Paying Tax for Share's Dividend vs Paying Mutual Fund Expense

 Let's do some calculations to find out what is efficient, paying tax for Dividend from shares or paying the Mutual Fund(MF) expense. 

We will assume a hypothetical scenario of a person (A) owning shares and he gets dividend and lets say he reinvents the dividend, he does not need the money

Let's say another  person(B) has an MF which just for the sake of comparison has a bunch of stocks whose dividend is exactly like the previous case. But here the MF is in growth option so basically reinvested back.

What if you are in the highest tax paying level, what will be efficient? 

For this let's take the Dividend Yield of the Nifty 50 which at this time of writing is 1.3%

So lets say Person A has invested Rs 10000 and so he will get a dividend in this year as 

Rs 10000 * 1.3% which is Rs 130. 

Even though he reinvests it he has to pay the tax  for this dividend income (Rs 130)  which will be 30% Rs 39 as tax.

Now the Person B scenario even though the MF gets dividend it does not have to pay tax

So Person B ends up paying the expense which for a Direct MF Index Fund will be 0.21%. 

Let's assume the best case scenario of 15% appreciation so Rs 10000 has become 

Rs 11500

For this new amount the expense paid is Rs 23 still cheaper than paying Dividend tax (Rs 39)

Does it mean that MF expense is always cheaper than Dividend tax…. need not be. 

There are 3 variables in this equation 

1. It's about the Dividends of the stocks you hold. There are companies which are paying huge dividends and some which pays very very little 

2. What is your income tax level? Are you in 5%, 20%,30%?

3. What is the expense ratio of your MF. A direct MF index may cost 0.21% but there are MFs with expense ratio above 1%. If you are using regular MF even 2% is possible 

Is God punishing us

You may be thinking this Covid, war etc are Gods way us punishing us. 

Punishing us since we dint go by the moral values, we were greedy and just plain sinners. 

If you can view this topic objectively it seems that it has flaws. 

If humans are the highest evolved speices God has wasted several millions of years since it took that much time for humans to surface. 

Dinosaurs are the most successful species they have lived for 100s of millions of years and have always been a good animal (lived the life of being an animal to the fullest)

Yet God punished them right? they evaporated rather very abruptly. 

Why should "a just God" punish animals, animals are doing what they were supposed to do right?

Please don't live in guilt, shame. 

We are just "fireflies in a night" in the whole scheme of time and evolution. 

If God exists, we are either too irrelevant to Him or He should be rather benevolent to allow earth to exist till now. 

Volcano happens, earthquake happens, human created issues like pollution, war happens. 

They just happen you can consider the following to interpret the results

1. all is random

2. God is punishing me

3. Hmm...... this is the card I'm dealt with now. What should I do to make it better for me and my fellow being. God or the benevolent universe will sure help me  

You can take any of these interpretations and when you view it through any of the interpretation you can see a majority of things being correct according to the framework but some are incorrect like holes in the illusion 

None of the interpretation is the truth but you can use a framework which will empower and improve you and make you a more positive person and can make it a beautiful experience for you 

Choose your version of framework and you also are choosing your God!!

5 year commitment

You cannot dabble and think of attaining mastery

Any skill needs deliberate practice for a long time. 

You have to be at it even after the thing lost its initial sheen. 

You want to learn table tennis you need 5 year commitment to get to a good level. 

May be in year 1 you would have achieved the proficiency of low hanging fruits but the mastery is made in the incremental improvement of nuances.  

Even for being a decent amateur in say guitar you need at least 5 year commitment. 

So don't have a lot of hobbies have just a few and start with only one and may be post the 1st year you can add another, since the 1st one would have stabilized

Time bound learning and life long improvements

Lets speak about any course (product) or sessions(service), they both are time bound and will end. The only way you can have a sustained improvement in your life and at least maintain the gains or insights that you got from the timebound practice is "reflection and course correction" as part of the routine.

Lets say you learned something and you want to make it as a habit to improve your life. The trap of habit is a habit without a  score card or a review and feedback may be mechanical and may not give the benefit associated with conscious intentional action. 

You need to know why you do what you do, did you did that well, did doing that improved your life. Do you need to increase the intensity or totally drop it and try some other thing. For this we need data points and reflection time. 

Entropy kicks-in if we don't supply external energy, so be vigilant, track it, reflect on it and course correct it. Does not take a lot of time but gives you immense benefit. 

Almost any self-help product is good we keep on scouting for the next product because of 2 reasons. 

The first reason is we lacked the discipline of tracking and reviewing our progress. For example every new mediation we stop doing it after few weeks and after several months we go back to another meditation from another guru. In this way we will never get the long term benefit and remember self-help is like a marathon a very long term game. So trying something and throwing it and trying something else in random way serves nothing. 

The second reason is that product is not for you, but here again if you track you can realize that you are leaving it not because of laziness but because of compatibility. 

Some gurus especially the "spiritual ones" will say don't think just do it with faith

My take is no need to have faith, you are rational enough to understand that any change needs sustainable action. But if you don't see any benefit after a month I think you can call it off isn't it?

What we need to understand is some higher level practice will not work for a person in lower level. A person cannot understand calculus if he does not know simple arithmetic. 

May be the course that you joined is having a very high benefit if you are in certain level , if you are in a low level you may have to take another path and you may never know you can come back to the original product later when you are ready.

We are not saying this product is inferior, we are just saying not compatible to me right now 

self-help guru's trap

There are people whose full time career is training people in self development. 

Since its their career they want to keep on improving their training material and also increase their revenue.

Any Self-help guru alive is either working on improving his existing product or creating a new product. 

What I will say is if you have the money to invest on yourself please try subscribing to their product try them. If a new product entices you and if you can afford it just give a go ahead. 

Don't analyze if it will be good or great or bad just try it. 

No harm in jumping from one product to another. You can keep on trying for even say 3 years and then you will have more pattern to realize the trap.

The trap is called new product trap. They will say the "5 things to change your life", the " 6 things to avoid" etc.

An universal solution trap which does not take into account about who you are and what will work for you.

The problem is self-help is a service industry but we are trying to make it a product industry. 

We need a guru who knows various tools and can look at a person and see what needs to be done and gives him a customized solution  

This guru will not be like the 'celebrity' self-help product guru, but he is the one you need to solve your self-help issues. 

Please do read the self-help book and also subscribe to any courses there are places for them in your self-improvement journey. 

But what you need for total transformation is a customized actionable solution for you which can be either  done by a psychotherapist or a coach as you can see that's a service rather than a product and its going to cost you more than buying a mass consumption product but you are not trying to do the thing which is cheap but the goal is efficiency.

Ghost - Robert Harris Review

I have read Imperium and also Archangel from Robert Harris. 

Very rarely I read more than one book from the same author and now I also have read The Ghost

How many memoirs hit the street every month from many famous celebrities do you think they wrote their Memoir themselves. Most probably they got a ghostwriter to help. 

Ghost is a story of a Ghostwriter who is enlisted to do a memoir of a former British Prime Minister. 

The ex PM is in US and the ghostwriter travels to US and simultaneously allegation against ex-PM is getting increased. 

The Ghostwriter finds out what the previous collaborator of the memoir is up to and that opens a bag of worms.

A good novel to take you to the life of a Ghostwriters and also the life of a politician who now no longer has power. Also political thriller a forte of Robert Harris

Couple of things were cinematic and few things were just accidental like the car ride to meet one person. 

Now that I have read few novels of Robert Harris I know the pattern 

1. The protagonist is not the Hero, he is an observer and is usually middle aged. 
2. The protagonist rubs the villain in the wrong side unaware that he is a dangerous person 

Of the 3 novels I read Ghost seems to be my least favorite  :(

When life throws a curve ball

What do you do when you are doing everything right like leading a good healthy life, exercise everyday, a loving family

and you also  make a difference in a society. You are leading your life with zeal and you are enjoying every moment

and then life throws a curve ball

We can say its all because of Past Karma or we say it is Random but whatever we say it all seems to be a “cruel joke”

Facing your mortality especially when you are having a terminal disease and you know your days are numbered is a

heart wrenching thing for both you and your loved ones.

What is character, its about who you are when the chips are down.

You can be a jolly, happy, pleasant person when everything in life is going good

but when life throws the curve ball, how are you facing it.

This article is triggered by Sarah Hallberg's story

 

Two other people come to my mind

1. Randy Pausch
2. Paul Kalanithi

These people without having any afflictions towards Karma, God, Heaven, Soul etc were able to face

their mortality gracefully and courageously.

 

I pray that we and our loved ones lead a long and healthy life, but at the same time appreciate life is fragile and finite

and do the best with "the cards given to us".

 

Don't be too caught up on the mundane things. Spread love, happiness and be pleasant, grateful

and respect and appreciate yourself and others.

My Experience with cult.fit

I have tried various fitness regime for many number  of times like Gym, Taichi, Karate, Yoga class, Quad Bootcamp also many free apps and youtube videos. 

I also did many DIY regiment like doing Tabada and many other things nothing worked for me. 

Why?

I lacked the Motivation

I was never able to push myself hard. I hate exercise.  I realized that if I had to stay healthy I need an environment which can support me. 

I was thinking of joining Gym or going back to Quad Bootcamp but then I saw cult.fit group class near my place and took the plunge and its now 15 days and I hope this journey continues. 

What I like about cult.fit is the sheer variety we have HRX, S&C, Yoga, Dance, Boxing etc and even if you got for only one class regularly like HRX they mix it up so each session is different and you don't get bored. 

HRX is just a strength and mobility training, it can be called in any name but let Hrithik Roshan get some royalty 

The next variety in cult.fit is the timing you can go to any class there are many slots in the morning and also in the evening

Also they have AC and ventilation so even if you sweat you dont end up drenching yourself. 

In Quad Bootcamp we do exercise in the open and we have to deal with heat and mosquitos and a tough concrete floor (it was a parking lot)

The next advantage of the cult.fit is the music. Like Tabada counting with a music is good

There are many  trainers for the same session. So you can see 2 different trainers for S&C under a fortnight which adds more variety. 

Also the technology is good you have to book the session and you cannot do bulk booking on the go and forget, every other day you have to look at what session is available when and book it

If you booked and you have a no show you are penalized by subtracting 1 day from your subscription. But there is an option to cancel your booking before the class. 

The cons are:

One trainer for many people and even though he does his level best its superficial you may end up getting hurt if you made a wrong move. 

In Quad Bootcamp there were many trainers and lot of training was given on how to lift weight etc which was not seen here in Cult.fit and you may get hurt if you pushed yourself or incorrect posture

Also in  Quad Bootcamp, there will be a progress you can start from 8kg Kettlebell and end up going upto 24 or more kg. 

Here in cult.fit the oneness is on you to make progress, the trainer assumes that there are beginners in the group and so he will focus on asking people to take weights but he will not be able to remember what weight you lifted yesterday etc 

So cult.fit is more for people who want to stay heathy and do exercise regularly and that was my goal so it fit nicely. 

A magic happens when you go to a place with other people and you do exercise together, you do more than what you do alone and that's a win for me. 

But generally here is my observation

1. Humans are social animal you align with the group and you can make progress provided there is alignment of the goals between the individual and group 

2. Don't beat yourself if you are not motivated and you are not able to do it alone, its not a weakness to ask for a professional help or go for a subscription. What is important is how you improve your quality of life. Whether its by doing it all yourself or going for a paid membership

3. Paying for a service is good: 

MOOC is good but the completion rate is not great, a paid subscription for an online class even if the quality is lower than that of  a popular MOOC may help you in completing the course. Your motivation is not wasting the money and not actually learning but its ok. You are smart enough to create a system to make you learn which is great!!

4. Standalone bootcamp is not for everyone

Everybody has gone for a 3 month bootcamp and 6 months Yoga session and after 1 year you don't even do half of the sessions yourself. Sustained practice is required so choose the product carefully

5. Dont be in analysis Paralysis

You are not married to a Product or subscription. Don't spend endless time in reviews many of the reviews are biased (like a one off negative experience or a bait by the product to influencers so they get paid for a good review)

Also what works for one person may not work for others . More specifically what worked for you 6 months ago may not work for you now. 

You can always cut loss and move on so just take a dip and if you enjoy it good else at least you know what it is like

I tried a one on one fitness coaching and it was too tiring and I did not like it, but I know in my skin that I did not like it so its a good experience. 

Beauty, Healthy, Vitality, longevity is my aim. I want to age gracefully and be functional and independent and have a good quality of life. 

May be I may leave cult.fit but I hope I find some other thing to keep me healthy. The end goal is to be  a healthy person and the means right now is cult.fit. 

The Silent Patient - Review

Even though I buy some novels I almost never read them but sometimes I go to a lending library get a book that grabs my attention does not do any online search I just rent that book and 3 out of 5 finish the book. 

The Silent Patient by Alex Michaelides was 1 such book with an interesting premise of a psychological thriller

2 narrators 1 was a diary entry the other was from the psychologist. You can see elements of Nepali and Drishyam 2 in it . 

What I dint like about this novel is the feeling of "cheating the reader". The Narrator should not hide things from the reader in the sense that the narrator should be transparent of what he knows fully to the reader. But here the narrator does not do that. 

 

Kratu - Samarpan - reivew

 I had a fantasy of doing time travel and meeting with great soul from the past like Buddha, Jesus Christ etc. 

It seems Kratu was the answer to my fanatasy so started reading this novel. 

A very tough read since there are too many disjointed characters. I should say first half of the book was relatively ok with good flashback on the previous life of a Kratu but as he begins to grow to be a young man the story's steam is getting lost. 
First the premise of an eternal memory because of a curse seems to be too much and also looking for a person in one of his earlier life for ever and forever and not actually trying to search but just showing up in every life and  hoping to meet that person is childish. 

If you have lived several lives and have been to different realm of existence and your memory is intact you are supposed to be sophisticated. 

There are too many character who comes just once and they are simply stereotypic  and then you forget and then the author tries to bring that character back for the climax seems once again very ineffective. 

Also on the last chapter of the book there is an unnamed guy  =and a girl  and we have no idea who those people are. 

If you go to amazon you will see positive reviews those people could be the disciple of the authors or well wishers who just type good things about the book. 

I had similar experience reading a self help from a guru and it looks utterly hopeless but people are heaving praise on it. 

Its a dangerous terrain trying to read an Indian contemporary gurus book so please be wary. 

Its not surrender but trust

In spiritual vocabulary there is this word called Surrender. 

Surrender to God! Let thy will be done etc

I think Surrender is a wrong word. 

You have your intellect, emotion and have this physical body and also a Will. You don't have to surrender these things and be passive. 

You need to Trust that there is a benevolent universe. Trust that it cares about you (and also cares about bigger things also)

You have to play the game with this universe not competition but cooperation. Since you know the Universe is on your side.

Play the game with gusto. If result is not what you anticipated, see if you get the signal from universe. 

Try to understand and trust the universe, either change your goal post or your strategy and play again with gusto. 

Since what matters is how we respond to life, how we show up everyday, how we grow and contribute. 

Let your brief stay here be a good experience for you and people near you. Play courageously and with trust. If you do that the play itself will be very fulfilling   

Con Law - Mark Gimenez - Review

 One joy of going to a lending library is you can pick a book don't do any research in internet since the cost is less and you are just lending it and will give it back. 

I love legal thrillers "John Grisham" fan. 

I saw this book "Con Law - Mark Gimenez" looked like Jai Bhim, but anyway I like legal thrillers. 

I was expecting a court room drama but no court scene here in this novel. 

The positives

1. witty dialogue
2. a course on Fracking
3. a course on Marfa
4. very good Con Law discussion between Law students. only 2 scenes one each in the beginning and the end
5. politics related to tenureship election for professors

Professor John Bookman does not fear dying but fears about not living. He travels in a Hardley and appears on TV debate shows (would have enjoyed if there is a scene). He helps the needy who writes letters to him. 

He receives a letter from one of his ex-intern and thats how the story started. 

Story has twist and turns and its not black and white many characters have grey shades. 

There is a revelation on why the Professor does these things.. what is his motivation. 

Few things are cinematic like 

1. an intern towing with him wherever he goes. 
2. The Professor sometimes is just hot headed and assumes things and is trying to pick some fights. We expect him to be little bit more intelligent. Few things were obvious but he thinks otherwise and goes in wrong direction 

Anyway its a good read

Ukulele self learning

I had to  stop my Ukulele class due to various reasons...

I decided to continue Ukulele on my own with youtube. 

Found the youtube channel Uke Bajao and enjoying learning at my own pace. 

I am not good in hindi but able to follow the instructions. 

Also even though I am not good in Hindi I love hearing Hindi songs and would like to play some. 

Let's see how it goes 

Why I am learning Ukulele

 I read an article in Hindu about people turning to low cost music instrument to ward off  the lockdown blues. 

I came across one instrument in that article which was Ukulele. 

It doesn't cost much so I went to a music shop and I bought it. 

Later I tried youtube videos and that did not help in my learning. So I searched and found a teacher nearby and he teaches both online and offline and its been a month now. 

Its fantastic!! every time I go he teaches something which seems overwhelming and then I practice it for a week and then go back  with confidence only to return with some other new overwhelming things.

But why Ukulele? or why a music instrument and why learn from a teacher and not online 

I have been trying my hand on many things over the years. 

I am a software guy by profession and I absolutely love it but I don't want  to do coding in my free time. 

I tried pencil sketching I absolutely love painting and sketching but have no talent for them though!

I bought a cheap Udemy course but never progressed on it and later enrolled to a painting class but had to stop it after COVID lockdown 

But what I like about playing music instrument as a hobby over something solitary like drawing or writing is it may open up me socially

And I dont know anything about music and its a ocean learning an instrument is a life long process. But even though its life long we get tangible returns in every training. There is always some improvement which is visible. 

Once when I was in US my client asked what do you do in the free time. He plays guitar and has a small armature band. I have nothing else to say other than watching movie 

Nothing wrong in watching movie though. But we need 2 kinds of entertainment one of them is passive like listening to music or watching movie but other thing is active like playing sports etc

Active engagement will make us feel more fulfilling. Even if you just watch a movie all alone, if you discuss about the movie with your friends its deemed as an active engagement since it has a social angle  

What if the active engagement has both fun and learning like learning music

Another example of active engagement is sports -> competitive, healthy, social, fun 

There is a nuanced ice break question 

"What would you like to do after doing what you have to do?"

And you don't have to answer the person who asks this question. You need to live consciously and make your choices deliberately. 

Don't be a commentator be a strategist

 If you are saying things are not going good. You are just saying what is happening now. Like a commentator or a newsreader. You reading out the news aloud does not going to change the situation. 

Accept that the situation is not helping your highest vision but then don't blabber about it on and on blaming yourself or others. 

Try becoming a strategist what is good right now, is this is a lesson to learn, at least you know that this is not serving you. 

Paint a vision on what you want to be or how you want the situation to be in the future. Be a strategist and not a commentator. 

And as soon as you have a vague steps to take. Immediately take the first step

I dont even understand what you are speaking about -JOMO its the coolest thing

 From Fear of Missing Out (FOMO) to Joy of Missing Out (JOMO )

There was a Tamil movie called Viswasam in which there is a scene where the Villain tells the Hero his designation and his business etc for say 2 minutes non-stop just to make the Hero realize how big the Villain was. The hero who is a simpleton from a Village says I am paraphrasing , "Do you know who I am. I don't even understand what you are speaking about. That's me".  

People in the theater erupt with applause for this dialogue since there is a coolness in JOMO. 

Lets embrace it, no more herd mentality, no compulsion to do the things everyone does. 

Lets do JOMO

How to get permanent change with external force

Very interesting to see Taliban taking over Afghan even after several years of being dormant. They were in sideline when US came and the moment US left they are back. 

So this external force is a wasted time, we are unable to bring change after applying external force for such a long time.

There is a science experiment about creating permanent and temporary magnet

There is a way to create permanent magnet and I think it makes sense to apply a high external energy to get a permanent change. 

We can definitely supply some external energy for temporary magnet but even there we need to make the temporary magnet more productive with less external energy as the time progresses. 

Why we are not able to solve this Afghan problem permanently?

But lets look at our lives and the lives we can influence. What we should do so that we have permanent changes without the need to supply a lot of external energy. 

How we can have an amplified return to the energy we put for reaching an outcome. 

On Affirmation for your future self

 Let's say you want to materialize something in your life like in 3 years you want to have x amount of money. 

Your affirmation should not be "In 3 years from now I will have x amount of money"

It should be "By July of 2024 I have x amount of money"

Did you notice the subtilties 

1. Have the exact date since if you are going to say "In 3 years from now" every day after 6 months it should have been "In 2 years 6 month from now.." but you don't generally modify your affirmation that you end up in no progress since the difference between today and the end date is constant

2. The first affirmation is in the future tense and the second one is in present tense.  The theory of expectancy should kick in and you already know it is happening.

3. Next comes how you say it. Feelings are important lofty goal but no emotion will not get you there. Say it with feelings. If you have an affirmation but it doesn't move you then please have another affirmation which moves you. 

4. Actions:  Many gurus says don't think about how to achieve your goals and affirmations how will take care by itself. Yes that's partially correct.. You need to get your why and then the what first and your incompetency of "How" it is going to happen should not reduce the loftiness of the goal. But once you have a vision you need to figure out the how, at least the first step. You are telling universe that you are doing your part and the universe can do its part. If you want x amount of money may be you should ask for a hike or upskill yourself for a promotion, change job, increase investment or reduce expense. You need to do something.

I deleted youtube app in my phone

Yes I did it and feel super awesome!

I used to burn sometime everyday looking at my subscription and the never ending list of suggested videos from youtube in my mobile its a distraction. 

I still have youtube in my smart tv and that's ok. Because its a planned downtime when I sit in front of my TV. But with my mobile since its handy and when I feel I needed to look for something interesting it kills the time 3 mins becomes 13 mins just like that!!

Anyway if I want to access youtube in my mobile I can still use browser and since it requires some effort I don't end up doing it and this helps me save hours every week. 

You don't need willpower to overcome addiction to distraction. You just need to setup your environment which benefits you and that's a smart way to becoming productive

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.