Investment strategies for young working women – Part 1

Last week we had Women’s day. There were a lot of articles on women empowerment, how women have broken glass ceilings etc. While a lot of women today have become very capable leaders with very high education, we still don’t teach our daughters, sisters, lady colleagues on the simple concepts of creating wealth for themselves.

While general principal’s of compounding remain constant for everyone, for women there are certain nuances which women face depending on the stage of life they are in.

However the biggest mind-block I have seen with women is that they think investments, finance are related to maths and a lot of them think they are not capable of doing financial planning. It could be because they were not good in maths and therefore cannot understand the nuances of investments. They would rather leave it to their father or husband.

In this post I will talk about a girl who’s just finished her education and has decided to go for a job and she thinks marriage is 5-7 years away. She may have taken a loan for her education or has done her basic education and wants to fund her higher education on her own so that she does not need to take a large loan.

Now inspite of whatever I write, the first thing to keep in mind is don’t do anything which causes you to lose your sleep. Having said that however be a little open to trying new things. Maybe just that one new thing that you try may change your life dramatically.

So I will talk of just 3 simple concepts to keep in mind

1. Rule of 72 – everyone of you has a calculator. All you have to do is remember that this magic number can tell you everything about doubling your money.

If you know the amount of interest that an investment is giving then you know the approximate time it will take to double your money.

a. Your savings bank deposit gets about 3% annual interest. So if you have 100 in your account and you don’t touch it for one year then at the beginning of the next year you will have 103. At this rate of interest if you want to find how long it will take to double and make the amount 200 you just take your calculator and divide 72 by 3 to get 24. So if you don’t withdraw the money from your bank for 24 years you will have 200 in your bank.

b. Banks also have fixed term deposits where they give 6-7% annual rate of interest…suppose you were to put the same 100 in such a deposit you would need to divide 72 again by 6 and in 12 years you get 200

2. Rate of interest – which brings us to the second important item which is rate of interest. The bigger is the number by which you divide 72, the lesser is the amount of time to get to double your money. Which means higher the interest rate you will take less time to double your money. Generally speaking you need to keep one thing in mind….as the interest rate starts climbing higher the amount of risk that you take with your money is also higher.

3. Identify your goal – if you don’t have your goals defined you are not be able to define what is the right amount of distribution of investments that you need to make. Then use the following graph to map to your goal.

So if you are this young girl who wants to say go for her MBA after getting a work experience of 4-5 years and you need USD 50000/- as an example. The brown line on the map is the number of years you have for your goal and the blue line shows the kind of interest you need. So on the yellow line plot the 5 years and on the blue line straight above the 5 corresponds to about 15% interest. So if you need to get USD 50000/- in 5 years from now and you get an investment which is giving you 15% interest then USD 25000/- invested today will give you USD 50000/-, 5 years from now.

Now lets use the same picture and see what happens if you are only getting interest rate of 10%, then on the blue line check for 10 and then put a pencil on the brown line right below 10 and it will show you it could take you seven and half years. So now you may need to save more than 38000/- dollars so that 5 years from now you will have close to USD50000/-.

You will see that in the picture while the blue line goes as a straight line, the brown line is non-linear. This is something we will explore in a later post.

Till next time …. Carpe Diem!!!!

How women in India are already changing the consumption landscape of India

Financial Independence, Uncategorized

Couple of posts back I had written on how the impact of ladies coming into the workforce will change the whole economy in India.

Over the last 2-3 weeks after writing the posts I noticed a few trends which I wanted to share.

I happened to go to eat at Pizza Hut in Connaught Place, New Delhi last weekend. My wife loves the pizzas there. There were at least four sets of girls only groups who had come to eat there. It’s quite common to see boys and girls in some restaurants, it’s quite common to see families in restaurants but on that one afternoon I saw at least four different sets of girls come and have food there. And its not they were there just to have a quick meal. They were out there having a good time and had ordered quite an elaborate lay-out.

The week before that in the PVR at Logix Mall in Noida I had gone to see a movie and in the IMAX screen there were nothing less than at least 7-8 girl only groups who had come to see the movie. The reason for pointing the IMAX is that it has I think the most expensive seating out of all the PVR screens.

And the last was the visit to showroom of Maruti cars – this was there Nexa showroom. Out there were women, who had come with their husbands or families to select the cars, what was astonishing was that it was the women who were signing the documentation for car leases or giving the cheques

Now on the face of it none of this has any significance. People in general and women have been going out to have lunch or to meet friends or going to movies. What is significant however is that all these things that I mentioned above were happening at above average locations or at places which are probably considered premium and in “ladies paying” situations.

When I started doing some fishing around to see if these trends are observed at other places I also came to know that there are high end bars who offer “women only” nights, on somedays of the week. Premium lingerie ads are all over the cyber city corridor on metro pillars in Gurgaon.

If Indian women are empowered and are going to be spending at such premium locations whether it is to buy cars or to have pizzas or have wine then it suddenly throws up so many opportunities for someone who would like to just sit back and passively watch their income grow

If there are funds or there are companies who are going to benefit from this consumption boom which is taking place in metros because of Indian women, then those investments well grow dramatically fast

So from a pure selfish interest I think we males need to figure out ways to empower women to grow so that when 400-500 million women in India come into the workforce people who are invested in this consumption theory for women will get dramatically rich.

Carpe Diem!!!

Quarter Century

Financial Independence, Uncategorized

This is my 25th post….. its been quite a journey over the last few months…..never thought would ever reach this figure.

First of all getting me started to take my own domain name and then take the WordPress subscription and then figuring out what to write was a major effort. For the last 2-3 years that I have been wanting to take this activity but some issue or another kept cropping up.

I read blog posts and heard podcasts from Tim Ferriss, I took a course with Ramit Sethi and I read others across the board but did not get the “ignition”

Even after taking the domain name and the WordPress subscription I wrote about four or five posts but after that I did not know on the topics that I could write.

Then I read Gary Vaynerchuk and one thing which struck me was he wrote and I paraphrase “why not first make a list of topics that you could possibly write on and then go on writing against each of them. If you come across something in-between you could add to the list”

I took Gary”s advice to heart and over the last few months I have consistently written whether it was a topic which was from the list I had made or there was a topic which I read in the magazine or a video I saw on the internet.

Even then sometimes I had a writer’s block and as I had written in one of my blogs couple of weeks back, it was the podcast from Tim Ferriss with Daniel Pink that got me started on just writing and things falling in place….now I am consistently started doing that.

I started the blog post with the idea that at some point of time if I will be able to monetize it. I will use part of the earnings to ensure that we are able to feed impoverished kids and enhance the life of women in India…..lets see when I am able to reach that stage.

The content of the blog was meant to be for young Indians who are at the age of around the age of my son, but what I found is that I have had more followers joining from countries as far as the US and Canada than from India itself.

Thanks to all of you for taking time to read my posts and liking them.

Till next time then….

How women in India can change the destiny of the country – part 2

Financial Independence, Uncategorized

Continuing where I left last, when more women come into the workforce there is money in more hands.
First this money goes to ensuring that the basic necessities of life are taken care of.

The good thing about basic necessities however is that once they are taken care off, there is not too much more that needs to be done , so once you have had three meals you can’t have one more meal during the day.

Once people have more money than they need to take care of their basic necessities they do 2 things – one they try to save and two they like to move up in life by doing discretionary spending.
When discretionary spending starts to happen the GDP growth starts to multiply. In India from the time the per capita rose from $1000 to $1700 one major trend that is seen – last year the growth of Air Traffic has been faster than the growth in rail traffic. The per capita is expected to in the next 7-8 years hit $3000/-. That is considered the poverty line in countries like the US& Canada for a family of 5. But adding $1300 per capita into more than 1 billion people can mean such a huge uplift for India.
Just with the addition of $700 per capita (from $1000) even though the Indian economy does not seem to be doing very well, still you have most Metro airports and all the Planes and flights which I have taken recently completely full. Whether it is low cost Airlines like Indigo and Go air or full service Airlines like Air Vistara or Air India you don’t see empty seats. There is a waiting list for cars and 2 wheelers. People are wanting to move up in life. They have aspirations to be better than what their parents were.

So what does this have to do with financial freedom….

If more women come into the workforce they will add to the per capita income. Once they take care of the part of the burden of the basic necessities of the house, then they will end up spending on better education and health of their children and better quality products for themselves.

If you see trends like these and you invest in countries like India, which have a such a young demographic, you can be picking gems which can make you rich many times over. Invest through SIPs in mutual funds or invest in Emerging Market funds, but systematically go about investing in growth stories and the growth momentum can propel your finances into a different orbit…

Till next time

Keep identifying trends