Eastern Sun Wealth Management Pvt. Ltd.

25/08/2015

If you are worried about the stock market heading downward, don't be. Yes, there will be some pain in the short term; your portfolio will not look very nice for the next few months. But if you were in the game for the long term to begin with, why not use the opportunity to accumulate?

Do not make the basic mistake most new investors make: invest when the market is high and get out in panic when the market goes down.

Stay invested, preferably using a SIP. If you are not investing currently, this is an excellent time to start. Yes, you read that right: a market downturn is an opportunity. Be a smart investor.

17/03/2015

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Eastern Sun Wealth Management Pvt. Ltd. - Answer to all your money-related questions. Advice you can trust. Valuable advice from experienced investors. Expert, unbiased financial advice for all income levels. Safe and legal solutions. Anyone can make money with a disciplined approach. We will show y…

18/10/2014

WHY SHOULD YOU INVEST IN THE STOCK MARKET? The simple answer is, the stock market is the best place to grow your long term wealth. And why is that? Let me explain.

When you want to save money, you normally put it in a bank. Maybe in a fixed deposit, on which the bank pays interest. Why would the bank pay you money to keep your money safely? Because they can lend the same money to others at a higher rate of interest. If they pay you interest rate of 9% for your fixed deposit, they can lend the same money on a car loan at 14% and make a profit. (As an aside, you can see from this example that taking any loan against your fixed deposit is one of the stupidest things you can do: the bank is basically lending you your own money and charging a higher interest on it! Won't they just love it.)

Banks also lend to businesses, at rates higher than fixed deposit rates. Why would a business borrow money at such rates (13%-15%, maybe even more)? Because they can use the money in their business to get a return of more than 13-15%, hence even after paying off the bank, they still gain from the borrowing.

In other words, companies typically make the most of their capital, getting returns in excess of the borrowing rates. When you hear India growing at 7% or 9% or whatever, it is these companies who are capturing much of the gain. And how can you tap into this fountain of wealth? Yes, the STOCK MARKET!

Now, don't go and start trading shares in the stock market tomorrow just because I said it is the fountain of wealth. There is a difference between "trading" shares and "investing" in shares. What we advise is to "invest" in shares. But isn't playing in the stock market dangerous, you ask? Yes, playing/trading in the stock market is dangerous; but INVESTING IS NOT.

Another point before I close. Insurance companies raise huge amounts of money in premiums from investors - in thousands of crores. Where do you think this money goes? Significant part of this corpus also gets directed to the stock market. You give it to them, they put it in the stock market, in a manner of speaking. So, you can do better by cutting out the middleman and invest your money directly in the stock market. (To be technically correct, you don't invest IN the stock market, you invest in companies USING the stock market.The market is just a place to buy/sell)

I will discuss the difference between trading and investing, and how to safely invest in the stock market in another post soon.

06/10/2014

What is GOOD RETURNS on your investments? What is the rate that you can get? What should you aim for? I will give you some thumb rules so that you are able to judge your investment options a bit better.

I define "good return" as something that doubles your money every five years. If you have put in 1 lakh today, after 5 years it should become 2 lakhs, after 10 years it should become 4 lakhs, after 15 years it should become 8 lakhs, and so on. The doubling every 5 years equates to 15% compounded annual return. If you can get this kind of return over a long period, your money is going to grow A LOT.

As you can see from the example above, after 25 years, your money should become 32 times the original amount!

All very well, you say. Why can't I double my money in 3 years, or even in 2 years? The answer is, it is extremely difficult, and nearly impossible without taking very very high risk of losing your capital. That is why, if anyone says "I will double your money in 1/2/3 years", I say "thank you very much, I don't need that kind of return".

Had the thousands of people in Assam who invested in all those dubious schemes followed this simple thumb rule, they would not have fallen for the scamsters who cheated them out their hard-earned savings. Remember, doubling in about five years is possible with normal investment channels. Anything more than that is suspicious.

26/09/2014

You DON'T HAVE TO BE SMART to make money on the stock market. In fact, being ignorant about the "stock market" could be an advantage. One recent research paper suggested that people who are "dumb" about their investments, in the sense that they don't try to do anything "smart" but just follow a plan, tend to do better than people who try to be "smart". How can this be?

It's simple really: the smart people get excited by the happenings of the stock market. They know which stocks to buy and sell. They do complicated calculations, they look for trends in the world economy and adjust their holdings evey month. Their "plan", if there is one, changes from month to month. The "dumb" people, on the other hand, don't know much about the stock market. For them, the market is just a place which helps them execute their plans. They just follow the plan, year after year, with slight adjustments when needed. The key here is THE PLAN. If you don't have a solid plan, it is unlikely you will achive what you want. Isn't that true for everything?

I know, the answer is a boring repeatation of the same advice you see repeated in online investment columns, newspapers, magazines etc. - MAKE A PLAN and stick to it. But that is the truth!

First, choose an investment advisor you can trust, who will answer all your questions transparently, including how much he is going to make out of your investments and why, and how your interests and your advisor's interests are aligned. If you have the slightest doubt, walk away.

Secondly, understand the credentials of the advisor. Although I would not equate investment advice as equivalent to the specialisation needed by a lawyer or a doctor, before you decide on who should advise you, understand that person's ability and willingness to advise you correctly. For example, being an insurance advsior does NOT, by itself, qualfies someone to give investment advice. Same with CAs, and bank relationship managers. Although there might be people in those professions who can serve as good investment advisors, please be aware that their incentives and focus are generally not geared towards serving your interests in terms of investment. For example, a CA's focus is to save you tax. A bank relationship manager's job is to bring more revenue for the bank from you.

Thirdly, make a plan with your advisor's help and stick to it. You need to give time initially to explain your financial situation and your financial goals, but after the initial stage you only need to check with your advisor once in six months or so to make sure the plan is on track. Or if your financial situation changes, you should contact your advisor so that the plan can be changed to take care of your new situation.

That's it. You are on your way to beat 90% of the people in the investment game and come out wealthier at the end of it.

(DISCLAIMER: the 90% figure is only an indicative figure of how many people fail to plan their investment.)

22/09/2014

Ok, I want to emphasize on the that point of how difficult it is to visualize compounded returns - please read the previous post if you want to know what I am talking about. Anyway, Let's get back to the example. It went like this:

You are a 30 year old person. You are given a deal like this, "pay Rs.1000 per month for 25 years. At the end of the term we will pay you back 3000 per month for your lifetime." Question was, was it a good deal or not? I said it was not.

But what if the offer is made even better by saying "we will pay you 5000 per month for your lifetime". You are going to get FIVE TIMES the amount each month you actually paid, for your lifetime! Now surely it is a GOOD DEAL, you say?

The answer is, IT DEPENDS. If you are willing to take moderate risk and invest yourself, you will do MUCH BETTER, so in that case it is definitely NOT A GOOD DEAL. However, if you are risk averse, this will be a reasonable deal for you (I am still not convinced it is a good deal)!

The bad news is, most of the "investment plans" offered by insurance companies ( and banks, who sell the same products) are MUCH WORSE than this. So, what should we do now? Put our money in some company which is promising to double it every year?

Turns out, there is a sensible, I would say even boring, way which gives you good returns over long term. But more on that later...

20/09/2014

Human mind cannot comprehend the power of compounding. Without a calculator it is impossible to calculate returns over long term. This is one of the reasons insurance companies can almost promise the moon to a lay investor. The investor thinks he has a good deal, but is it really so?

Let's say you are a 30 year old person. You have a decent salary but today's costs don't leave you much to spare. Now, you are told something like, "pay Rs.1000 per month for 25 years. At the end of the term we will pay you back 3000 per month for your lifetime." Sounds like a great deal, right? You pay for 25 years, but then they pay you back every month TRIPLE the money you paid each month, and it continues maybe for 30 years.

The problem is, if you do not know how to calculate returns over longer term, it is impossible to decide if this is a good deal or not. (HINT: IT IS NOT!)

And then there will be other numbers thrown at you to confuse the issue. So, what do you do? YOU GO BY GUT FEEL because "IT SOUNDS LIKE A GOOD DEAL". Other factors play a part: maybe at this point you have some money to spare, and you are thinking of investing somewhere and this comes just at the right time!

DO NOT make the mistake of doing investment decisions by "GUT FEEL" or by thinking "THIS SOUNDS LIKE GOOD DEAL"! If you know how to do the calculations, do them first.

WE ARE HERE to explain to you everything. Just send us a private message, leave your number and we will contact you to answer any doubts you may have. No commitment needed. NO FEE either, because we consider educating the investor the first duty which will help our business grow in the long run.

16/09/2014

Do your investments consist of mostly "LIC" and bank fixed deposits? Are you tired of investments sold to you by "known person" which are not giving any returns? If yes, you have come to the right place. PLEASE READ ON.

If you cannot trust anyone in this day and age, why should you trust us? The key is "transparency". WE WILL EXPLAIN EVERYTHING about how investments work. Secondly, WE ARE NOT GOING TO TAKE YOUR MONEY. We will only advise where you should put your hard-earned money. For this advice, we will charge you a fee.

Why should you pay for our advice when you can get "free advice" from your neighbourhood insurance agent, CA or bank manager? Because, FREE ADVICE IS NEVER ACTUALLY FREE (we will explain how this is).

Again, it is about transparency. We will tell you what advice you are going to get, and how much we will charge for that advice. IT IS YOUR DECISION IF YOU WANT TO USE OUR ADVICE OR NOT. You pay nothing upfront.

Make a start to greater wealth today. GIVE US A CALL!