Category Archives: Financial Freedom

Your Personal War in Cyberia

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Are you illiterate?

Literacy is not just alphabetical.

The meaning of literacy has expanded itself into your cyber world and also into your financials.

I mean, can you call yourself literate without knowing computer and financial basics?

I don’t think so. Not anymore. Times have changed, and so must you, in case you want to be called literate.

One of the first things one learns during one’s quest for financial literacy is the operation of one’s netbanking.

Once you are logged in, you soon realize, that your assets are under attack, and must be appropriately secured.

Login password, secure login, phishing filter, security questions, transaction password…you are learning fast. Your vocabulary is changing. Your defences are up. Yes, you are at war.

What kind of a war is this?

More of a cold war, till it gets hot for you, which can happen, but is not a must.

Worst-case scenario is that someone cleans you out. As in, a cyber thief steals all your money that was reflecting in your netbanking.

Your common-sense should tell you that your netbanking password is the all-important entity. Tell it to no one. Store it in a password safe. Keep changing it regularly. Don’t forget to update it in your safe. The safe of course opens with its own password, and is in sync between your mobile and your desktop. On both your mobile and your desktop, internet security prevails. Meaning, don’t use an el cheapo antivirus. Use a good one. Pay for it.

If there is a large amount reflecting in your account for a number of days without being used, secure it. Even if someone hacks in, available amounts should be as minimal as possible. Let the hacker first deal with unsecuring a secured amount. This gives you a time-window, during which you read and respond to any sms sent by your bank, that a secured amount has now been unsecured. The shot has been fired, your watchman has alerted you, and you now need to respond.

For the amount to be actually transferred out of your account, one more thing needs to happen. The hacker needs to set up a new payee under third party funds transfer. Some banks take three days for this, during which they coordinate with you whether or not you really want this payee to be set up. Other banks have a one-time password (OTP) system, where a transfer can only be activated by an OTP sent by sms to the registered mobile number linked to the account. Works.

Nevertheless, hackers seem to be getting around these systems, because one hears and reads about such cyber thefts all the time. However, the window created by your systems in place gives you crucial time to respond.

What is your first response, after becoming aware that you are under cyber attack?

Relationship manager (RM) –  call him or her. After you’ve alerted your RM, login if you can, and secure any unsecured amount. Change your login and transaction passwords, along with security images, words, questions and answers. Delete all payees. Logout. Close all windows on your desktop. Clear all history, cache, temporary files, cookies and what have you. Run a virus cum spyware scan. Clean any viruses, then shut your computer.

How does one go about securing unsecured amounts?

Make a 7 day fixed deposit with your unsecured amount. Or, configure your mutual fund operations through your Netbanking itself, and transfer the unsecured amount to a trusted liquid scheme offering 18-20 hour liquidity, all through your netbanking. Pretty straight-forward.

After you’re done, join your RM in finding the loophole. If you’ve incurred a loss, file a police report along with an application for reimbursal, citing all security measures you undertake as a given while also outlining the chronology of your actions after you realized that you were under attack.

That’s about it, I can’t think of anything else that you could do. If you can, please comment.

Right then, all the best!

The Frog That Lived in the Well

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Once upon a time, there was a frog.

It lived in a well.

Its cousin, however, lived in the ocean, and this particular cousin came to visit.

Cousin froggy was stunned. How could one thrive in such a small space? Our original froggy, however, did not believe that one’s world could get any better. It loved the well, and only after much coaxing did it agree to see what the ocean was like.

Upon seeing the magnitude of an ocean, our original froggy’s head exploded. This story’s from Paramhans Yogananda. 

I’m sure you’ve heard this story from someone. Something similar probably happened to you too, of course on a much smaller scale of magnitude, with no head explosions and all that.

I used to walk around pretty smugly with my Blackberry, thinking that I was like there, connected. Experienced kind of a head explosion upon moving to an Android smartphone.

What is it about us humans?

Why are we so limiting?

Why do we create barriers around our life-experience, around our possibilities?

Market conditions keep changing. Just as we get tied up into a rut and define a market as range-bound and going nowhere, it breaks out. Are you able to cope?

Be honest.

Can you adapt to such changes in conditions?

Are you quick on your feet? Or are you lethargic, and full of inertia?

What’s that song by The Black Eyed Peas?

“don’t…don’t…don’t … … don’t-stop-the-party!”

I know you’ve been humming this song during your continuing debt market party, but there is more to the scene than just the debt market. The debt market is not where things start and end in the world of investing. There’s more.

The world of investing is like an ocean.

The next buzzing market will make itself known. It’s only a matter of time. Be ready for it. Don’t remain clogged up within the claustrophobic walls of one market only, out of sheer laziness and a false sense of security.

Get out there.

Experience the ocean, without your head needing to explode.

The Ugly Side of Leverage

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Not too long a time ago, in an existence nearby, people saved.

Credit was a four letter word, or a six letter word, or whatever you want to all it, as long as you get my point.

People worked hard, and enjoyed the sweet taste of their labour.

They knew their networth on their fingertips, and there was no question of extending oneself beyond.

People were happy. They had time for their families. Words like sophistication, complicated and what have you had simpler meanings.

At the end of the month, as large a chunk as possible was pickled away.

For what?

Safety. Steady growth. For building a lifetime’s corpus. For the future generation.

Life was straight-forward.

Then came leverage.

At first, leverage was an idea that was looked down upon. People were slow to leave their safety zones.

Then they saw what leverage could do.

It could make possible a lifetime of fun. One could do things which were well out of one’s financial reach currently. Leverage could even buy out billion dollar companies.

All one had to do was to pledge one’s incoming for many, many years. If that didn’t suffice to fulfill one’s fun-desires, one could even pledge the house. The money borrowed would eventually be paid up, along with the compound interest, right? After all, one had a steady job that promised regular income.

What use was a lifetime of sweat if one didn’t get to enjoy oneself? One couldn’t really live it up after retirement, could one? That’s when one would eventually possess enough free funds to do what one was doing now, with the advent of leverage.

The do-now-pay-later philosophy soon took over the world.

Without being able to afford even a meaningful fraction of their expenditure, people began to go beserk.

What people didn’t know, and what they are now finding out the hard way, is that leverage is a double-edged sword. Since people didn’t know this, and since they didn’t bother to read the fine-print of the documents they were signing while leveraging their monthly salary or their home, well, financiers didn’t bother to educate them any further. No hard feelings, it was just business strategy, nothing personal.

Today, we know more. Much much more. Hopefully we have learnt. We are not going to make the same mistakes again.

So, when you buy into a company, look at the leverage on the balance-sheet. A debt : equity ratio of 1 : 1 is healthy. It promises balanced growth. If the ratio is lower, even better. We’ll talk about debt : equity ratios that are below 0.5 some other day.

Most companies do not have a healthy debt : equity ratio. Promoters like to borrow, and borrow big. You as an investor then need to judge. What exactly is the promotor using these funds for? Is he or she using these funds to finance a hi-fi lifestyle, with flashy cars, villas and company jets? Or is the promoter using these funds for the growth of the company, i.e. for the benefit of the shareholders? Use your common-sense. Look into a company’s management before buying into any company.

As regards your own self, reason it out, people. Save. As long as you can avoid taking that loan, do so. Loaned money comes with lots of hidden fees. If I’m not mistaken, now you’ll even need to pay service tax and education cess on a loan, but please correct me if I’m wrong. There’s definitely a loan-activation fee. Then there’s the huge interest, that compounds very fast. Ask someone who has borrowed on his or her credit card. There’s the collateral you’re promising against the loan. That’s your life you’re putting on the line. All for a bit of leveraged fun? How will your children remember you?

Also, when you invest with no leverage on your own balance-sheet, your mind is relaxed. There is no tension, and your investment decisions are solid. Furthermore, if you’re invested without having borrowed, there’s no question of having an investment terminated prematurely because of a loan-repayment date maturing coupled with one’s inability to pay.

How does the following sentence sound?

” Then came leverage, and common-sense disappeared.”

Not good, right?

Making the Grade

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It’s your convocation. From now on, you’ll be a degree-holder.

Yippeeee!

Just pause for a second.

All your life, you’ll be introducing yourself as a master’s in this or a bachelor’s in that, or perhaps even as a Ph.D. in xyz.

Have you even once considered, that your respective field will continue to evolve, long after you stop studying it?

For example, one fine day, in a Chemistry lecture to class XII, I noticed that the stuff I’d learnt for my master’s degree exams was the very stuff I was now teaching these 17-18 year-olds. That was a big realization for me. It then dawned upon me, that I had to either keep moving with the developments in the subject, or I needed to change my profession. I moved on from Chemistry in 2004.

So, for heaven’s sake, a paper degree is not your ticket to your subject for life. Things, people, seasons, subject-matter, issues at hand – everything changes. Every decade or so, there’s a complete overhaul. To stay on top, and still feel like a degree-holder of your subject, you need to be with things as they move, through the whole decade.

Does your marriage give you a licence to stay married to that same person for life without working on the relationship day in, day out? No, right?

Your degree doesn’t make you a king-pin in your subject for life either, without the appropriate ground-work everyday. Let’s please digest this truth.

The worst-case scenario of whatever I’ve said above happens in the markets. It is a worst-case scenario, because you enter the markets with some finance degree, thinking that the degree has taught you to play the markets successfully. Nothing is further from the truth. Here, you have a piece of paper that gives you false confidence, and you see your balloon bursting after your first few live shots at Mrs. Market.

Financial education in colleges and universities lacks two basic factors. The thing is, these two factors are game-changers. Get them wrong, or don’t know much about them, and your game becomes a losing one.

What are these two factors?

Everything and everyone around us teaches us not to be losers. We are taught to shove our losses under the carpet.

Cut to reality: winning market-play is about losing. Losing, losing, losing, but losing small. To be successful in the markets, we need to learn how to lose small, day in day out. It’s not easy, because our entire system is geared up to win, every time.

Then, everything and everyone around us teaches us to seal that win and post it instantly on our resume, on facebook, on twitter. Modern society is about showing off as many wins as possible. Losers don’t get too many breaks.

Cut to reality: winning market-play is about winning big, very big, every now and then, amidst lots of small losses. That can’t happen if we immediately book a winner. We need to learn to nurture a winner, and to allow it to win big. Again, that’s not easy, because as soon as a winner appears, our natural instinct tells us to book it and post it. So bury your “win it-cut it-post it” attitude. Instead, win, let the winner win more, and more, and when you feel it’s enough, without getting greedy, cut it, and then keep quiet, bring your emotions back to ground zero, and move on to the next winning play.

The reason, that most teachers of finance in colleges and universities don’t know about these two factors, is that their own money is almost never on the line. They have almost never felt the forces of live markets through this “line”, day in, day out. The line one puts on is one’s connection to market forces. Only a regular connection to these forces teaches one about realistic, winning market-play.

One could argue that the case-studies examined in finance school are very real. Well, they are very real for those protagonists who actually went through the ups and downs of the case-study in real-life. They got the actual learning by being exposed to live market forces. You are merely studying the statistics and drawing (dead) inferences, devoid of first-hand emotions and market forces. Whatever learning you are being imparted, is, well, theoretical.

Theory doesn’t cut it in the markets. Theory doesn’t make the grade.

So, what makes the grade?

I consider a seven year stint at managing your own folio a basic entry requirement into bigger market-play. What happens during this time?

Each body cell gets attuned to real market forces, live. You get to know yourself. You build up an idea about your basic risk-profile. Your market-strategy takes shape. It is fine-tuned to YOU.

During this stint, money needs to be on the line, again and again, but the amounts in play need to be small, because you are going to make many, many mistakes.

And please, make whatever mistakes you need to make in this very period. Get them all out of your system. Make each mistake once, and never repeat it, for life. Point is, that after this stint, money levels in play are going to shoot up. Mistakes from this point onwards are going to prove costly, even devastating. The kinds, where one can’t stand up again. You don’t want to be in that situation.

Once you are comfortable managing your funds, and don’t get rattled by Mrs. Market’s constant action, her turnarounds, crashes etc. etc., your market decisions are such, that you start applying your knowledge of money-management successfully. You have now become a practitioner of applied finance.

Applied finance is advanced level market-play. To win at applied finance, your money-management basics need to be fully in place and rock-solid. You can define applied finance as Money Management 2.0.

Winning at applied finance is self-taught. You don’t need a degree for it. In my eyes, a degree here is in fact detrimental, because you then spend a long time unlearning a lot of university stuff during real market-play. You actually see for yourself, that most of what you learnt applies only in theory. The stuff that makes winners, where is that? Why wasn’t it taught? Well, you’ve got to go out there and learn it for yourself.

Let theory be where it belongs. Respect it, but leave it in its appropriate world. The world needs its theoreticians to make it go round, but you need to go beyond theory, to win big.

Put on your practical shoes when you put your good and real money on the line, and be ready for anything.

Let your mistakes teach you.

Keep making the grade, day in day out.

Long after society tells you that you’ve made it.

Don’t Cry for Chris Atkinson

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Chris Atkinson is terminal.

You couldn’t tell that by looking at him.

He’s happy. Most of his physical pain gets subdued by medicine. The remaining portion gets subdued by the harmonious environment he’s created around himself all his life.

Whatever’s left of his life is still a pleasure. He looks forward to it.

He won’t be sorry to go, though, for he carries with him a huge sense of accomplishment.

For starters, he’s had a flawless marriage. Neither of them have felt the need to fight.

He has been faithful to her and has given her everything he possibly could.

She has supported him selflessly in every venture of his. She has never abused the financial freedom he’s given her. Also, she’s never been jealous of his intelligence.

She has not nagged. That’s a huge one, and he knows the value of his good fortune.

Furthermore, she has overlooked the “too-much proximity” clause, and has allowed him to work from home in peace. She has even added to the harmony of his work-sphere at home.

He’s not told her he’s terminal. In fact, no one else knows, except him and his doctor.

He has always wanted to work till his last day. Also, she should see his smiling side till the end.

What about after that?

Will she be safe?

After all, before her marriage, Jane Atkinson was probably the most tech-unsavvy woman alive.

Forty something years with him have completely turned that around.

She is financially independent today. More importantly, she’s able to access and manage her personal funds and investments independently. She doesn’t need to contact any fund-managers, brokers, bankers or the like. All her accounts are online, and their logins and passwords are sorted, stored, and accessible only to her. She is able to move her personal funds worldwide with a few button-clicks.

He has taught her fantastically.

She has learnt very well.

Initially, it was a slow going.

The most important thing was, there was no ego from her side while learning. She knew he was teaching her something really important. Though she was not the least bit interested in it, she respected his seriousness and intensity, and decided to learn as diligently as she could, without insulting his earnest attitude.

Slowly, she’s gotten the hang of it. Slowly, her interest in money matters has awakened.

It’s also worked because he has been very patient with her. He’s never blown up.

His monthly “lectures” on saving have converted her from a champion spendthrift to a slightly serious saver. She still spends a lot, but has been managing to save a bit every month. Since his monthly allowance to her has been huge since the beginning, the bit she saves equates to a lot of money in her personal account at the end of every month, money that’s waiting to be invested.

And now comes the kicker. She knows how to handle idle funds. Her knowledge on investing comes purely from watching him in action. She has watched in bits and pieces over forty plus years. She has shared his professional tensions, allowing him to speak freely about what has bothered him. Her mind has soaked in all this information. Because of the long time-span involved, she has digested the information and transformed it subconsciously into a usable form. Today, she is not only financially independent, but also financially capable.

So, no, he’s not worried about her on the financial front.

What’s eating him a bit is the emotional side of life. How will she take it?

He knows she’s strong. She’ll be shattered, though. They share a bond that most people don’t have. They don’t need to speak in each other’s presence. There’s so much mutual love, that life is telepathic. Her mental strength will pull her through, he tells himself. Their happy memories will sooth her feelings.

If you ask him, he’ll want her to move on. As in, he’ll want her to find a new and suitable relationship. She won’t, though. They have something a new relationship will not be able to replace.

He knows she’ll plunge further into her charity work, and will keep busy.

She’ll remember and miss him every day. That very thought takes away any of his pain that remains, physical or mental. He feels wanted, and will do so till his last day and beyond. Feeling wanted is a tremendously satisfying state of mind.

He has always been aware that she is emotionally dependent on him, and has never abused this knowledge. Over the last four decades, he has made her aware of her emotional dependence, asking her to work on it.

Today, he feels she’s capable of handling his permanent physical absence. It’ll hurt her, but she’ll handle it. She’ll cry, but joyful memories will pull her through.

Don’t cry for Chris Atkinson.

When he goes, he’ll go on a happy and fulfilled note. He’s had a great life.

Many couples wish they would live their lives like Chris and Jane Atkinson have done.

Only the Lonely

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You are unique.

Are we still debating this?

No, right?

If we are, then sit yourself down.

Alone.

Reflect.

Please see how you are… unique, and that you are… unique.

Moving on, what does that mean for you?

Specifically, what does it mean for your market strategy?

A newbie starts off with very generalized market strategies.

What’s good for the goose, is good for the gander types.

Ones that treat donkeys and horses alike, to literally translate from Hindi.

Slowly but surely, you realize that you don’t want donkey treatment anymore. Mrs. Market has kicked you around and converted you from a donkey into an intelligent market player.

An intelligent market player requires a fine-tuned, risk-profile specific strategy.

That’s where you either step in or you don’t.

Choice is, as they say, now yours.

Do you want to continue with generalized, text-book level donkey strategies, or do you want to spiral up to the level of exclusive strategy tailoring and fine-tuning.

People who approach the market as a secondary or tertiary activity don’t generally spiral up. Most of them are unhappy with their returns, but since they already have primary (and probably successful) professions going for themselves, they choose to remain where they are as far as the markets are concerned, and they don’t aspire to rise any higher.

You see, they don’t have the time to take this spiral plunge.

Now it’s decision time for you, buddy.

Do you wish to remain at the average donkey level all your life as far as the markets are concerned? If not, read on.

You need to spend some alone-time, as long as it takes.

Go over all your market activity till date.

Develop a feel for your risk-taking ability.

What bothers you? What do you like? What kind of a “line” are you capable of stomaching? For how long? How do you react to a loss? To a profit? Are you emotionally stable? Can you remain stable for long? How long? What gets you on tilt? Once you make a rule for yourself, are you able to follow it? Or, do you keep second-guessing yourself? What kind on income are you looking for from the markets? Have you learnt to sit on cash? Can you stay invested for long periods? Can you let your profits run? Do you respect your stop? Do you know what a stop is? Do you know how to manage a trade? Have you fully understood basic money-management? After what level of income do you start functioning smoothly?

Etcetera, etcetera, etcetera.

Ask yourself these and many more such questions.

Let the answers come from within.

Listen to those answers.

Understand who you are.

Then, devise a unique and fine-tuned market strategy for yourself.

Keep working on this strategy, fine-tuning it till it is in tandem with your unique self.

At that point, it will become a successful strategy, and will yield above-average results.

Being above-average in the markets is a winning scenario.

The Sweetest Spot

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In the markets, we often lose our balance.

Then we find it. Only to lose it again.

The key is maintaining this balance over long periods of time.

There’s a spot, where everything, suddenly, goes into balance. I like to call it the sweetest spot. What are its characteristics?

Firstly, at the sweetest spot, health is intact, on the physical as well as on the mental level. Then, one has identified a trade, entered it, and the trade is in the money. At this spot, the spouse respects you and your profession, because neither you nor your profession are bothering him or her for space. Relationship with him or her is harmonious. At the sweetest spot, you find time for your children. You’ve got a rapport going. Your off-spring learns from your every word and action.

Phew, sounds amazing!

Wait, there’s more!

At the sweetest spot, one is debt-free. Neither is one under-trading, nor is one over-trading. Reactions to market events are sharp, and one turns with the market, i.e. one is in the Zone. As profit levels increase, so does position-size, proportionately. You are getting your strategy basics right, one after the other.

At the sweetest spot, goodness wells inside the human being, and he or she does an extra bit for the benefit of society.

Life, profession, existence…it’s all one smooth, harmonious, automatic flow.

Then, in a flash, the spot is gone. One or more of the many factors mentioned tend to go haywire. That’s quite normal.

Which only means, that you start looking for the sweetest spot again.

Whenever you find it once more, your primary goal is to maintain it as long as possible, again, and again and again (to the power of n, with n > 1).

Before you realize it, you are then staring at financial freedom. You are there, financially independent of any other factor or being. You have arrived.

Some things in life are really sweet, and worth striving for.