This is the third blog in the series “Swami’s titbits on Family Finance” based on narration from my friend Swami.
After a long hiatus, I managed to connect with Swami again. As promised last time, Swami was eager to talk about his sojourn in US.
Land of Opportunity
Swami had moved to US, the “Land of Opportunity” with an IT job in April 1996. He was excited about the experience and wanted to get the best out of it.
Within one year of serving the first client, he became the permanent employee at the client’s place. During compensation negotiation, Swami was offered a significant amount of stock options in lieu of reduced salary. Since the company was small with no visibility of getting listed in the stock market, Swami chose the middle path: some salary to manage the livelihood and some stock options (worth $12,000) for upside.
At the job, Since 401 K plan (equivalent to PF in India) had a contribution from the company, Swami enrolled in 401 K plan from day one.
US has a rich library system in place. You could go to your county library and get 50 books issued at a time. If that library does not have the book of your choice, they will source that book from other county libraries in the country. In short, you have access to all the reading materials you want. Swami found that the biggest leveller in the society, rich and poor have the same access to the knowledge they want. Swami was hungry to know about US equity market and investments, and his never-ending reading journey started with the read of “The Intelligent Investor”, “A Random Walk Down Wall Street”, “One Up on Wall Street” and continued beyond.
He was picking up the nuances of the US Equity market. For investment, he opened an account with a full services brokerage firm Merrill Lynch and another account with discount brokerage ScottTrade to place cost-effective trades. To start with, he tried to play safe and his investments were predominately in blue chips (e.g. General Electric, Proctor Gamble, American Express) largely from the Dow Jones. Slowly he started developing investment bias for large technology names (e.g. IBM, Intel, Nokia, AOL, Yahoo, CISCO, Oracle), which were market darling in those days.
Boom and the Bust on the Street
In the later part of the 1990s, the dot-com boom was in full swing. The story of a silicon-valley entrepreneur selling his company for multi-million dollar was the talk of the town. Sabeer Bhatia sold Hotmail for $400 million to Microsoft in 1997 and inspired many to emulate.
The technology-based start-ups with no bottom line were rechristening themselves as Internet based company and getting listed in the stock market at hefty valuation. Swami’s company also got listed in the market. You remember the $10,000 worth of stock options which Swami was apprehensive to sign up for, had become quarter million on the day of listing and half a million at its peak. While Swami was relishing the paper wealth, the dot-com bubble burst in March 2000. Swami was a die-hard bull and an eternal optimist and was expecting the stock price to head north but that was not to happen. Every small rise in the stock price led to another big fall. Swami stayed put with the stock till the dust settled, but by that time the valuation had taken a major hit. Swami disposed it off at $20,000 still doubling the money but far cry from 50 times purchase price valuation he had seen at the peak. There was a lot of learning for Swami.
The American Dream
While the Equity market, was taking a breather, Swami was looking for alternative investment opportunities. Buying a house on the mortgage would help him save on taxes and build equity in real estate. After six months of gruelling search, Swami bought a townhome for $182 K in 2001 in midwest. It took almost a year for Swami to get all the amenities of the house in place.
Post the dot-com bubble burst, Fed was on interest rate reduction cycle. Unlike in India, the mortgage rate in US is fixed for the life of the mortgage. In one and a half year, Swami used refinancing twice to bring down the interest rate from 8% to 5%.
Home Calling
When it appeared that everything had settled in US for Swami from Green Card to owning a house, a call came from home, Swami had to pack up and move back to India with family.
Wrap up began. Identifying the city to move in India, job search, school for kids. Back in US, Closing IRA, Roth IRA and selling of the home, cars and all amenities. It was 6 months of effort which the family patiently endured.
In Sept 2003, on the way back to India in aeroplane, when Swami was finally taking a breather, flashback of wonderful memories of those whirlwind 7 years started reappearing: Weekend dinner with friends and families, Veda chanting, basking in the sun and greens on 18 hole golf course, rooting for local American Football and Basketball teams in stadium, 4th July Independence day celebrations, Thanksgiving Dinner with American Friends, Snow laden Christmas, Skiing and Skating in sub-zero temperature, Watching Lion King Musical with kids in Broadway theatre, the list was endless. He could not have asked anything more from life?
Well, a magnificent journey was coming to an end, and another amazing journey was about to begin.
At this point of time in conversation, Swami wanted a break for another day to tell his story of homecoming and streamlining his finances.
Hope that you will stay with me to hear his last chronicle of this series.
To read next narration from Swami, refer https://finmyn.com/the-homecoming/
To read the previous submission from Swami, refer https://finmyn.com/learning-nuances-of-equity-investment/
To read all narrations from Swami, refer https://finmyn.com/category/swamis-titbits-on-family-finance/
The writer is a SEBI Registered Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services. If you want to know more about him, click on https://finmyn.com/about/.