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.