgets during festival months/birthday months/vacation months etc

  1. Not Tracking expenses.

The beginnings are always easy, but continuing gets tougher. Most of us end up tracking the expenses in between either because of sheer boredom or lack of time.

Solution: Use an expense tracking app / just an excel to record all the expenses. Include every penny in that tracker.


3.Leaving out a few non-recurrent expenses.

While creating a budget, ensure to revise it every month depending on the expenses that come either quarterly/half-yearly/ yearly, etc.

Solution: Revise budget every month to factor in non-recurrent expenses.

  1. Not working as a team.

Ensure to make a budget for the family and not just for you.

Solution: As a family, make a budget for the complete family including personal expenses.

  1. Not maintaining an emergency fund.

Some months the expenses are more than the monthly income, forcing us to use credit cards and then fall into the debt trap. With careful budgeting & planning, we can avoid these traps by creating an emergency fund.

Solution: Keep at least 12 months’ expenses as an emergency fund.

  1. Forgetting the difference between Need & want.

While creating a budget ensure to write against each expense whether it is a need or a want. This helps in re-thinking if the wants/desires can be postponed or satisfied immediately. This helps in keeping the expenses in control or plan the expenses.

Solution: Create Wishlist vs Necessities with timelines.

  1. Not accounting for the credit card expenses.

A lot of times in our expense tracking, small little credit card swipes are not accounted for resulting in huge credit card bill at the end of the month.

Solution: Keep track of what is being paid by credit card. Create a budget category wise/payment mode wise.

  1. Not including Investment / Saving as a part of the budget.

Warren Buffett said, “Don’t save what is left after spending; spend what is left after saving.”  Treat Savings/Investing also as a mandatory expense in your budget. This helps in disciplined investing.

Solution: Treat your investments as your first expense, hence include it in your budget as a non-negotiable item.

  1. Not creating a budget for unexpected expenses.

Many of the times, we encounter sudden expenses that are so random yet unavoidable. Make sure you keep a small budget for such expenses.

Solution: You don’t want to miss the sudden get-together of friends, sudden invite to a party which you can’t miss, etc. Factor in some % of the money for these expenses.

  1. Not having a budget in the first place.

Last but not least, one of the biggest mistakes that we do is not having a budget at all, thinking that I know all my income sources & expense pattern.

Solution: Don’t think that budgeting is only for companies. It is for every individual and family. Make a structured approach to spending by creating a budget.

Who is making more money – you or your bank?

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Amazon / Flipkart sale had rocked the online shopping this festive season. While a lot had been debated over a few months on the impending slowdown in consumption these sales have attracted crores of consumers to buy stuff.  What is surprising is if there is no liquidity from where did the money come for this shopping?  Is it offers like Zero Rate of interest EMIs? Swipe now, pay later facility? If yes, I wonder how will anyone give a freebie in business?

We might argue saying to promote a sale, they must be giving extra incentives and bulk consumption will average out their cost, etc.  However, if you recall, the most famous quotes in history, “There’s no such thing as a free lunch.”  What the adage refers to is the idea that it is impossible for a person to get something for nothing.

While we know & understand that there is no free lunch, yet we get excited with the offers that come in front of us to buy stuff at 0% Interest on EMIs.

Many of us buy most of our household items like electronics/laptops/ mobiles etc. on EMIs with 0% rate of interest.

Do you think it is really 0% and you don’t pay anything extra to buy the product now and pay it in installments?

As you know, there is no free lunch for anyone, How these financing companies give you an option to pay in installments and don’t charge you interest.

Few important points to note in this arrangement are :

  1. Manufacturers or Retail stores share some part of their profit margins with these finance companies to increase the number of sales.
  1. The cost value of the product is increased if taken on EMI vs immediate payment.
  2. In some instances, a processing fee is charged to start this EMI and this processing fee is indirectly the interest you pay

To give an example, Suppose a customer opted for 0% finance to buy an electronic device worth 10,000/-.

Product Cost Processing Fee EMI  (6 months) Effective Interest
10,000/- 500/- 1670/- 10% approx.

Buyers, therefore, need to be very careful before falling into the zero percent interest rate trap and spend some time doing their math in order to understand how much they are paying for a facility that looks very attractive from the outset.  Instead of falling into this trap, it is better to plan the purchase rather than impulsive buying depending on future income.

Start saving for the purchase beforehand rather than making your banker/financier rich at your cost.

Is this a recession or Global Slowdown?


In continuation with my July’s blog on trade wars and its impact, where I had mentioned that due to currency valuations, trade wars, oil import bans, interest rate changes etc the markets are volatile and may continue to stay like this for some time in near future.  We are now experiencing the same thing in equity and debt markets.

In the last few weeks, you would have noticed the news about the stock market falling on an average 1-2% almost every week. If you see the below table from Apr’16 till date Sensex returns were pretty decent, while you check for last few months in isolation it is   -ve 5%.

Month Sensex Cumulative Returns MoM returns
Apr-16       25,607
Apr-17       29,918 17%
Apr-18       35,160 37%
Apr-19       39,032 52%
May-19       39,714 55% 2%
Jun-19       39,395 54% -1%
Jul-19       37,481 46% -5%
Aug-19       36,492 43% -3%

If we look at the Sensex movement in isolation with a view of the last few months i.e, from Apr’19 till Aug’19 there had been around 5% downward correction.   Do these movements worry you? Are you receiving a lot of information on entering a slow down and global recession?

If you are one of those who are getting into panic mode or a sort of restlessness with these frequent fall in markets, do read the rest of the article.

This question always haunts us!! “Are we heading for a bear market or a 2008 repeat?”    Probably yes it is a slowdown, probably it is just temporary, for some probably it is still not slow down but the market is correcting due to some stressed sectors.

To be very frank, no one including stalwarts like Warren Buffett can predict any meltdowns/bull phases.  Once in every few years, these bull and bear cycles come into force and that is the nature of equity markets.  In the long run, what matters is only the time spent by you and the consistency with which you continue investing.

So, what do we do when we receive the gloomy & scary outlook of the economy? How do we handle our investments?

Before knowing how to handle investments in such situations, do go through this below data :

 Sensex Closing
Month 2015-16 2016-17  2017-18 2018-19 2019-20
Apr   27,011   25,607    29,918  35,160   39,032
May   27,828   26,668    31,146  35,322   39,714
Jun   27,781   27,000    30,922  35,423   39,395
Jul   28,115   28,052    32,515  37,607   37,481
Aug   26,283   28,452    31,730  38,645   36,977
Sep   26,155   27,866    31,284  36,227
Oct   26,657   27,930    33,213  34,442
Nov   26,146   26,653    33,149  36,194
Dec   26,118   26,626    34,057  36,068
Jan   24,871   27,656    35,965  36,257
Feb   23,002   28,743    34,184  35,867
Mar   25,342   29,621    32,969  38,673

There are multiple times, the markets have gone back to previous year’s Sensex levels. But in the 5-year horizon, does it actually matter?   Remember equity investments are meant to be for a long term and not for weak hearted (short-sighted) investors.

How do we deal with these kinds of market volatility?  The answer is a repetition of what I had mentioned in my previous blogs.

I repeat a few of the points from my last article:

  • Do I have sufficient money in safe instruments i.e Liquid / Fixed Deposits / FD alternatives to cater to my next 3-5 year’s goals & emergencies?
  • Do I have an asset allocation (Financial) plan as per my financial goals?
  • Does this news impact my earning or saving capacity? If yes, it’s time to sit back and review and re-organize. If no, continue with asset allocation and continue investments.

One last but not the least thing to remember is to stay calm in such phases and have very moderate expectations of returns in such years.   Returns are made only when invested for the long term with consistency.

Stay calm and continue with your financial plan.

An Interesting story of Odyssey & Sirens

Odyssey & Siren

Today I am writing about this eternal tale named “The Odyssey” and how few lessons can be learned from this tale while dealing with our investments.

The Odyssey was written by Homer about 2700 years ago.  It tells of the adventures of the Greek hero Odysseus (Ulysses in Roman mythology) during his harrowing return to Ithaca after being away for twenty years, ten of which he had spent fighting the Trojan Wars.

In one part of the journey, Odysseus is aware that he is about to encounter the sirens (monsters), famous for luring sailors to their death with their beguiling wind-like song.  Intensely curious to hear them, he has all his sailors plug their ears and tie him to the mast, with instructions not to untie him, no matter what he says.  As they approach, the sirens begin singing and Odysseus gets mesmerized with the singing screams to be untied, but the sailors can’t hear him and they are all saved.

According to some versions of the myth, the sirens are fated to die if sailors were to hear their song and escape.  So after Odysseus’ ship passes by, the sirens fling themselves into the sea and are drowned.

This piece suggests this dramatic encounter.  If you listen carefully, you can hear the wind-song becoming ever more insistent, the rocking of the ship, Odysseus’ screams, and finally, the sirens plunging to their death.

Why is The Odyssey still popular? It’s a timeless and fast-paced tale which features a hero on a seafaring adventure traveling through exotic lands, enduring terrible storms and horrifying monsters. All of this is set against an enthralling, supernatural atmosphere where gods move around in humble disguises so they can be involved in human activities.

Those gods, of course, are capable of casting spells and curses. They can predict things, which actually come true, and their warnings to humans can help people avoid catastrophes—provided, of course, that they heed the warnings.

At the center of it all is a human hero called Odysseus (Ulysses) who is a sympathetic, complex man. He tries to do the right thing and usually pays attention to what the gods tell him.

He especially heeds advice from the goddess Circe who warns him about the “Sirens.” These two monsters, who pretend to be beautiful women with amazing voices, try to assure sailors, who pass their island, that they just want to entertain them with beautiful melodies.

What they really want, however, is to kill them.

What is the message about the Sirens which Circe gives to Odysseus? Among other things, she warns him that his men must fill their ears with wax so they do not hear the Sirens’ beguiling songs.

How is this tale related to our investment journey?

Like the Odyssey, we all are sympathetic, emotional at the same time complex human beings.  Sirens (The monsters) are all over the place, while we are on our investment journey in the form of news, tempting advertisements, super lucrative instruments which are providing an unbelievable rate of returns on investments.

The Goddess Circe is the Power of Compounding and it keeps warning us about how time plays an important role in creating wealth.   It also warns about market ups/downs in the short run and asks us to tie our hands and stay on the course of the investment journey.

Those who pay attention to Goddess Circe ( Power of Compounding) sail through this ride and those who get mesmerized with Siren’s melodious songs ( News / Events around us) will get succumbed.

Those who demonstrate patience and will power to stay & ride the course of volatility is surely going to reach home like Odyssey. When I say home, it is the goal for which the investment journey had started.

Believe in your Goals and Stay determined to invest through the course, Tie your emotions and plug your ears to the noise around to succeed.

Have loads of patience & will-power. Happy Investing!!

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Scams & Accidents – A way of Life!!!

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In the recent years 2018 & 2019, we have seen fatal air accidents involving Boeing 737 and as per the past records of the aviation industry, there were many accidents in the past so many years involving Boeing 737.

The Boeing 737 series is the best-selling commercial jetliner in history, with the first unit having first entered airline service in February 1968 and the 10,000th unit entering service in March 2018.  

  • The first accident involving a 737 was on July 19, 1970, when a 737-200 was damaged beyond repair during an aborted take-off, with no fatalities;
  • the first fatal accident occurred on December 8, 1972, when United Airlines Flight 553 crashed while attempting to land, with 45 (43 onboard plus 2 on the ground) fatalities;
  • and, as of May 2019, the largest loss of life was an accident on October 29, 2018, when Lion Air Flight 610, a 737 MAX 8, crashed into the Java Sea shortly after take-off, with 189 fatalities.
  • The most recent crash was on March 10, 2019, when Ethiopian Airlines Flight 302, another 737 MAX 8, also crashed shortly after take-off, prompting a worldwide grounding of all 737 MAX aircraft.

On getting to know such news of accidents, immediately, what comes to our mind is fear for air travel. Despite the fear, we all continue to do air travel. Aren’t we? The reason is we do not have alternative time effective travel options. While we understand the risk involved in air travel, we still use this mode of transport.

Similarly, the real estate industry has its own share of false promises, undelivered projects, disappeared builders, scams, etc.  There has been the innumerable number of frauds/scams that have been happing in this industry and many innocent home buyers have lost lots of money.  Despite knowing that there are many grey areas in real estate industry, most of us still prefer real estate as one of the preferred and safest investments for the long term. We continue to invest in it, knowing the risk. 

In both above examples, because of the failure/frauds, the regulators of the respective industries have brought in risk-mitigating rules/regulations.  These changes will eventually help us in lowering our risk. Grounding boeing 737 is one such change, Bringing in RERA in Real Estate is another measure.

The reason of highlighting these two industry’s challenges/risks here in this article is to give you an analogy and help you know and accept risks involved in your wealth creation journey & how to mitigate them. 

Coming to wealth creation journey, as I always mention, asset allocation is the key at any point in time.

Before I reiterate the importance of asset allocation, let me highlight the recent fiascos happened in the financial industry.   You may have been hearing/reading about them and wondering are Mutual funds safe to invest? Should I stick to my traditional way of Fixed deposits and/or Insurance policies?

1 ) Infrastructure Leasing & Financial Services (IL&FS), an unlisted infrastructure lending giant with over 150 subsidiaries, has been making headlines for all the wrong reasons. The company’s debt was downgraded over the past few weeks for default of interest to its bondholders.

2) DHFL slumped after a news portal reported at the end of January that it gave loans amounting to Rs.31,000 crore to “dubious” entities linked to the promoters, who were said to be the ultimate beneficiaries. Reports of a probe by the ministry of corporate affairs added to the pressure. 

The company has faced a liquidity crunch since the second quarter of the last financial year and has been trying to raise finances to keep afloat.

3) Jet Airways, once was a top-notch running airline in India, today fighting for its existence.

4)Then there are few more fiascos that have happened in the past like Zee, Essar, Nirav Modi, etc.

5) In the past, there were so many bubbles happened in different economies.

  • The Tulip Mania – Year 1637
  • The South Sea Bubble – Year 1720
  • The UK Rail Road Mania – Year 1850
  • The Great Depression – Year 1929
  • The Nifty Fifty Era, US – Year 1973
  • The Nikkei Bubble – Year 1989
  • The Dot Com Bubble – Year 2000
  • The US Housing Bubble – Year 2008
  • India’s Bull Markets – Year 1992, Year 2000 & Year 2007
  • The current scenario – Year 2008 -2018

All these events indicate that your investments which are either in these direct stocks or in mutual funds, will have / would have impacted. So, now what do we do? Should we entirely stay away from these financial instruments?

The answer to this is No. We should not entirely stay away from these asset classes.  The regulator here too, will always work towards risk mitigating mechanisms. They have been implementing rules/regulations. They will continue to do so at all times.

Just relate back to the examples mentioned above i.e, of airline crashes & real estate fiascos. We do still fly by air, we do still buy real estate despite the fact that they do carry risk.

In life, everything comes with an element of risk. We all must know to understand the intensity of risk and learn to reduce it as much as possible.

In wealth creation journey, the only way to reach your goals is to stick to asset allocation with a clear understanding of the time frame of these goals. This helps to participate in Risk alongside Safety.

Key points to keep in mind always while in your wealth creation journey are, To have  :

  • Emergency funds – At any point of time, have 12-18 months of your monthly expenses as Emergency funds, invested either in Bank Fixed deposits or in Liquid / Ultrashort term Mutual funds
  • Short Term Goals (1-3yrs) – Any requirement of money in the next three years, should be either in Bank FDs/Short Term Debt funds.
  • Medium Term Goals (3-5yrs) – Any requirement of money in next 3-5years, should be in Medium Term Debt Funds with the high-quality rating.
  • Long Term Goals ( > 5 yrs) – Any requirement of money after 5 years should be equity mutual funds as per your risk profile.

Risk is inevitable but how we deal with is in our hands. Risk can be your friend if you understand it correctly and do the right asset allocation of your money.

Please remember,  the current situation / the current conditions of the market, is of least importance to you in five years from now.

Happy  & Safe Investing !!

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Wanna Retire early?


Are you one of those aspiring to retire early and explore your hobbies or go on vacations? OR Are you one of those thinking that there is still a long way to go to retire??  If yes to any one of these questions, this article will be an eye-opener for you.  Take out next few minutes and hold your breath, go on to reading this article.

Thanks to an improved standard of living, better quality food, and better health care, Life expectancy, in general, has increased considerably. We can see many senior citizens around us in the age group of 85-90.

This means that many of these senior citizens would have been surviving on their Retirement funds for the last 25 years, with an assumption that they were retired at the age of 60. Do you know how much retirement money is required to survive next 25-30 years with the same standard of living?

There is an interesting article published in Bloomberg, which states that America’s elderly are twice as likely to work now than in 1985. In the United States, for the first time in 57 years, the participation rate in the labor force of retirement-age workers has doubled to 20 percent mark, according to a new report from money manager United Income.

The article link is given below :

These statistics are startling. It means that many of these senior citizens, unfortunately, couldn’t estimate the quantum of retirement funds required. They also would have missed counting the bigger demon – inflation.

I am sure, most of us have many aspirations such as retire early, travel across the world, take up hobbies etc but there is no or minimal preparation to reach these aspirations.

Here is the table which indicates the quantum of retirement funds required to maintain the same standard of living.

Current Age 50 40 35 30 25
Estimated time left to retire at 60 10 20 25 30 35
Current monthly Expenses 1 Lac 1 Lac 1 Lac 1 Lac 1 Lac
Current yearly Expenses 12 lakhs 12 lakhs 12 lakhs 12 lakhs 12 lakhs
Inflation adjusted expenses at the age of 60 21 lakhs 38 lakhs 52 lakhs 69 lakhs 92 lakhs
Inflation adjusted expenses at the age of 85 92 lakhs 1.65 cr 2.21 cr 2.96 cr 3.96 cr
At 8% withdrawl rate, retirement value required now 1.5 Crs 1.5 Crs 1.5 Crs 1.5 Crs 1.5 Crs
At 8% withdrawl rate, retirement value required at age 60 2.69 cr 4.81 cr 6.44 cr 8.62 cr 11.53 cr
At 8% withdrawl rate, retirement value required at age 85 (in Crs) 11.53 20.65 27.63 36.98 49.48
SIP required from now to reach the retirement value at 60     1,31,137     63,351      48,520    38,112      30,367
Value of retirement money at the age of 85          29.10       52.12        69.75      93.34      124.91
( @10% growth rate ) in crs
Note : Inflation considered at 6% & Inflation adjusted investment growth rate at10%

Looking at the above table a 25-year-old to maintain the same standard of living require around 11.53 Crs of retirement money at the age of 60. In order to accumulate this money, he/she needs to do a SIP of 30k every month from today. The assumption in this calculation is at the time of retirement, 8% pa is withdrawn to meet expenses and the remaining amount stays invested to grow at a rate of 10% pa.  This 11.53 Crs will grow to 124.91 Crs at an estimated growth rate of 10%pa.

So, Are you investing sufficiently to meet your retirement needs? These calculations are for a person to retire at the age of 60. Assume if you want to retire early, the numbers are way different and high.

Should you need assistance in planning your financial goals, please do reach out to me at or

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Is it Six or Nine? Confirmation bias is the way you see it!!

Confirmation Bias

Whether we believe it or not, human beings are not rational at all times. A lot of pre-conceived notions /opinions play on our mind while taking any decision. We always try to search for evidence to prove our intuitions/opinions.  In short, this is what is called confirmation bias.

 Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s pre-existing beliefs or hypotheses.

The 2-4-6 experiment that was developed by Peter Wason was one of the experiments that proved that humans suffered from this bias trying to support their own theory, instead of completely and rationally evaluating their theory.

The participants were told that these numbers conform with a certain rule, and the experimenter had a certain rule in mind that was true in case of three sets of numbers, and to find examples that adhere to this rule. The experimenter had a very simple rule in mind: numbers in ascending order. However, the participants took complicated theories and did not test whether the theory is false for these numbers.

Thus, when you formulate hypotheses, you look for clues that confirm it, rather than find information that will criticize it. Thus, when a researcher formulates an opinion, instead of critically evaluating it, he will be in the pursuit of finding theories that support it.

In real life we have many examples where unknowingly we fall prey to the confirmation bias, such examples are :

  • Many of us who are Cricket fans have this belief that if Sachin Tendulkar hits a century, India will lose the match. Because of this belief, we end up searching for a past history of such matches lost and form a hypothesis.
  • We have been for ages hearing Cancer as a deadly disease and end up believing it that it is not curable and survival is very low. This belief is so strong that we end up finding failure cases rather than checking for advanced improvement in medical facilities which has helped many patients survive cancer.
  • Celebrities such as Ratan Tata, Mahatma Gandhi, Mother Teresa, Sachin Tendulkar, Big B, Rajnikant, Barack Obama are left-handers. Most of us do end up believing that all the successful celebrities are left-handers.
  • A low carb diet helps to lose weight. If this is what is on your mind, everywhere your mind will end up finding evidence to prove this theory.

There are many such real-life examples, where confirmation bias plays a role in our perceptions and decisions. Now, how does this confirmation bias affect our investment decisions?

  • Online websites, print media, etc keep publishing performances of various mutual funds and promote few mutual funds in the name of returns. This information creates a bias towards a fund and we all intuitively hunt for information to support the information and start investing.
  • Similarly, in the case of bear phase / falling market phase, there is a lot of information about negativity or issues with the various investment products. Intuitively again we hunt for the information to establish evidence to it.

This is one of the reason, why many investors have not made returns while on paper Sensex had delivered returns in the long run.  The philosophy of Buy low, Sell High didn’t happen because, confirmation bias pushed us to do the opposite i.e, Buy High, Sell Low.

How do we protect ourselves from such biases overpowering our investment decisions?

The only way out / solution to stay away from this bias is as follows :

  • Establish & write down your financial goals
  • Create an asset allocation plan and stick to it
  • Every time a piece of news/information hits you, find out both sides of the information and rationally evaluate if that information affects your financial goal. If yes, take a decision else stick to your asset allocation

Remember in the long run, only patience, asset allocation and disciplined investing help you reach your financial goals.

Unfortunately, we all have confirmation bias. Even if you believe you are very open-minded and only observe the facts before coming to conclusions, it’s very likely that some bias will shape your opinion in the end. It’s very difficult to combat this natural tendency.

If we know about confirmation bias and accept the fact that it does exist, we can make an effort to recognize it by working to be curious about opposing views and really listening to what others have to say and why. This can help us better see issues and beliefs from another perspective, though we still need to be very conscious of wading past our confirmation bias.

Happy Investing !!

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