Great investments don't grow on trees

I've been hunting... the rich dad way...
and his words ring truer with each investment opportunity I explore.
Great investments certainly don't grow on trees. It takes time, I've been hunting now for the past 2 months or so. Most investments when thoroughly analyzed are so bad, you wonder whether the people selling you those have no conscience.
Rich Dad's words "it's not the investment which is good or bad it's the investor" also ring in my ears, teaching me paitence. If great investments were so easy the mass of the population would surely not be in the rat race.

Currently I'm learning more about 2 areas:

• Real Estate
• Stocks

It's amazing how much education one is lacking. It never hurts to learn more about both these areas.

Some days ago I finally created a real estate evaluator for myself. It's an Excel sheet where I need to put in the numbers such as the asking price, the discounting, the stamp duty, registeration costs, the loan amount etc. The receivables in terms of rents, the EMI payable on the loan the society charges payable monthly etc. Based on these and some other parameters I can calculate the actual investment to be made and returns/gains from the property investment. I'd be happy to share and discuss this with people reading this blog.

more on 6.5% RBI Bonds in India

Just today, The Free Press Journal, Mumbai edition carried an article regarding the same topic RBI Bonds I had discussed in my earlier post. They ratified my thoughts regarding how small investors lose because of the change in policy introduced by the new government.

I'm surprised that the big dailies like the Economic Times and the Times of India somehow just didn't highlight this loss to small investors in the way it should have been. The Times of India had a one or two para on the 6.5% RBI bond being scrapped but certainly not enough information to guide the small investor.

Bond... well ahem not the James Bond kinds :-)

RBI Bonds are popular instruments which people use in India. Especially for retired people there used to be pre-Mr. Chidambram's budget an RBI bond which would give retired people tax free 6.5% interest. Unfortunately that's on it's way out. Instead a new Bond(they just don't die) is supposed to replace this one. It will offer a higher rate of interest, rumors say 9% but unfortunately this is not a tax free bond :-( So ineffect it's not really doing to much assuming tax at the rate of 35% the highest tax bracket as of today the yeild due to this bond on say 100 Rs. would be a pathetic 5.85%. Thats lower than the earlier bond + it's lower than the rate at which inflation in growing.

You would need to calculate how much money you're actually going to make due to this bond, by seeing what tax bracket you fall in.

Sadly another investment option for most old people has just disappeared in INDIA. This is indeed a sad state of affairs.

Another point to note is that there is a ceiling on the maximum one can deposit into this RBI bond, 15 lacs to be precise. The time period for investment is 5 years for this specific bond, moreover you have to keep money atleast for a two year period.

Mr. Chidambaram made a very weird statement on Television(CNBC), in a recorded meeting with CII, to a question asked by a gentleman in the audience he replied, we know this(the earlier RBI Bond) was a place for the rich to park their funds, hence we've removed this bond and have kept a lockin period of about 2 years. Now that's strange, which rich person/true investor, in their right minds would keep their money locked in a bond which gives a pathetic interest rate of 6.5%.

New to Investing

First I'd recommend read the Rich Dad Poor Dad book. That's the starting point, whether you're in India, Japan, USA, Antartica. The basic principles are the same. You need to understand the difference between an asset and a liability, good debt and bad debt and other such fundamentals before you can really start investing.

Can the principles be applied in any country, frankly after listenining to phenomenoal opposition from people that this can't be done in India, I started doing my own personal research and I've realised it's possible here and any where else. Frankly before I came to this staunch belief I had to read thru a number of the Rich Dad Poor Dad series of books, each book taught me much more, and I realised I didn't know so much.

The last book Robert Kiyosaki book I read was Who Took my Money, I would definitely say this is the best book in the series. This book for me atleast refferred to very recent cases of how people were losing and gaining money. If I say the earlier books opened my eyes to the world of financial literacy, then this book kept my eyes open. It teaches more effectively according to me things like getting your money off the table, leveraging investments, managing them, understanding trends and helps you in understanding that the rich ensure that each investment is a guaranteed investment and how you could possibly do the same. It teaches most importantly the difference between CashFlow vs Capital Gains, a topic very few people understand. It teaches how the rich leverage in both good and bad ways and how we as investors should be aware of the same and make sure our investments gurantee a return.

Another important lesson it teaches is that great investments don't grow on trees, if that were the case everyone would be plucking them :-) It teaches you how to identify what a great investment is, it reinforces that the investment isn't good or bad but rather the investor.

Rich Dad Poor Dad

This book teaches financial literacy, my aim is to enable Indian's to be financially literate and understand the nuances of how Rich Dad's teachings are relevant in the Indian context.

Luckily for me the Indian budget 2004 has just been announced and frankly I see this as a perfect opportunity to highlight how investors can understand what investments make sense in the Indian context.

With each post I'll try to share my learnings, which hopefully will help educate and encourage true financial knowledge sharing among Indians.