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Thanks for the comments!


Yasmeen posted a comment and I thought I’d reply in a separate post:

Great Job Deepak. Neat BLog. I like the content and the style!

Thanks, Yasmeen!

I have been investing mainly in equity and I find the tax implications quite ok. I haven’t tried any mutual funds and do some (very little) insurance only for some tax saving and some risk coverage.

Insurance: I’d suggest you get a risk cover, just in case. I have taken a “pure risk” term policy – which is only Rs. 300 per lakh! For 20 lakhs I pay 6,000 per year, and this also gives me a tax saving. Effectively, I pay only around Rs. 4,200 per year, to ensure that my family is taken care of if I die.

As I build up my liabilities I will further add to such pure risk term insurance – to cover my liability (like a housing loan, if I take it) and have some money left over for family.

How I look at my equity investments – Theres only so much that is tax exempt so I’d rather play my money on equity, pay tax and be done – anything i miss in thinking this way? – esp since I also wont tear my hair over it if it all crashes.

I agree completely. You might invest in Equity Linked Savings Schemes (ELSS) of mutual funds but as I’d mentioned in an earlier post, it has too many disadvantages. You could also invest in unit linked insurance schemes, but I think they have the same disadvantages as ELSS.

Tax wise: if you hold your shares for a year, you have no tax liability. This only applies for market transactions where you have paid Security Transaction Tax (STT) – this should be there in your contract note.

What I have to ask:
a) What benefits do mutual funds offer over equity investing – other than being somewhat low risk? Is their any tax saving or anything else?

Tax Saving – ELSS schemes are tax exempt upto investments of Rs. 1,00,000 – this is all inclusive of all 80 C investments.

Mutual Funds have another alleged advantage – they are professionals and can get better returns than most of us. While this is true in many cases, I’ve seen enough people make a lot more by value investing – investing in stocks that have much more long term value.

For instance, an investment in Hero Honda in 1997 has given a return of over 1000%, apart from some astoundingly huge dividends. No Mutual Fund that I know of has come anywhere near this.

Also remember that Mutual Funds are simply other people’s money (for the fund). This means that people can withdraw funds when they like – in a market downturn, lots of people suddenly withdraw, and in the redemption pressure, MFs sell good stocks to generate cash. This will involve loss of revenue.

Having said that, you will only beat a Mutual Fund if you have lots of time for research and employ a sound investment strategy. If you don’t have the patience or the time, Mutual Funds are a better bet.

b. Also I am keen on looking at getting a house (for my parents)and some land (mostly for our non-profit work) – And since you manage your existing real estate assets – some information on profitability, current prices and such like would be what I would like – I wonder if this is a good market at all to buy???- if you have some answers and predictions…

Current Prices in Bangalore are high. But in every market there are some good deals – you have to look hard. Sometimes you get a deal that is just great!

In terms of profitability, you have to depend on capital appreciation – betting that the property value will go up – for your gains. Cash flow is usually miserably bad since in most properties you can’t even expect rent enough to pay for your EMI for the first five to ten years! I will explain using a very interesting Excel sheet I have developed for this model (I call it the Robert Kiyosaki Model)

Price wise: Real estate is a cyclical – it will go up and down. In the past it has gone down much lesser than up, so the prices now are much higher than 20 years ago. Also you will see that some areas will develop well, so you can pay a premium for such areas – since they will command a better price for better infrastructure in the long term.

I’m not particularly interested in real estate for investment. I think it’s too much of a hassle 🙂

( I not only will take it with a pinch of salt I will also take only what I want and leave the rest.)

Once again very good work – I am sure this will induce people to address their investments and perhaps also some seasoned investors will comment.

Thanks Yasmeen, and keep posting. I don’t have any accreditation or long term experience – I’m just another investor, and I would love to hear from more seasoned folks.


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