Stocks vs Mutual Funds for people in high tax slab

 With the recent taxation for Dividents in India people who are in high tax bracket may end up choosing Mutual Fund (MF) vs stocks here are the reasons why you are better off with MF

1. You get taxed for Dividents and lets say you diligently try to reinvest you have to still pay brokerage and other taxes as part of buying you dont need to do that in MF

2. Its very difficult to track your investments may be you have several lakhs invested in many companies do you think you can do a rational choice when something goes up or down 

3. If you invest in MF you can do a predefined amount but the same thing is difficult in Stocks you need to get the exact amount which could be less or higher than your desired amount

4. Even lets say you were able to diligently invest in stocks how do you do portfolio rebalancing how  you are sure your stocks are in the right weightage when you have to book profit or loss tactically

5. All the above mentioned in #4 may have tax implications and that's bypassed in MF you don't have to pay tax 

6. Also MF with its volume may get better deal in rates then you as an individual 

Agreed that for a given investment you  are paying regular fees in MFs and if you can do all the investment yourself you may end up saving that cost but is that what you need to spend time on. 

If your regular job is not in stock market and something else will you not rather spend time on upgrading your skill and having good life experience, spending time with your family or will you be looking at stock market. 

You may have got 300% return in a stock investment but how much you invested say 1 Lakh!

Is that enough for your future expenses and retirement?

Do you have the guys to exit that investment and put all the money in the next stock (else compounding will not happen)

Mutual Fund is a passive investment for you and you are never going to be rich just by investing in MF. 

The critical part of any investment is the amount you invest and if you can manage your active part of earning good money taking care of yourself and your loved ones then you end up increasing the amount invested in good quality MFs and this will make you rich. 

Aim for 10% XIRR in MF equity and manage your life style and skill development and live well below your means. 

Have an aggressive % of investment target like 40-50% of your salary and that will make you rich in a tax efficient way. 

Legacy Planning - what should happen when you die

 

There was a scene in a film where the villain asks the hero, “tell me how you want to die”

The hero replies, “as an old man”

That’s our wish right we want to die as an old man but when we die is not in our control.

We should definitely try to form good habits and take care of our health but death just happens sometimes and mostly when we are not ready for it

 

Some of my colleagues died due to COVID leaving  young dependent children behind… and that got me thinking

 

 

When we leave our family unexpectedly we have to let them know what they have to do.

There are 2 aspects

1. inheritance of wealth
2. inheritance of memories

 

Since we are in digital age lets speak about the above 2 only from the digital point of view since I feel that’s going to be very difficult.

 

If you have physical document about your investment in a suitcase your family know exactly where to look but with digital investments how many demat account, MF Folios you have .. you may yourself may not know.

 

With ease of paperwork in digital you would have tried zillions of investment products and even though you have placed a nominee in each of the account the nominee needs to know about them then only they can act on it.

 

So please think about this… do you want to create a will or at least print out the consolidated investment statement once a year and keep it somewhere so your family can see. Please plan this and discuss with your family

 

Next comes inheritance of memories, nowadays we don’t take print of our photos and also not even copying it in a cd and its all in some cloud platform say google.

There are ways to make these assets /memories to be transferred to your dear ones on your demise.

Please read this article

https://economictimes.indiatimes.com/wealth/personal-finance-news/how-to-bequeath-your-gmail-facebook-other-digital-accounts-to-your-family-heirs/articleshow/58548246.cms?from=mdr

 

We cannot afford to think about legacy planning at our 60s. Legacy planning is an ongoing process and we have to start very early and keep on updating them as things change over years.

 

Invitation for Mastermind

 I was curious about starting a mastermind and I ended up starting mastermind not with a group but as a one on one sessionss. 

There are many programs for self development, you can join an online class or read a book. But there is something about a peer to peer connect. A Magic that happens in the "we" space. 

There is a customized recipe that we discover with being in a mastermind and I think its a important tool for personal development and it can co-elevate our community

Here is a snippet of what I use for sending invite for mastermind. 

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Hi <name>

I was thinking of starting a mastermind group. You would have heard of a master mind group in some books. Its about few ppl get together and discussing their problems and come up with solution A peer to peer mentoring group. Its also an accountability group. You go to the group and say this is what I want to achieve and the ppl will be your accountability partner and check whether you are making progress.

We are so productive in office since we have some goals for the project and we meet frequently with our peers and boss and give report of the progress and we are held accountable. But we don’t have the same system for personal development.

Very successful ppl are part of some mastermind groups and they usually charge very high amount and it’s a very private group no one speaks about it and its not open to public.

When you look about general friendship calls that ppl have its generally shallow we discuss about politics or movies or something like that and we don’t go deep about our personal aspiration and problems and we don’t say about our goals to anyone and so there is no tracking of the goal and we end up living well below our potential.

 

Anyway ppl in mastermind group should have known each other so I thought why can’t we start with our friends

Are you interested in creating a mastermind group. I cannot think of anyone other than you, me,<friends name> if you think you want to have a mastermind group but don’t want any of these ppl let me know. We can have it between just the 2 of us.

 

We can  discuss about the rules etc . We can have some calls say 30 mins once a week or whenever we want and we need to go very deep and speak about our things openly with trust and be open to being vulnerable and getting feedback.

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For me inspiration for mastermind came from lifebook, mondvalley and books like think and grow rich