This is the final blog in the series “Swami’s titbits on Family Finance” based on narration from my friend Swami.
Swami moved back to India from US in Nov 2003. He took two months of hiatus and then joined an IT company. He had to dispose of most of his belongings back in US but did ship some of his children’s memorabilia which arrived in India after 3 months.
Family and Celebrations
Swami and his family were really excited to be back in India. His wife was particularly interested in growing up kids by immersing them in Indian culture. Swami committed to an annual visit to parents and in-laws place and their visit back to Swami’s place, particularly in winter. The visit to relatives, family and friends during any significant occasion (e.g. marriage, festivals) was cherishing the experience and gave a sense of belonging to the extended family and the society. In addition, Swami made sure that he visited a local place in India for a family getaway every year.
Getting Basics Right
Following the success of the Y2K story, the Indian IT services companies were getting more traction. They were agile, hungry and willing to learn. One area which required some work was their ability to tell a convincing story to the client. They embraced Onsite-Offshore model which allowed them to bring local employees on board to be the storyteller. While this gave them the success, the scale came when they started internalizing and encouraging each employee to be the storyteller.
Back in India, Swami wanted to capitalize on all available opportunities for investments. From the beginning, Swami maxed out contribution to PPF in his and his spouse’s account. To save taxes, he invested in Superannuation and NPS.
The Stock options offered by his company was a real kicker. Swami sold stocks as soon as they got vested and deployed in the Indian markets. In US, one needs to earn 40 credits (or 10 years of work) to be eligible for US social security benefits. When Swami returned from US, he had earned 32 work credits. Since Swami’s company was based out of US, the earning from the stock options as a Green Card holder over two years made him eligible for the social security benefits. While US Social Security is not fully solvent, any payment from the US Social Security would ease his financial burden during retirement.
Markets for Enhanced Return
After 2000 dot-com bubble burst, the Equity market was again picking up globally and India was no exception. In 2004, Swami started investing in individual stocks with aggressive bets in too many small-cap stocks (e.g. Jindal Photo, Control Print, Megasoft, Jindal Poly, Mirza Tanners, KSB Pump). Swami had too many stocks with haphazard allocation. At peak, he had 41 stocks in which one stock was 30% of his overall portfolio. Swami would not miss investing in any good IPO offering.
From 2006, Swami started becoming conservative and moved to Large / Mid Cap stocks (e.g. Bharat Forge, ICICI Bank, PFC, REC, AIA, GSPL, ICRA, Maharashtra Seamless, Man Industries) and Mutual Funds (e.g. HDFC Premier Multi-Cap, Franklin India Prima Small-Cap).
In US, post dot-com bubble burst, the Fed had substantially lowered the interest rate and that resulted in the offering of the subprime mortgage by the lenders which eventually led to the housing bubble. To top this up, the lender started selling these mortgages to investment banks which in turn sold it as mortgage-backed securities in the market. When the Fed started increasing interest rates, customers started defaulting on the loan payment resulting in a significant loss for the bank and the price of the mortgage-backed securities was in free fall as there were no takers. This resulted in one of the major financial crisis in 2008 and the onset of the bear market globally.
It was very difficult for Swami to time the market, he stayed invested. His primary focus was on the rotation of stocks / MFs. While, he was not good at selling the investments, which were in the money, he was prompt at identifying the dogs and dumping them at the earliest sign of concern. From 2008 to 2013, Swami’s portfolio changed from stock heavy to Mutual Fund heavy.
It was sheer coincidence that at every onset of the bear market, Swami ended up creating some exposure to real estate. In 2008, Swami bought a home for living and a land for investment. In 2015, just before demonetization, Swami was lucky to dispose of the land at a handsome gain.
From 2014 to 2017, Swami transitioned his portfolio completely to regular Mutual Funds. In 2018, Swami wanted to quit his job and do something on his own, he moved all his regular Mutual Funds to Direct Mutual Funds to save on management expenses.
Best is Yet to Come
The time has flown by. Swami’s elder kid will be completing his graduation and taking up a job next summer, the younger one will be completing 12th this year. His current focus is to settle his kids and look after his parents.
He cannot thank God enough for the experiences he has got in life so far: growing up by Sone river, hiking Fuji-san in Tokyo, watching splendour of Niagara Falls from Canadian side, romancing Eiffel Tower from Seine river, hearing famous words ‘Et tu, Brute?’ from the tour guide at Foro Romano in Rome, reliving “Sound of Music” movie in Salzburg, admiring the gothic masterpiece of St. Vitus Cathedral in Praha, learning Walz dance in Vienna, walking by Sydney Opera House, enjoying reggae music at Bob Marley museum in Jamaica and Photo Op by Burj Khalifa. The list is endless.
Soon Swami is planning to travel and see the rest of the world. Best is yet to come.
To read previous narration from Swami, refer https://finmyn.com/from-dalal-street-to-wall-street/
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/.