Lazy cash

I hate lazy cash.

To me, lazy cash is money that doesn’t work at least as hard as a decently performing short term floating rate fund. As of today, the average short term floating rate fund would return around 4.5-5% annually.

Anything that sits in low interest account’s especially due to activity paralysis and status-quo mindset would qualify as lazy cash. Few examples are

• excess money in savings accounts
• excess money in floating rate funds when higher return alternatives are available (lets say the market is at a 15 P/E, then I think an index is a better option)
• money lying in the safety locker at home
• money lying in dead assets like jewellery
• and since I am into photography, now,… I know a few photogs out there equate photography equipment as assets. I wouldn’t qualify them as assets let alone lazy assets. Duh!

Any guy who does his math well would do well for himself by moving his lazy cash at least to a decently managed floating rate fund. If you have been sleeping, act on it today. What you don’t need in next 1 month, move it to a higher returns account.

Of late, I have been too lazy and caught up with other things in life (travel, photography, etc). These coupled with a stock market that has moved out of my comfort zone have meant that I have a rather high % of my money in low-return avenues. Yikes!

But I am pretty happy that I am sticking to my decision of not getting into the stock market when the odds are not strongly in my favor. For now, it should be a decent short term floating rate fund like one managed by Birla Sunlife. Picking dividend option should save a bit more for the ones in higher tax bracket.

One of my goals in financial management is this. Zero lazy cash. Reviewed every month first week. I admit, I have been a bit slack in the last 3 months.

Now, don’t just read this. Go and do your homework. Review your accounts. Dig out your lazy cash. Set them on work. Getting that 2-3% extra will help you in the long run, especially because, small amounts add up!

CAUTION: Now, taking undue risk with such cash is stupidity. And as I said, I am not deploying such money in the stock market, esp the index as I find the P/E above 22 and beyond my comfort zone. Find out your odds of safety. Stay withing your comfort zone! Better safe than sorry!

Nifty BEes at PE 23 and liquidation

A portion of my portfolio is into Nifty Bees (ETF based on Nifty index).

A rough and very simple strategy I use to run this portion is

• P/E   < 12 – Very Strong buy
• P/E 12-15 – Strong buy
• P/E 15-18 – Buy small quantities
• P/E 18-22 – Stay inactive
• P/E   >  22 – Start liquidation
• P/E   >  25 – Move towards minimum equity limits

While tracking Nifty Bees, in addition to P/E, I also tend to look at P/B ratio and dividend yield.

Now, the Nifty P/E is hovering around 22-23 mark. You can get the Nifty data here.  I have decided to get out of Nifty Bees totally!

Historically (looking at 10 years of Nifty data), above 22 P/E, the returns have tapered off moving into negative zone. Of course, all this is historical and the future could be different. I AM WILLING TO LET GO OF THE OPPORTUNITY of higher returns from here on. My comfort zone is within the 22 P/E.

The Nifty actually has been hovering over the 23 mark for a few months now. I had somehow been bitten by status quo and did nothing about it.

Time to pull the trigger now!

Update: Liquidated!

Note: Read my disclaimer!

Tax planning 2010-11

Its a new financial year!

Time to plan for taxes and get them worked-out right away!

Before I even start, I would like to reiterate one thing.

I do not invest just to save tax. I invest in things I would anyway invest in. Tax savings is just a bonus!

Okay, for the year FY 10-11, as far as I am concerned, the key things were

• favorable slab revisions
• Deduction of an additional amount of Rs. 20,000, over and above the existing limit of Rs 1 lakh on tax savings, for investment in long-term infrastructure bonds.
• NPS (actually, not much except the Rs 1000 per year addition.. I was looking at EEE, )

Usually, my money goes into these that also happen to be tax saving instruments.

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On the financial front

Its been 3 months into 2010. Time for a post on finance.

Financially, it has been a very silent (read passive investing) period.  Not many changes. Things have been this way for more than 6 months now.

The Nifty P/E has been hovering around 22. I havent’ sold much (I will if the P/E hits 24-25). But I haven’t bought any too, apart from the SIP’s into regular mutual funds.

The cash % of my folio is 27%.. quite high and deployed mostly in floating rate funds. I am uncomfortable with buying Nifty BEes / stocks at this point in time. (Now a days, my direct stock investments are not significant given the lack of enough time to research stocks, I stick to ETF’s mostly).

I strong believe in this philosophy.

Sometimes, doing nothing is the best thing to do.

Since the index is out of my comfort zone and I don’t have enough time to research and pick stocks bottom-up, I am ok with sitting on cash (and getting paid a measly 5-6% for it). I can wait…

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2009 – a fantastic year comes to a close!

Another year comes to a close! First, let me wish you all a fantastic New Year ahead! May all your wishes and dreams turn true!!!

To me, 2009 turned out to be one of my best years so far! Many firsts, many challenges overcome and goals reached, an addition of a cutie-pie in my family (baby girl) and much more!

The most important thing was the birth of my daughter! She was born on 21-Nov-2009. She has changed me forever. My world is now filled with fairy tales! Here is a pic of her.

Financially too, the year has been great. I reached my personal networth goal for 2009 in July itself, aided hugely by the stock market surge. I managed to better my own goal by 33%… inspite of more than expected spending. My yearly savings figure for 2009 stood at 51.6%.

If you kept adding to your folio during the downturn without listening to naysayers, you made a killing. The Nifty in 1 year went from 2959 to 5201, a rise of almost 76%. If you picked your stocks well, you even made 3-5 baggers. My biggest gainers were Yes bank, BEL, LMW, GDL, etc all of which had a high weightage in my folio in addition to Nifty bees and Junior nifty bees. Ever since the Nifty hit P/E of 18+, I had been a seller. In Sept, Nifty P/E hit 22 and I sold almost 40% of my index holdings. However, I am holding onto my individual picks except Yes bank which I had sold during the year.

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Updates

A few updates this week

1. Had a bird photography contest in office. I volunteered for activities like collecting snaps, getting it printed on A3, etc. I submitted one of my own. The result of the contest in my view was a cropper – Dr M B Krishna, the judge selected a caged bird pic as one of the winners, which to me was shocking! IMHO, only 1 pic of the top 3 deserved the award. Caged bird pics deserve no place before the bottom. Learnt a lot from this event…like the need to calibrate the monitor. The A3 print of my snap looked slightly different in color from my monitor.
2. Maybe, I should think of an advanced course in post processing.
3. Stock market has moved up nicely. Nifty PE has moved up close to 21. Maybe people should lock in their profits at least a bit by selling atleast a portion of their folios.
4. Had the worst time driving in the last 2 years. A drain got damaged on Bannerghatta road near Oracle / Accenture causing massive disruption of traffic. I took 2 hours to cover 6 Km on June 4th. The worst thing was the way how the cops handled the whole thing. Pathetic.
5. Shocked to know that most of the bullet-proof jackets that our Mumbai cops used were actually nowhere near bullet proof. Another scam cooking?
6. Everywhere I go, people ask me about the impact of recession on software techies. I am getting bored of this question!
7. I dont know why, but this question has appeared so many times in the last few days in my mind. If I weren’t a software guy, what would I have been (or like to be)?