Happy New Year - Some thoughts on personal investments

I was wondering what I have learnt in the past year… that I can share with you as a New Year’s gift… I came up with this… hope it helps…

I attended a conference where Marc Faber, an investment guru, was the lead speaker… The room was packed with atleast 1000 people… all shrewd fund managers and smart analysts… He asked us to raise our hands if we had more than 10% of our investable corpus invested in Gold… I was shocked to see that the number of people who raised their hands was Zero… Every one has been following Marc Faber for donkeys years and he has been advising Gold for as many years… But none did what he said… When he enquired as to how many of us were 5-10% invested in gold… six hands went up… thats 0.6% of the most astute investor community… the torch bearers of the investor community… This made me realize that the opinion about Indian investors investing in gold excessively is hyped up… The reality is the new age knowledgeable investor is under invested in Gold… So, the first tip for the year is to invest atleast 10% of corpus in Gold… The yellow metal is still glittering!... the macro scenario across the globe indicates that it is going to glitter for decades… Analyze any asset class against gold over the past decade and they have all under performed this precious metal...

At the cost of being a spoil sport of your zest, I am writing the next para… A few days back, a cousin of my close friend passed away in a freak accident at age 22… He was the sole earning member for the family of three – mother who is a house wife, father who is retired from a private job & has not saved for post retirement life and sister of marriageable age… How do you think the family will survive? I have no idea… I guess neither do you… My next request is that all of us should have a Term Policy… Thanks to online term policies like ICICI iProtect and Aegon Religare iTerm, you should stop wondering that you are getting nothing out of your ‘investment’… You get a piece of mind with yearly expense of Rs 11,000 for a 30 year old for sum assured of Rs 1 Crore taken for 30 years… It translates to about Rs 900 – lesser than the tab you pick for a two person dinner… Ten years down the lane, you pay the same premium for the same cover but will you pay the same amount of the same dinner??? I doubt… it will be four times the current bill…

Talking about prices… Inflation is here to stay… I remember paying a labourer 30 rupees for an honest day’s work during my IIT days in 2000… I was embarrassed when he touched my feet to thank… Today, I am willing to pay 600 rupees and I can get no one to do some low skill carpentry work at my house… high prices are a reality… the way to play hedge against inflation in by investing in Equities… counter intuitive but true… or real estate if you can afford it… You may know that I have been a proponent of IDFC Premier and HDFC Equity mutual funds for a long time and would continue to believe that they should do well going forward as well…

Finally, I will quote legendary Warren Buffet to invest in Self. "The most important investment you can make is in yourself. Very few people get anything like their potential horsepower translated into the actual horsepower of their output in life. Potential exceeds realization for many people. Just imagine you’re 16 and I was going to give you a car of your choice today, any car you wanted to pick. But there was one catch. It was the only car you were able to have for the rest of your life. You had to make it last. So how would you treat it?

Well, of course you’d read the owners’ manual about five times before you turn the key in the ignition. You would keep it garaged; any little rust would get taken care of immediately; you’d change the oil twice as often as you were supposed to – because you would know it had to last a lifetime.

Then I tell the students you get one body and one mind. And it’s going to have to last you a lifetime so you’d better treat it the same way. You’d better start doing it right now because it doesn’t do any good if you start working on it when you are 50 or 60 and the little speck of rust has turned into something big… The best asset is your own self. You can become to an enormous degree the person you want to be."

Wishing you a very happy and prosperous New Year 2011!