No investment is fool proof, but there is a certain degree of safety offered by some instruments

Want to add gold to your kitty? Here's why SGB is a good option

US economy added 303,000 non-farm jobs in the month of March, 2024. This is much higher than expectations. The expectation was that it would add just 200,000 non-form jobs in March. Unemployment rate in the month came down to 3.8% from 3.9% in February. Unemployment rate in the country is below 4% for the 26th consecutive month. According to data from The Economist, this is the longest spell of unemployment rate being less than 4% in more than 50 years. US economy has added an average of 231,000 new jobs per month in the past 1 year. March non-form jobs data has dampened the expectation that US Federal Reserve will start cutting interest rates from June. The expectation is that it will start cutting down interest rates only in the latter part of 2024. The US central bank in an earlier monetary policy meeting this year had hinted that it will go for three interest rate cuts of 25 basis points each in 2024. One basis point is 0.01%.&nbsp; &nbsp;US Federal Reserve has been increasing interest rates in the past 1.5 years so that the US economy slows down and unemployment rate increases. Higher unemployment rate usually translates into lower wage growth and slowing down of inflation rate. The US central bank is trying to bring down inflation rate in US to its target of 2%. Currently, inflation rate there is around 3.2%. &nbsp;Wage growth in March in non-form jobs, in US, stood at 0.3% over that in February. Average hourly earnings in non-form jobs in the month stood at $ 34.69 per hour. With wages also increasing, along with increase in new jobs created, there is a very high likelihood that US central bank will postpone interest rate cuts beyond June. Bond yields also increased because of this expectation.&nbsp; &nbsp;Yields on US 10 year treasury bonds increased by 8.9 basis points to 4.398%, after March data came. On two year treasury bonds, it rose by 7.2 basis points to 4.71%. Yields increase when expectations of higher interest rates remaining for some more time, increase. Yields on bonds increase when their prices go down, and vice-versa. &nbsp;If US Federal Reserve postpones interest rate cuts, then other central banks may also follow suit. They too may postpone their interest rate cuts. This includes the Indian central bank, RBI too. In the past 1.5 years, RBI and many other central banks have followed the US central bank in their monetary policy.&nbsp; &nbsp;Swiss central bank recently cut down its benchmark interest rate. It became the first central bank in a developed country to cut down interest rate, in more than 2 years.&nbsp;

US economy added 303,000 non-farm jobs in the month of March, 2024. This is much higher than expectations. 

US economy’s continued strong performance – What does it mean?

It is a common misconception that millionaires and billionaires blow their money by splurging on ridiculous things and extravagances.&nbsp; While that may indeed be true for some of the most visible among the such rich, most wealthy people prefer to spend their money rather prudently on things that would enrich their lives.&nbsp; Make no mistake, most of those who have gained millionaire status do spend good money to live comfortable lives. After all, what use is all that money if not enabling a good life. But most people who have made good money, by sheer dint of hard work and perseverance, understand its value, and so, are prudent spenders. &nbsp; So, what exactly do millionaires and billionaires spend their millions and billons on?&nbsp; Education&nbsp; High quality education makes it possible to earn more. And once people have made big money, they want their kids to attend even better schools and colleges than they did. On average the rich spend significantly more money on education than do the middle and the lower middle classes, even if the proportion of their spends on education in relation to their incomes and net worths is much lower. &nbsp;&nbsp; An elite school or college gives a millionaire’s son or daughter access to a network of peers who are similarly already on the high table. This tends to help them immensely over the course of their working lives irrespective of whether they are working for a corporate or managing their own business. &nbsp; Retirement&nbsp; While they try and ensure their kids have a bright future, millionaires also try and make sure their spouses and themselves also have a comfortable retirement. In fact, there is a huge gap when it comes to retirement savings &amp; investments of the affluent and the middle class.&nbsp; Unsurprisingly, high income earners invest a much higher proportion of their income towards retirement. This helps them build a solid nest egg for their golden years. &nbsp; Pets&nbsp; Over the past couple of decades, as people have seen their incomes and net worths grow, a large number of Indians have begun adopting exotic pets, including expensive breeds of dogs and cats. This has been true of almost all such societies that have seen a rise in income levels and a new breed of HNIs coming up. &nbsp; In pre-liberalisation India people mostly either adopted local Indian dog and cat breeds or even mongrels or at best one could find Pomeranians or Indian Spitz that were relatively cheaper to maintain. Now, across the country it is common to see wealthy households adopting such expensive foreign dog breeds as Saint Bernards, Chihuahuas, Huskies, Dalmatians, Cane Corso, German Shepherds, Dobermans and Labradors, just to name a few. &nbsp; &nbsp;&nbsp; Experiences and Events&nbsp; HNI families typically spend lavishly on entertainment and sporting events as well as social events such as wine tasting, food shows, fashion shows, horse racing, concerts, museums etc. The wealthy, both old money as well as the nouveau riche typically tend to spend significantly more than middle and lower middle classes on such experiences and events, which are often used to network with other people in their peer groups. Even when at such events, the wealthy can be seen in exclusive enclosures that have either been paid for from their own money or they have acquired passes for such places by leveraging their networks.&nbsp; Vacations HNIs typically spend considerably more on vacations than people lower than them in the economic strata. On vacations the wealthy typically spend on travel, luxury hotels, good food and drink, entertainment, partying and such like. Spends on vacations had come down substantially during the pandemic, but have since risen back to near pre-pandemic levels again.&nbsp; High quality products and services HNIs typically indulge in buying high quality and high-end products be they clothes, footwear and other personal accessories, electronic gadgets including phones, laptops, tablets, household appliances or for that matter cars and bikes. &nbsp; Even when it comes to availing of services, HNIs typically go for the best. So, they would rather fly business class than economy as it is more comfortable, and saves them time since they get priority check ins and even concierge services at the airports and at hotels, pick and drop services as well as other forms of secretarial assistance. Whether travelling for work or pleasure, they typically tend to stay at high end hotels that offer them the best possible services. &nbsp; HNIs also prefer living in exclusive high end gated communities that offer them all the basic amenities including multi layered security, manicured lawns, well maintained buildings, club houses, swimming pools, sports and recreational facilities and in some cases even medical facilities including geriatric care. &nbsp; &nbsp; The idea is simple: such high-quality products are long lasting and high-end services make their lives more manageable. For that, the wealthy do not mind spending some extra money that may be a tiny proportion of their net worth and may therefore not pinch them much. &nbsp; Healthy food For the wealthy health is a priority and to keep themselves in good shape both physically and mentally, they consume food of the best available quality. &nbsp; In fact, HNIs and millionaires spend their money differently when it comes to food. Most poor, middle class and lower middle-class people tend to eat a lot of unhealthy junk food and therefore have a higher calorie intake as compared to the well-heeled who consume organic fresh food that is free of pesticides, insecticides and fertilizers and is low on calories. The wealthy often take the services of a dietician and fitness trainer and have a strict diet and exercise regimen that helps them remain in shape and allows them to be more productive and, in turn, earn more. &nbsp; Good food and good health are therefore directly linked to one’s ability to generate more wealth. And this is one virtuous cycle that the wealthy are only too aware of and do not ignore. &nbsp; Healthcare&nbsp; Like we mentioned, HNIs and millionaires make sure that they and their families and other kin are in the pink of health as much as possible. For this, apart from healthy food and regular exercise, they also make sure that they have regular health check-ups and have a designated set of doctors who they can call in case of an emergency. They also invest good money in the best possible health insurance plans that are comprehensive and allow them the best possible hospital and post-hospital care that money can buy. Often the wealthy also travel overseas for the treatment of specific health ailments for which some of the best specialists may not be available in their country of residence.

It is a common misconception that millionaires and billionaires blow their money by...

8 Things Millionaires Invest Money on

Back in 2017, two separate decisions, one by the country’s central bank, the Reserve Bank of India (RBI), and the other by the market regulator, the Securities and Exchange Board of India (SEBI), opened up a new investment avenue for Non-Resident Indians (NRIs).&nbsp;In February 2017 the RBI allowed NRIs to access the exchange-traded currency derivatives (ETCD) market, to hedge currency risk arising from their investments in India.&nbsp;Then, four months later, in June 2017, SEBI too allowed NRIs to hedge currency risk by accessing the ETCD market.&nbsp;Before the two regulators allowed NRIs this option, they were permitted to hedge their rupee currency risk through over-the-counter (OTC) transactions with banks.&nbsp;To be sure, the clearance given by SEBI was conditional. The market regulator permitted NRIs to trade in the currency derivatives segment of stock exchanges subject to certain terms and conditions. These included mandating NRIs to designate a bank to monitor and report their combined positions in the OTC and ETCD segments.&nbsp;So, what did SEBI actually say? “NRIs may take positions in the currency futures/exchange traded options market to hedge the currency risk on the market value of their permissible (under FEMA, 1999) Rupee investments in debt and equity and dividend due and balances held in NRE accounts," SEBI said.In addition to this, SEBI said that the onus of ensuring the existence of the underlying exposure rest with the NRI concerned. “In case of any contravention, the NRI shall render itself liable to any action that may be warranted by the Reserve Bank of India (RBI) as per the provisions of Foreign Exchange Management Act (FEMA)," SEBI said.&nbsp;The regulator also asked stock exchanges to take steps to put in place necessary systems for implementation of the new norms. Earlier, the RBI had allowed NRIs to invest in exchange-traded currency derivatives.&nbsp;But why do NRIs even need currency hedging?&nbsp;NRIs earn in foreign currency and are prone to currency risk all the time. Therefore, traditionally they had been permitted to hedge their rupee currency risk over the counter (OTC) with authorised dealer Category 1 banks.&nbsp;Although this did help NRI investors hedge currency risk to some extent, the RBI’s and SEBI’s move to grant them permission to enter ETCD and allowing them access to additional hedging products has helped such investors, many of whom are UHNIs or HNIs, a great deal.&nbsp;NRIs can access this route subject to the following terms and conditions: &nbsp;<ol style="list-style-type:decimal;"><li>NRI trading in ETCD has to be mandatorily routed via an Authorised Dealer bank that needs to be designated by the investor.</li><li>The NRI investor can hedge currency risk arising out of permissible investments in Indian rupees that are held in their NRE accounts. These investments can be made in debt and equity, and investors can take positions in currency futures and options. It is incumbent upon the exchange to provide details of all the transactions of an NRI investor to AD bank designated by him or her.</li><li>The designated bank has to monitor and report the combined positions of the investor across both the OTC and ETCD segments, via them or any other AD bank.&nbsp;</li><li>The ultimate responsibility for their exposure however, lies with the NRI investors themselves. &nbsp;The NRI cannot hedge unless they have taken an existing position in that currency and if found doing so, can face action as deemed appropriate by the RBI.</li></ol> Which currency pairs are permitted?According to the SEBI circular of June 2017, NRIs are permitted to trade in four currency pairs. These are:&nbsp;&nbsp;<figure class="table" style="width:427pt;"><table><tbody><tr><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:86pt;">Currency Pair</td><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:341pt;">Position limits</td></tr><tr><td style="border-color:hsl(0, 0%, 0%);border-style:solid;height:30.0pt;">USD-INR</td><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:341pt;">Gross open position across all contracts shall not exceed 6% of the total open interest or USD 10 million, whichever is higher</td></tr><tr><td style="border-color:hsl(0, 0%, 0%);border-style:solid;height:30.0pt;">EUR-INR</td><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:341pt;">Gross open position across all contracts shall not exceed 6% of the total open interest or EUR 5 million, whichever is higher.</td></tr><tr><td style="border-color:hsl(0, 0%, 0%);border-style:solid;height:30.0pt;">GBP-INR</td><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:341pt;">Gross open position across all contracts shall not exceed 6% of the total open interest or GBP 5 million, whichever is higher.</td></tr><tr><td style="border-color:hsl(0, 0%, 0%);border-style:solid;height:45.0pt;">JPY-INR</td><td style="border-color:hsl(0, 0%, 0%);border-style:solid;width:341pt;">Gross open position across all contracts shall not exceed 6% of the total open interest or JPY 200 million, whichever is higher.</td></tr></tbody></table></figure>What exactly are currency derivatives?Currency derivative trading is basically an exchange of two currencies at a mutually agreed price at a future date. The currencies are exchanged by dealing in currency futures or currency options.&nbsp;But unlike in equity derivative trading, the underlying asset here are the currencies and not stocks. Also, no broker is involved in the process as it is facilitated by AD Category 1 banks. &nbsp;&nbsp;What are the requirements that an NRI needs to fulfil for trading in currency derivatives?An NRI needs to fulfil the following requirements for currency derivatives trading: &nbsp;<ol style="list-style-type:decimal;"><li>They need to designate an Authorised Dealer Category-I bank who is a clearing member of the exchange or the clearing corporation. Often times banks offering NRI accounts also offer such services.</li><li>The NRI investor is required to apply for the Custodial Participant (CP) code through the clearing member. In this case the clearing member is the AD Category 1 bank. To apply for CP code, an NRI is required to provide the copy and details of the PAN, passport no. with its expiry date. The AD bank updates their details and sends it to the clearing corporation for CP code allotment.</li><li>The NRI also need to place a margin with the &nbsp;exchange via the clearing member for trading in currency derivative</li></ol>&nbsp;So, why should NRIs even consider investing in currency derivatives?NRIs typically move funds across geographies (mostly from abroad to India) for investment purposes or to support their families back home. At times, they also take back money from India to their country of residence. &nbsp;&nbsp;This opens an NRI investor to currency risk owing to frequent fluctuations in exchange rates. Investments in currency derivatives allows such investors to hedge currency risk. Apart from this, it also offers them some additional benefits:&nbsp;<ol style="list-style-type:decimal;"><li>Helps diversify the investment portfolio</li><li>Helps provide a transparent trading platform</li><li>Allows an investor to take greater leverage by paying lower margin costs</li><li>Eliminates counterparty risk, which is common in OTC platforms</li></ol>&nbsp;ConclusionThe moves by the banking and stock market regulators to allow NRIs to hedge currency risk has opened up a new investment opportunity for them. But this has not gained in popularity yet as not too many NRI investors are yet aware of the new changes. Moreover, banks have also not marketed the new services to their potential customers from among the NRI community. As an NRI investor, you can take advantage of this way of currency hedging by approaching your bank and seeking further information from them.

Back in 2017, two separate decisions, one by the country’s central bank, the Reserve Bank of India (RBI

Guarding Against the Winds of Change: Currency hedging for NRIs

Voluntary Provident Fund (VPF) is the voluntary contribution that an employee can make towards her public provident fund (PPF). An employee can make up to 100% of her basic salary and dearness allowance as voluntary contribution towards her PPF. The interest earned on VPF is same as that on PPF. An option like VPF offers salaried professionals much-needed flexibility with lucrative returns in the long run.&nbsp;EPF interest rate now at 8.25%; these are good times for VPFIn February, the Employees’ Provident Fund Organisation, or EPFO, set the interest rate for 2023-24 at 8.25%. This is the highest rate in the last three years.&nbsp;Currently, fixed deposits in scheduled commercial banks (the only equivalent of EPFO in terms of risks) will earn you lesser. There is more. The EPFO return is not only tax free at withdrawal (except in some cases, explained later), you can also withdraw it before retirement in some emergency cases (again, explained later).&nbsp;The law requires all employee above a certain threshold of income to contribute 12% of the basic pay every month to EPF, and the employer typically matches this amount. Now, if you wish to increase your corpus, you can opt for voluntary pension fund up to 100% of your basic salary, along with dearness allowance. There is no matching contribution from the employer to this though. &nbsp;&nbsp;However, the interest rate received on the corpus remains the same and so do most of other benefits such as those on taxes, withdrawals etc.Now, why should you at all invest in VPF, instead of receiving that money at the end of the month in your account and then using it wherever you want it to?&nbsp;Benefits of VPF&nbsp;Habit of savings : VPF is cut directly from your salary, inculcating the habit of savings. As there are also few restrictions on its withdrawal, you get a much larger corpus at retirement, than you would normally.Tax : The Voluntary Provident Fund is considered one of the best tax-saving options under Section 80C of the Income Tax Act, and for a good reason. VPF is an ideal choice if you are ready to park a dedicated sum for five years, the minimum tenure of this scheme.&nbsp;You can avail tax deductions of up to Rs 1.5 lakh a year under Section 80C, the interest earned on VPF is tax-free while any withdrawal made after the mandatory five-year lock-in period also does not attract any deduction.&nbsp;Note that any withdrawal within five years is course taxable, even if it is a partial withdrawal.&nbsp;Interest Rate: Historically, interest rate on EPF or VPF has been higher than on fixed deposits, leading to one of best returns on a quasi-government instrument.&nbsp;Here is a look at interest rate on EPF over the years.&nbsp;<figure class="table"><table><tbody><tr><td style="height:5px;padding:0cm 5.4pt;text-align:center;width:90.0pt;">Year</td><td style="height:5px;padding:0cm 5.4pt;text-align:center;width:90.0pt;">EPF Rate</td><td style="padding:0cm 5.4pt;text-align:center;width:150pt;">Average deposit rate*</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY14</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.75%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.77%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY15</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.75%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.68%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY16</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.80%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.08%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY17</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.65%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">7.34%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY18</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.55%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">6.67%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY19</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.65%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">6.8%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY20</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.50%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">6.7%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY21</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.50%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">5.68%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY22</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.10%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">5.1%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY23</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.15%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">6.03%</td></tr><tr><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">FY24</td><td style="height:15.0pt;padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">8.25%</td><td style="padding:0cm 5.4pt;text-align:center;vertical-align:bottom;">6.7%</td></tr></tbody></table></figure>*Calculated from RBI release on weighted average domestic term deposit rates of commercial banks&nbsp;&nbsp;From the above graph it is clear that EPF/VPF has generated higher return than bank deposits. Even in the few years, when they did trail bank deposits, the tax advantage would have more than negated the impact.&nbsp;Ease of Withdrawal: The VPF is a popular fixed-income alternative because it offers an individual the option to withdraw their investment for specific needs. It typically allows withdrawal for:&nbsp; &nbsp;<ul><li>Medical emergencies&nbsp;</li><li>Wedding expenses</li><li>Education expenses&nbsp;</li><li>Land/house purchase or construction &nbsp;</li></ul>The Caveats Unlike mutual funds, EPF or VPF are not subject to market risks but as covered earlier, this investment may attract taxes in exceptional cases: &nbsp;<ol style="list-style-type:decimal;"><li>If your investment in these funds exceeds Rs 2.5 lakh a year, interest on the contribution will be taxed under “income from other sources”</li><li>You have withdrawn your contribution before the completion of the five-year tenure.</li></ol>&nbsp;VPF acts as a safety net for risk-averse individuals because of the ease of withdrawal at a highly-attractive interest rate. The recent increase in the EPF interest, which will be carried forward to VPF, is a good opportunity to cash in on this stable investment option.&nbsp;Depending on your base pay, in a single financial year, you can ask your employer to deduct a total of Rs 2.5 lakh, or more, towards EPF and VPF combined. This contribution will not be taxed, while interest earned on any additional amount will be taxable. ConclusionOne can earn 8.25% interest on this sum without making any other investment and still enjoy attractive returns due to the magic of compounding.&nbsp;This fixed income fund allows you to invest until your retirement or resignation.&nbsp;It also saves energy at the time of filing taxes as its benefits and deductions will be calculated in the Form 16 issued by the employer.&nbsp; &nbsp;

Voluntary Provident Fund (VPF) is the voluntary contribution that an employee can make towards her public provident fund.

Retirement Readiness: The VPF edge

This year is poised to be a significant one for India's high-net-worth individuals (HNIs) and family offices. They are marking a shift towards global portfolio diversification. Historically, India's strict controls and non-transparent regulations on capital outflows have posed significant challenges for the global investment aspirations of the ultra-rich and HNIs. However, a notable change is on the horizon with the emergence of family investment funds, which have gained momentum following the establishment of guidelines in mid-2022. A prominent example is the family office of billionaire and IT company founder, Azim Premji, which has received preliminary approval to establish a family investment fund (FIF) at the Gujarat International Finance Tec-City (GIFT City). &nbsp;What Is FIF?Family Investment Funds (FIFs) or family offices are self-managed investment vehicles formed to manage the wealth of a wealthy family. Traditionally family offices in India operated in a more informal and unstructured way. To give more structure to it Indian government has allowed the provision of setting up of more formal Family investment funds (FIFs) in International Financial Services Centre or GIFT city. FIFs can adopt various legal structures including that of companies, contributory trusts, limited liability partnerships, and proprietorships. These funds offer considerable operational flexibility, operating as either open or closed-ended schemes, and can create diversified investment portfolios that may include international listed and unlisted securities, as well as tangible assets like bullion and overseas real estate. &nbsp;Investments made by FIFs are governed under the Fund Management Entity (FME) regulations. An FIF is required to maintain a minimum capital of $10 million within three years of commencing its operations. For regulatory and exchange control purposes, an FIF will be treated as a resident of India, yet it will be considered a foreign resident in the context of exchange control regulations. &nbsp;Booming Family Office In India, family offices—private wealth management advisory firms that serve ultra-high-net-worth individuals—have traditionally been the preserve of business families with intergenerational wealth. However, the surge in start-up successes and entrepreneurial achievements has broadened the base of individuals accumulating substantial wealth. These new wealth holders seek not only to achieve their financial objectives but also to build a legacy and ensure a smooth transition of wealth to future generations. Consequently, having family offices to manage their wealth privately has become a preferred strategy for them.&nbsp;The emergence of Family Investment Funds (FIF) is set to revolutionize the concept of family offices in India. Historically, ultra-high-net-worth individuals (UHNIs) have established their family offices in overseas locations such as Dubai and Singapore, attracted by benefits like lower taxes and access to global markets. In contrast, India's financial regulations, including the Liberalised Remittance Scheme and Overseas Direct Investment guidelines under the Foreign Exchange Management Act, 1991, have been perceived as restrictive. The introduction of FIFs in GIFT City, however, promises to offer many of the advantages previously only found in foreign jurisdictions. This development could significantly alter the landscape for family offices in India, making domestic options more attractive for wealth management and global investment. &nbsp;Taxation&nbsp; The primary advantage of Family Investment Funds (FIF) lies favorable taxation &nbsp;and a variety of other exemption benefits. The tax treatment of FIFs depends on their structure, whether established as a trust, a Limited Liability Partnership (LLP), or a company. FIFs located in GIFT City benefit from a complete tax exemption for a duration of 10 years within a 15-year window, as per the Income Tax Act of 1961, provided certain conditions are met. Additionally, these funds enjoy exemptions under the Goods and Services Tax (GST). Legal and tax professionals suggest that for FIFs organized as trusts or LLPs, taxation should be applied at only one level. This policy positions GIFT City on equal footing with foreign jurisdictions that are currently favored by family offices, which also offer the benefit of single-layer taxation. This makes GIFT City an increasingly attractive option for family offices looking for efficient tax structures and aiming to consolidate their investment activities within India. &nbsp;Advantage Gift City Gift City, located in Gandhinagar, Gujarat, stands as India's beacon of international finance, modeled after global financial powerhouses like Dubai, Singapore, and Hong Kong. Its appeal lies in a host of tax benefits and exemptions, thanks to its status as a special economic zone. The Indian government's commitment to investor-friendly and stable regulations has set the stage for a diverse range of financial institutions, including banks, asset management, and advisory firms, to establish their presence in Gift City. This ecosystem presents a significant advantage for Family Investment Funds (FIFs), which can tap into the comprehensive services available. &nbsp;Remarkably, FIFs in Gift City are permitted to borrow funds for leveraging purposes from local banks, showcasing the flexible financial environment. The rules governing overseas investments into Gift City are particularly accommodating. For instance, the August 2022 framework restricts resident Indians from investing in foreign financial service businesses, but this doesn't apply to investments in the International Financial Services Centre (IFSC) like Gift City. Similarly, the requirement for a three-year profitable track record for overseas direct investment (ODI) is waived for family offices in IFSCs. &nbsp;Investments in pooling vehicles such as FIFs established in Gift City are classified as overseas portfolio investment (OPI), simplifying compliance compared to ODI. This classification benefits FIFs by allowing them global investment opportunities without the constraints of FEMA regulations.&nbsp;For individual investors, using the Liberalised Remittance Scheme (LRS) route caps overseas investments in securities and properties at $250,000 per annum. Establishing an FIF enables maximizing this limit through the family-owned entity, preserving individual LRS quotas for other investment avenues. &nbsp;Conclusion The Indian government's ongoing emphasis on fostering a business and investor-friendly environment promises a stable climate for investment and taxation. The inclusion of India in global bond indices underscores this commitment. Gift City, with its favorable regulatory framework, invites family offices and affluent individuals to consider the advantages of FIFs. The stipulation for FIFs to maintain a physical office in Gift City, complete with a principal office in charge of investment decisions, aims to build confidence among family offices and alleviate any potential concerns.

This year is poised to be a significant one for India's high-net-worth individuals (HNIs) and family offices. 

Family offices & Family Investment Funds – What do they mean?

Art has always been the preserve of the rich and the famous. For centuries royal families as well as ultra wealthy business families across the world have patronised some of the best art and the artists that created those masterpieces.&nbsp;While a lot of these masterpieces have found their way into museums across the world, a vast array of paintings and sculptures that are valued in millions of dollars, are part of private collections and remain stashed away in secret vaults.&nbsp; &nbsp;New money and the art marketThe art market has traditionally been accessible only to old money families that often have such tastes, a discerning eye for all the finer details and deep pockets to be able to afford such expensive luxuries. Over the last few decades, however, an emerging class of collectors that come from first generation wealth, have also begun to seriously dabble in the art market.&nbsp;In fact, the art market has lately become democratised and accessible enough to first generation high networth individuals (HNIs) that art is now considered not just an investing class on its own, but also a hedge against the uncertainty in capital markets.&nbsp;Art as a hedge against volatility and inflationArts and collectables have generally shown a lower correlation with traditional asset classes when it comes to ups and downs besides having an emotional appeal that makes an investor desire and then hold on to a painting or a sculpture or for that matter an antique item of historical significance that may appreciate in value in the years to come.&nbsp;This makes art an ideal hedging tool against inflation as well as an instrument that allows an HNI investor to diversify his or her portfolio.&nbsp;While the increased participation of HNIs in the art market has been a global phenomenon, it has largely been driven by wealthy investors from Asia- mostly China and India. As these countries develop and a new class of the wealthy and the ultra-wealthy emerges, more and more of them are taking a keen interest in betting on expensive art and other collectables such as watches, wines, cars, gems and jewellery and classics.&nbsp;How big is the art market?It is no wonder then that the size of the art market has grown strongly over the past several years. In 2023 the global art market was estimated to be worth more than $520 billion and is expected to grow to nearly $560 billion in 2024. By 2028, the global art market will likely be worth more than $700 billion and by 2032 it is expected to cross the $880 billion mark.&nbsp; &nbsp; Art market segmentationThe art market is divided into seven main segments-&nbsp;<ol style="list-style-type:decimal;"><li>Art shop</li><li>Art gallery</li><li>Frame shop</li><li>Appraisers</li><li>Art collectors</li><li>Antique stores</li><li>Other collectors <ol style="list-style-type:lower-latin;"><li>Antiques</li><li>Jewellery</li><li>Comic books</li><li>Coins</li><li>Stamps</li><li>Wine</li></ol></li></ol>&nbsp;This segmentation is not water tight and could vary across geography. But as an HNI investor you should be aware of how the market works.&nbsp;The Indian art marketIndia is at a fascinating inflection point as far as its art market is concerned. This is borne out by the fact that art galleries and exhibition spaces have been opening across the country. The latest such space to open was the Reliance Industries sponsored Nita Mukesh Ambani Cultural Center in Mumbai. This will soon be followed by the Brij Museum in Delhi as well as the Hampi Art Labs in Karnataka.&nbsp;In 2023, long term curator Payal Kapoor, who manages Arushi Arts, had launched the country’s first travel art fair Artix. In February this year, the India Art Fair saw more than 100 exhibitors showcasing their wares.&nbsp;Art galleries galoreArt watchers say that an increasing collaboration between institutions, patrons and commercial galleries are helping support local art scenes. The growth in the art market is being supported by a strong economy and surging stock markets, art experts say. In fact, they say that since Mumbai is home to some of the wealthiest people in India, it is no coincidence that India’s financial capital is seeing the most prolific activity as far as the art market goes.&nbsp;While on the one hand well known international art advisors and collectors such as Lawrence Van Hagen are bringing works of artists of the league of Andy Warhol, Keith Haring and Roy Lichtenstien to India, on the other, a new generation of tech savvy nouveau riche investors are popping up, looking to invest in “affordable art.”&nbsp;Delhi too has not been left untouched by this upsurge in interest. Commercial gallery DAG has opened a new gallery in Janpath, in the heart of Lutyens Delhi and has taken over the residence cum studio of the late modernist artist Jamini Roy.&nbsp;Industry watchers say that first time art buyers with increasing amounts of disposable incomes, are interested in acquiring works by upcoming artists whose paintings and sculptures could appreciate in value over the years.&nbsp;Online art marketplacesBut it is not just offline art galleries that are seeing greater footfalls. Online marketplaces such as Mojarto.com, Gallerist.in, Fizdi.com, Artiflute.com, Myart.com, Indianartideas.com and Indiaart.com are seeing a great deal of interest from this category of buyers. In fact, new buyers first get introduced to the intricacies of art by visiting some of these platforms, and then begin visiting art galleries.&nbsp;On these platforms you can buy paintings, fine arts, prints, lithographs and other works of art ranging from a few thousand rupees by upcoming artists and going into lakhs by some of the more established ones.&nbsp;So, how much of your net worth should be invested in art?There is no limit to the amount of money you can invest in art. But if you are a first time investor, still trying to understand the intricacies of the world of art, you should invest no more than 2-3% of your net worth in expensive art.&nbsp;While there is a good chance that the painting you bought from that upcoming artist will see its value rocket, there is also a fair chance that this may not happen and you may end up with an investment that is unlikely to appreciate. Moreover, works that sell in the millions, are often by established artists who are no longer around or not active on the scene any more. The more scarce the piece of art, the more valuable it will be. Art is therefore an extremely speculative investment.&nbsp;Finally, only that portion of your money, which you can stash away for the long term should be spent on expensive art. This is important to keep in mind also because art is not an investment that will generate regular income or cash flows but could potentially only generate handsome returns after several years

Art has always been the preserve of the rich and the famous.

How can HNIs invest in the Art Market

Investors and traders have to constantly juggle with this question. This was once a million-dollar poser when the Indian economy was dominated by a handful of old-world family businesses. As the seeds of entrepreneurship was sown in the 70s and 80s and got a shot in the arm in early 90s due to liberalisation, it became a billion-dollar question. &nbsp;It did not take long for Indian wealth creators to add more zeros to make it a trillion-dollar question as the country became the fastest growing major economy in the world. &nbsp;In October 2021, the two benchmark indices—the BSE Sensex and the NSE Nifty—scaled new peaks. Sensex tested Mt 60k and Nifty entered the adult territory for the first time crossing the 18,000 mark. This was despite the Covid-19 pandemic continuing to rile consumer and sentiments. &nbsp;It took a pinprick in the global tech valuation bubble to bring some sanity as the overall markets corrected 10-15% by mid-2022. Global tech valuation did bounce back eventually, but the Indian markets had a particularly short-lived correction. &nbsp;While the tech heavy Nasdaq Composite index hit a new high last week, Indian benchmark indices have been on a more secular rise. Indeed, Nifty broke out from the previous peak in several months ahead of the top two US indices- Nasdaq Composite and Dow Jones- that have just managed to break out to new highs much more recently. &nbsp;This is despite the slide in Indian currency against the greenback. Rupee depreciation tends to fan flight of offshore capital but the market has behaved counterintuitively. One of the key reasons for this is rise of domestic capital. This started around seven years ago as demonetisation of large valued currency led to asset rebalancing with real estate being pushed down as the first choice to park money. &nbsp;The incentive structure with tax liability and ease of transacting also pushed more people to look at stock markets either directly or indirectly via mutual funds. This has acted as a counterbalance and supported rich valuations despite a war in Europe that has pushed up oil prices. So, net-net how fairly valued is the Indian market currently? Has the flush of domestic liquidity taken it back to insane territory? &nbsp;The P/B ratio One can use various metrics to assess fair valuation. The more usual practice is to compare share prices with the profits being pumped out by companies in a bunch or as part of a benchmark index. Another method is to gauge the value of assets of those companies. &nbsp;The price-to-earnings (P/E) multiple, the most commonly used valuation metrics has its limitation as it is based on past performance which can change due to underlying changes in input prices besides consumer and business sentiments. To be sure, one can use forward multiples but different analyst will have different view on that. &nbsp;One does have an alternative in the firm of the price-to-book value (P/B) ratio, which gauges the market’s valuation relative to the book value of net assets. We can map out the historical numbers of the P/B ratio of the 50-stock Nifty against the various events over the last 20-25 years to see how the market behaves as it breached the average trendline. &nbsp;Assessing this metrics over time shows that the average P/B ratio for the Nifty has been around 3.6x. This papers over the highs and lows running across the madness of the dotcom boom (1999-2000), the subprime crisis and its fallout with Lehman Brothers implosion (2007-08), the global liquidity-led bull run ahead of the Covid-19 outbreak, and the tech market rave party in 2020-21. &nbsp;There are some critical points to be noted here. &nbsp;The most important one is that the criteria for assessing the ratio changed a few months ago. As a result, the ratio cracked by a fifth straight away without any correction in the indices. This means suddenly the valuation started looking more attractive. However, this gave a false comfort as one was comparing apples to oranges. &nbsp;Yes, a consolidated picture does provide a better picture of the state of affairs as several large Indian companies comprising the Nifty have scaled up via new arms that have taken gigantic proportions over time. Take India’s biggest company Reliance Industries that has spawned giants with multi-billion dollar assets such as those in retail and communications to name a few. &nbsp;Then again, many businesses have built large overseas presence via offshore subsidiaries through acquisitions in the last decade and more that was not getting reflected and inflating the valuation multiple, giving a false impression of overvaluation. &nbsp;In 2007, which was the precursor to the major stock market crash, Nifty’s P/B ratio based on standalone net worth of its constituents had breached a clearly unsustainable level of 6! This corrected thereafter only to move towards the level three years ago when the ratio had crossed the ‘4’ mark after a gap of 12 long years. &nbsp;Last September it had scaled to around 4.5, a level it had tested previously only to see a healthy correction. Notably, the current Nifty P/B ratio at 3.8 has climbed around 12% since September 2023. The Indian market has traditionally traded at a higher P/BV ratio compared to other large markets hat rarely breach the ‘2’ mark. But the current trends show the market is overvalued even against its own historical trends despite an adjusted parameter that may make it more palatable. &nbsp;Second, and what could well turn out to be more prophetic, the previous two up and down cycles were followed by two- to three-year periods (2001-03 and 2011-14) where the Nifty traded at a discount to its long-term average. That is arguably yet to happen and portends a deeper correction is in the horizon with indices waiting for some trigger. To be fair, the flush of domestic liquidity as a new force in the capital market ecosystem may prevent this from happening but there is a real risk lurking around. &nbsp;Endnote So where does this leave us with the trillion-dollar question? Indian market is now approaching what is a danger zone. While there has been a minor pullback over the last few weeks, with national elections around the corner, the fate of the current government retaining power and continuing with its policies is already factored in the exuberance of the investors. &nbsp;While the war in Europe failed to shock the global economy and certainly did not have any significant fallout for India, despite the push to the oil price, any escalation of the continuing tension in the Middle East could lead to a bigger impact on input prices, leading to central banks taking a hawkish stance to control inflation and resulting in a slowdown. &nbsp;But the single biggest factor that could well decide if Indian market can sustain super rich valuation, is the coming national elections. Long-term investors should do better than cashing out completely but should be prepared to see a correction of sorts in the near term, though this may be preceded by another push upwards. &nbsp;Indian markets appear to be currently overvalued by 8-10%, based on historical trends of both P/E ratio as well as P/BV. But that does not necessarily mean it would correct by that much due to structural changes with domestic money, unless there is a major trigger with a surprise in the election outcome or fresh global outbreak or large scale war. Any correction of 5% or more may not transpire.

Investors and traders have to constantly juggle with this question.

How fairly valued is the Indian Stock Market

The huge push of domestic capital sourced from retail investors in particular who lapped on to the mutual funds and multi-channel flow of capital from high net-worth investors (HNIs) who have shuffled their asset holding away from real estate, especially after demonetisation, has increased the weight of Domestic Institutional Investors in equity markets in India. This is not to suggest that global factors do not still affect local sentiments. Whether it is the US Fed monetary policy decisions and its impact on how foreign investors rearrange their asset allocation, or geopolitical tension in Europe or Middle East, given the impact on oil price, both global and domestic factors determine the course of equity markets in India. &nbsp;The latest data of the stock holdings of different categories of investors only points to how domestic money is also gaining weight in Indian equity markets. &nbsp;Stake of MFs in listed companies rose to an all-time high The share of domestic Mutual Funds (MFs) in companies listed on NSE rose to an all-time high of 8.81% as on December 31, 2023, from 8.73% as on September 30, 2023, as per PRIME Database Group. &nbsp;The share of retail investors (individuals with up to Rs 2 lakh shareholding in a company) decreased marginally but the share of HNIs or individuals with more than Rs 2 lakh shareholding in a company increased slightly to 2.06% as on December 31, 2023. The combined retail, HNI and MF share, reached an all-time high of 18.44% as on December 31, 2023. In contrast, the share of FIIs declined to 18.19%, down from 18.40% as on September 30, 2023 &nbsp;One way to gauge this is by tracing the set of companies where the different investor groups have increased their stake and the average change in share price of those stocks during the period. &nbsp;To be fair, this is a short-term performance and this may not be replicated consistently over a longer period. That said, it does provide an insight on who has been above the crest in their stock choices. &nbsp;We looked at the quarterly statistics to get a report card of different investor groups active in the country. &nbsp;Looking at the broad set of investor categories, where we factor out promoters’ stakes, we see FIIs and lately HNIs who have been more successful in placing their bets. &nbsp;<figure class="image"><img src="https://azprdbrkiiflsecurities.blob.core.windows.net/%24web/assets/average_rise_in_stock_prices_in_july_september_quarter_4c017188f3.png"></figure>Based on a set of around 1900 companies listed on NSE’s main board for the quarter ended December 31, 2023, the 718 companies where FIIs hiked stake, the average share price moved up 20.01% last quarter. As against this, the benchmark Nifty 50 index rose just 10.06% last quarter. &nbsp;Of the 621 companies were domestic institutional investors (DIIs)- domestic mutual funds, insurance companies, banks, financial institutions, pension funds, Non-Banking Financial Companies (NBFCs), etc- upped their holding, the share price rose 16.18%.&nbsp; &nbsp;If we look at individual investors, of the 1,007 companies where retail investors hiked their holding, the average share price increase was pegged at 13.99%.&nbsp; &nbsp;Of the 758 companies where HNIs or &nbsp;investors with investment of more than Rs 2 lakhs, bought additional shares, the share price went up 18.18%. &nbsp;Among others, private promoters who bought additional shares in their companies (118 in total), the share price of those companies rose 19.98%. &nbsp;This does not mean that just because the stock price of the companies, in which a particular category of investors invested, increased, investors in that category also necessarily earned higher returns. &nbsp;Suppose the stock price of a company, A, increased from Rs 10 to Rs 20 in the three month period between October and December 2023. This is an increase of 100% in the stock price of the company. You invested in the stock in November when the price of the stock was Rs 15. So the return that you have got at the end of December is 33.3% [(20-15)/15] and not 100%. This return will also be notional and not real. You will realize return only when you actually sell the stock at Rs 20 at the end of December.&nbsp; &nbsp;Another thing that the above data may indicate is that HNIs or investors with investments of more than Rs 2 lakh were more momentum driven. They went along with the momentum. They invested more in stocks whose prices were rising.&nbsp;

The huge push of domestic capital sourced from retail investors in particular who lapped on to the mutual funds...

Indian Equity Markets in the December Quarter

The Dilemma of Increasing EMIsThe path to creating wealth is often through consistent and disciplined investment. However, this journey can encounter roadblocks, especially when loan repayments, commonly known as Equated Monthly Instalments (EMIs), increase.&nbsp;This situation, often a result of policy changes by financial authorities like the Reserve Bank of India (RBI), can lead to a decrease in your disposable income and savings, making it challenging to continue your investment endeavours.&nbsp;Understanding Why EMIs IncreaseEMIs are susceptible to changes in the financial market, primarily due to adjustments in interest rates.&nbsp;For instance, when the RBI raises its benchmark lending rates, banks typically pass on this increase to consumers, affecting all existing floating rate home loans.&nbsp;This results in higher monthly payments, thereby impacting your financial planning and budgeting.&nbsp;To combat inflationary pressures, the Reserve Bank of India (RBI) has increased its benchmark overnight lending rate by 250 basis points, or 2.5 percentage points, since May 2022. The Impact on Household BudgetsThe resultant rise in interest rates has led to a rise of Rupees 18 lakh crore in additional EMI as of January.&nbsp;The EMI payment towards the home loan can account for up to 30-40% of a family's monthly income for a middle-class family.&nbsp;When these EMIs rise, there's less money available for savings and discretionary expenses, affecting overall financial stability.&nbsp;Strategic Responses to Rising EMIs1. Re-evaluating Your Financial Plan The first step in adapting to higher EMIs is a thorough review of your financial plan. Scrutinise your income and expenses to identify potential savings.&nbsp;This might include cutting back on non-essential expenditures, such as entertainment subscriptions or luxury items.&nbsp;2. Prioritising Loan Repayments When dealing with multiple loans, prioritize them based on their interest rates. High-interest loans, like credit card debts, should be cleared first due to their compounding nature.&nbsp;Additionally, consider closing loans for depreciating assets like cars, as they typically have higher interest rates compared to assets like homes that generally appreciate over time.&nbsp;3. Loan Refinancing and Restructuring Refinancing your loans can be a viable option. This involves replacing your current loan with a new one, ideally with lower interest rates or more favorable terms.&nbsp;It's essential to shop around and negotiate with financial institutions to secure the best deal.&nbsp;4. Adjusting Investment StrategiesWhile maintaining a disciplined investment approach is crucial, it's also important to be flexible. Consider temporarily reducing your investment contributions and focus on managing your current financial obligations.&nbsp;Remember, investment is a long-term journey, and short-term adjustments won't significantly derail your overall goals.&nbsp;Seeking Expert Financial GuidanceSeeking advice from a professional financial advisor can be invaluable. They can offer insights tailored to your specific situation, helping you navigate through challenging times without compromising your long-term investment objectives. &nbsp;Navigating Through Financial ChallengesThe increase in EMIs presents a significant challenge for investors, but with strategic planning and adaptive measures, it's possible to continue your investment journey.&nbsp;By reassessing your budget, prioritizing loans, considering refinancing options, and seeking professional advice, you can navigate through these financial challenges and maintain your path toward achieving your investment goals.&nbsp;Additional Considerations for Financial Resilience&nbsp;Building an Emergency FundOne key aspect of financial planning often overlooked is the creation of an emergency fund. This fund acts as a financial buffer, helping you manage unexpected expenses without disrupting your investment plans.&nbsp;Understanding Credit ScoresA good credit score can provide leverage in negotiating loan terms. Regularly monitoring and improving your credit score can lead to better loan offers, including lower interest rates, which can ease the burden of increased EMIs.&nbsp;Financial LiteracyEducating yourself about financial management, investment options, and market trends is crucial. Knowledge empowers you to make informed decisions and stay ahead in your financial journey, especially during periods of economic uncertainty.&nbsp;Look into using tools and apps for financial planning. They can give you a clear picture of how you're spending your money, how well your investments are doing, and how to manage any loans.&nbsp;But remember, it's not just about knowing where every penny goes.&nbsp;The real magic happens when these insights help us make better decisions in our financial lives. You know what they say: knowledge is power.&nbsp;Dealing with the pressure of increasing monthly payments can be tough.&nbsp;You need a solid game plan that covers all bases - smart budgeting, prioritizing your debts, investing wisely, and getting some professional help.&nbsp;This isn't about winging it; it's about being strategic and informed so you're in control of your financial future.&nbsp;Firstly, managing your money is key to staying on top of things. But not just any management - we're talking sensible budget planning here.&nbsp;Secondly, remember every debt has its own weight. Some are heavier than others and those should be taken care of first.&nbsp;Next up? Investments!Don't just blindly put money somewhere because someone told you to do so; make sure it makes sense for YOU.&nbsp;Lastly but definitely not least – don’t shy away from asking for guidance when needed. Because sometimes we need a little extra help to navigate tricky waters – especially when they’re related to our finances!&nbsp;Staying financially resilient even as loan repayments ascend is like juggling whilst walking a tightrope - it's challenging but doable if your focus isn't just surviving today or tomorrow.

The path to creating wealth is often through consistent and disciplined investment.

How to Continue Investing When EMIs pinch

In June 2014, Ronald Read, a Vermont based janitor and gas station attendant, who had led a non-descript life, died at 92. It was only after his death, that it was discovered that he was a secret millionaire who had quietly amassed a fortune of $8 million, all thanks to his smart spending and investing habits.&nbsp; In November last year, 82-year-old New Hampshire resident Geoffrey Holt, who lived in an unfurnished mobile home and drove a lawn mower left a $4 million fortune to the small town he called home. He, too, was a secret millionaire.&nbsp; We are sure there are scores of such examples even in India where people with modest annual incomes have managed to build portfolios in excess of a crore. &nbsp; It is tough to earn money, tougher to hold on to what has been earned and tougher still to compound it over time so that one can become financially free and perhaps gain millionaire status.&nbsp; While Read’s and Holt’s may be tough acts to follow, you too can gain dollar millionaire status by starting out small. It is not easy, but imminently doable. &nbsp; In fact, a bunch of people follow a disciplined approach to finance and investing and achieve in one generation what most others from their peer groups can often only aspire for. &nbsp; Often, these people do not flaunt their wealth and keep leading their lives as unassumingly as they had been doing in the past when they were not as wealthy. Such people are the quintessential secret millionaires who have net worth far in excess of most people who live around them and may perhaps even be oblivious to the fact that they have achieved millionaire status. &nbsp; Disciple, discipline and discipline&nbsp; So, what did Read and Holt have in common? What differentiates such secret millionaires from their peers? And more importantly, how can you become a millionaire despite having humble beginnings?&nbsp; The most important thing about these secret millionaires is that they are extremely diligent when it comes to saving and investing their money and can keep at it for long years, without a break. &nbsp; Such people understand that one fundamental rule of personal finance that most ignore- the power of compounding. &nbsp; They start small and then keep building on their gains, month after month, year after year. &nbsp; Here are some common investing traits of that secret millionaire who may be living in your midst. &nbsp; They begin investing very early in life and have a high savings rate Most people who manage to compound their wealth in one lifetime do so by starting small but starting early. They almost always have frugal habits and are very focused investors. This is, however, not to suggest that they invest in complex instruments. Far from it. Most self-made millionaires invest using simple tools such as index funds, which are low cost and do not need active management. Or they invest in blue chip stocks or dividend paying stocks, like Ronald Read used to do. &nbsp;Their investments compound over time and help them build a sizable kitty for themselves. &nbsp; They start saving for their kids very early- in some cases before they are even born Indeed, as funny as it may sound, some people begin planning for their future kids- even before they are born. They work towards providing a head start to their children before they come of age and begin their lives independently. Not only does this ensure that their children learn the importance of building wealth but also help in passing on their assets intergenerationally. &nbsp;&nbsp; They always seek financial advice Savvy investors always seek sound financial advice before investing their money into the stock markets either via direct equity or the mutual fund route. As an investor in India, you should ideally approach a SEBI-registered investment advisor or portfolio manager for sound financial advice. &nbsp; They have multiple income streams&nbsp; Secret millionaires often have multiple income streams and do not depend on just one source of income from their job or business or a service they render. Such multiple income streams could include rental income, interest income from debt instruments, income from annuities, dividends from shares in listed and unlisted companies and income from gig work other than their primary employment. These are just some of the possible examples of active and passive income streams that one can build over time for a secure future. &nbsp; They maximise the investment and tax benefits&nbsp; Under the Indian Income Tax Act, salaried employees as well as those making a living from their own businesses, are offered tax breaks under various sections including 80C and 80D, just to name two. These include tax breaks for investments in instruments such as the Public Provident Fund, the Employees Provident Fund, the National Pension Scheme, equity linked savings schemes, medical insurance premiums for self, spouse, family as well as parents. &nbsp; Apart from these employees can also claim tax rebates on house rent allowance, interest payment on housing loans, as well as tax free reimbursement on fuel bills, car leases as well as driver’s salaries etc. &nbsp; Savvy investors tend to maximise their incomes using such tax saving instruments, thereby increasing their take home pay substantially. This gives them disposable money that can go into investments and towards building a nest egg. &nbsp; &nbsp; They always have a sizable emergency fund&nbsp; Most savvy investors who go on to become everyday millionaires, almost always keep an emergency fund that can be adequate for their families, in emergency situations, at least for six months to a year. &nbsp; This emergency fund helps them tide over an unforeseen situation such as a job loss, or a sudden medical expense owing to hospitalisation, a sudden repair due on one’s house or shop or office or any other premises, just to cite a few possible examples. &nbsp; An emergency fund also ensures that the person does not have to liquidate his or her investments in an emergency, and the same can continue to compound unhindered. &nbsp; They don’t buy expensive liabilities like cars &nbsp; Most self-made millionaires who manage to hide in plain sight, do not indulge in expensive luxuries like expensive cars that are a drain on the pocket and are hard and expensive to maintain and run. &nbsp; Not acquiring expensive depreciating assets ensure that such people retain complete control over their money and they can stash enough money away for investments. &nbsp; They avoid debt like the plague&nbsp; Unnecessary debt is avoided by wise investors. Often, if one is not able to fully service the debt, it keeps ballooning, and the burden goes on increasing. Smart investors therefore know that debt should never be allowed to get out of hand and keep paying off their credit card bills in time. They also try to pay down their home mortgages whenever they have excess money to spare and several among them pay depreciating assets like cars, by making a cash down payment rather than by availing a car loan.&nbsp; They don’t try to keep up with the Joneses&nbsp; Like we mentioned earlier, such people who manage to build up a big corpus out of humble incomes, typically do not buy expensive luxuries like high end cars and other such items that can drain them of their hard-earned wealth. This is because they do not have an urge to keep up with the Joneses and impress anyone. They keep a low profile and are more content seeing their net worth balloon. Rather than blowing their money up on unnecessary extravagancies that will only impress some of their friends and peers, they put their money to work and let it grow in value and compound over time. &nbsp;&nbsp; Conclusion&nbsp; As you can see, secret millionaires do not do anything fancy to grow their wealth. They follow simple investment techniques; get sound investment advice if they are not sure themselves; live within their means, and keep growing their financial net worth, slowly and steadily. They often do not have the urge to advertise their achievements and are very reticent about their finances. They only confide among a group of close family and friends and take good counsel from certified financial planners while charting their path on the journey towards financial independence.

In June 2014, Ronald Read, a Vermont based janitor and gas station attendant, who had led a non-descript life, died at 92.

Investment habits of the secret millionaire

Buying a house is one of – if not – the most important investment a person can make in a lifetime. Therefore, it is all the more critical that one conducts a thorough and rigorous deep dive into all relevant dimensions before purchasing a luxury flat.&nbsp;There are numerous aspects to consider before one signs off on the dotted line. Purchasing a flat is a multi-layered process, which calls on the buyer to investigate and examine several facets with great care and diligence. Many of these factors — the builder’s reputation, the location of the apartment building, anticipated ROI or bank loan and interest rates — when looked at thoroughly give clear and loud signals on the pros and cons of a deal.&nbsp;Surge in luxury flat sales in IndiaThere has been a perceptible surge in the sale of luxury flats in India. As per a CBRE report, sales of flats priced at Rs 4 crore and above have jumped by an incredible 97% in the period between January and September 2023. Total sales of luxury flats during the January-September period of 2023 stood close to 9,200 vis-a-vis 4,700 flats sold during the same period in 2022. Not surprisingly, the sales were concentrated in a few metro cities, namely, Delhi-NCR, Mumbai and Hyderabad.&nbsp;Delhi-NCR region accounted for 37% of the total sales, followed by Mumbai which clocked in a neat 35%. Hyderabad positioned itself in the third position at 18% and Pune accounted for 4% of the total high-end sales respectively.&nbsp;The pandemic-induced changeAn Anarock Consumer research survey is quite instructive when it comes to understanding the evolving taste of consumers searching for a luxury flat. Before the pandemic, that is, in early 2019, only 9% of the respondents surveyed by Anarock were interested in purchasing a luxury home priced Rs 1.5 crore or above. However, this figure has moved up substantially in recent years. In 2023, as many as 16% of the respondents were interested in buying luxury flats. In the aftermath of the pandemic, the demand for spacious and luxurious flats has exploded, and people are keenly eyeing 3-, 3.5- and 4-BHK flats considering work-from-home and e-schooling compulsions. Another factor driving the market is the overarching rupee depreciation that has opened the gateway for many NRIs to channel their savings into high-end premium flats. Multiple discounts and offers put out by major developers across India have also lured in on-the-fence buyers.Key parameters to monitor before buying a luxury flat 1. LocationThis might feel, rather, obvious but a lot of flat buyers deliberately refuse to heed this factor, only to regret their purchase subsequently.&nbsp;When purchasing a luxury flat in a metro, the location is pivotal. An apartment society being built on the outskirts of the city might offer numerous benefits and amenities, but these benefits are soon outweighed by the long and frequent commutes to the heart of the city.&nbsp;Today, there isn’t a single city in India that is not victim to long-winded traffic gridlocks. Proximity to the city centre can help boost one’s official productivity while cutting down on the number of hours spent in grinding and mind-numbing traffic.&nbsp;In any case, the premium one pays for scenic, away-from-the-city locales runs out pretty fast considering the rampant pace of development in urban areas. After a few years, homebuyers are not only saddled with a flat surrounded by other apartment societies but also are forced to spend time-consuming commutes to the office every day.&nbsp;Paying a premium for a flat at the heart of the city with a short distance from the business hub is far more feasible. 2. Builder’s reputationThere are far too many horror stories of Indian real estate consumers who have paid their hard-earned savings to developers, only for the disreputable and suspicious builders to vanish with those funds. Of course, there has been a stark improvement with the advent of RERA on the regulatory scene. However, the list of projects stuck in litigation is near-endless.&nbsp;To save oneself from such a fate, prospective buyers should carry out thorough and detailed research, both online and offline. While talking to local property agents and other prospective buyers helps, one should, ideally, go above and beyond in their probe.&nbsp;Perusing media stories on the identified builder, scanning through the RERA database as well as browsing through online consumer portals can help unearth a lot of existing complaints against the builder. These digital deep dives can reveal both positive and negative aspects of the builder.&nbsp;A sturdy reputation with a long list of delivered projects is always a good sign, however, even here a customer must not seal a deal on blind faith. Buyers should finalise a purchase only after ensuring the financial viability and business resilience of a builder. 3. After-sales supportIn most cases, customers purchase a flat for a lifetime. It is imperative to ensure that the builder has a team present, on the ground, to help with maintenance issues faced by new customers. Interested customers must also ascertain that the purchase agreement mandates timely delivery of amenities in good condition. Moreover, completion of registration formalities is also a critical process in flat ownership. An uncooperative builder can make the registration process cumbersome and hellish for new buyers. 4. Financing optionsModern banks vie with each other to attract reliable individual borrowers with a strong credit history. Depending on your employment track record and your credit profile, you can avail of home loans at competitive rates for tenures spanning anywhere between five to 30 years. Borrowers with exceptional credit records can also negotiate with bankers for a better rate of interest, and should ideally explore loan products on offer by several banks before finalising one. 5. Re-sale valueMany investors take exposure to luxury real estate considering the handsome returns the sector delivered many times in the past. Unlike low-end and mid-range flats, high-end flats often end up defying economic cycles given that prospective buyers hail from the affluent class. By choosing the right flat in an upmarket location, and given a long enough timeline, investors can be rest assured of handsome returns. Luxury flats also enjoy high rental demand and can be leveraged for rental income.&nbsp;ConclusionIn India, flawed terminology is often deployed in the real estate sector, whereby very tall projects comprising 70-80 floors are automatically slotted as ‘luxury’ projects. New buyers should be aware of this ruse, and take all pains to ensure that the project being advertised is a luxury project, in the true sense of the word. Another misleading marketing tactic is for domestic developers to enter into a tie-up with a global developer. Often, the global developer lends its brand name in return for a license fee without any exchange of technology or expertise. This is a misleading practice that has conned thousands of unsuspecting buyers.

Buying a house is one of – if not – the most important investment a person can make in a lifetime.

Purchasing a luxury flat? Here’s your checklist

Alternative Investment Funds or AIFs raise money privately from investors. AIFs invest in a range of asset classes – from publicly listed ones to private assets. Investors in AIFs are usually high net worth or affluent investors.&nbsp;These funds are designed to cater to high net-worth investors, and the minimum investment ticket size starts from Rs 1 crore. AIFs are not allowed to seek public investment, according to the norms of the capital market regulator Securities and Exchange Board of India.&nbsp;While it was earlier the case that an investor was not required to open a demat account to invest in AIFs, the regulatory landscape has been rapidly evolving. In June 2023, SEBI issued a regulation directing all AIFs with a corpus above Rs 500 crore to issue dematerialised units to its investors. This reform was introduced to bring in more transparency and accountability for AIF investors.&nbsp;In an AIF, all investors essentially, receive the same returns from the fund, but the tax treatment of their returns is different depending on the residency status of the investor.&nbsp;Why should you invest in an AIF?Conventionally speaking, AIFs open new and exclusive investment options for high net-worth investors, institutional investors or market veterans, who are looking to tap into opportunities that domestic capital markets might not capture. With AIFs, a select class of investors can pool funds into several upscale asset classes like private equity, hedge funds, real estate, start-ups and more. Many of these AIFs are tailored to help investors seize opportunities that might become apparent to others only in the coming years.&nbsp;History of AIFs in IndiaSince 2012, the regulatory supervision of AIFs has opened up gradually, and more and more AIFs have been streaming into India attracted by the country’s promising growth prospects.&nbsp;<ul><li>The ball was set rolling in 2012 when the market regulator issued a regulation classifying AIFs into three categories.</li><li>By 2015, AIFs were allowed to invest in global firms with Indian ties. The collective investment in this case was limited to $1.5 billion or up to 25% of an individual’s corpus.</li><li>In 2016, several path-breaking changes helped pave the way for AIFs to set up business in India. Setting up of the National Company Law Tribunal, implementation of the Insolvency and Bankruptcy Code and greenlighting of operational guidelines of GIFT IFSC by RBI and SEBI encouraged more AIFs to establish bases in India.</li></ul> It is the cumulative impact of these reforms that India stands out as a lucrative AIF destination. In fact, 55 private credit AIFs have set up shop in the country in the last five years. As per a report titled, ‘Unlocking opportunities: India’s private credit landscape’ the AUM of private AIFs in India is estimated to zoom up to a handsome $60-70 billion by 2028.The strength of the AIF segment in India can be assessed from the fact that the average deal value in the AIF space has risen by a CAGR of 30% &nbsp;between FY18 and FY23. The average deal size surged from $33 million in 2022 to $80 million in the first half of 2023.&nbsp;The latest data available from the Securities and Exchange Board of India chalks up total investment made by AIFs to a whopping Rs 3.99 lakh crore, as of December 2023.&nbsp;Cumulative net investment figures at the end of December 31, 2023 &nbsp;<figure class="table"><table style="border-color:hsl(0, 0%, 0%);border-style:solid;"><tbody><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">Category of AIF</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;">Investments made in Rs crore</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Category I</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;">&nbsp;</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:right;vertical-align:top;width:200px;">Infrastructure fund</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">5,469.33</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:right;vertical-align:top;width:200px;">Social Venture fund</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">258.43</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:right;vertical-align:top;width:200px;">Venture Capital fund</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">36,935.42</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:right;vertical-align:top;width:200px;">SME fund</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">597.45</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">Category I total</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">43,485.98</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">Category II</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">2,67,911</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">Category III</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">88,255.97</td></tr><tr><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;vertical-align:top;width:200px;">Grand total</td><td style="border:0.5px solid hsl(0, 0%, 0%);padding:5.0pt;text-align:center;vertical-align:top;">3,99,653.19</td></tr></tbody></table></figure>Source: SEBI&nbsp;Types of AIFsThe market regulator issued a regulation in 2012, which delineates three types of AIFs in India. They include:&nbsp;Category I IAF: These funds invest in start-ups, early-stage ventures, social ventures, SMEs, infrastructure or other sectors or areas which the government or regulators treat as socially or economically desirable. This category also includes capital funds, SME funds, social impact funds, infrastructure funds and special situation funds.&nbsp;Category II AIFs: This category includes funds that do not fall in the first or the third category. These funds are not allowed to undertake leverage or borrow, other than to meet day-to-day operational requirements.&nbsp;These funds often invest in the unlisted space where a business is at mid-stage or late-stage. The investments are often in the form of debt or equity. These funds also go by the title of Private Equity funds. When these funds invest in a business that is looking to enlist itself, they are called pre-IPO funds. Many established players like Kotak Mahindra, Edelweiss, Axis Bank, Avendus, IIFL, Capitalmind, ICICI Venture and more are operational in this category.&nbsp;Category III AIFs: These funds employ diverse or complex trading strategies and are allowed to employ leverage for investments in listed or unlisted securities. They also include hedge funds or other funds which target short-term returns.&nbsp;Category III funds are further subdivided into long-only funds and long-short funds.&nbsp;<ul><li>A long-only AIF is a fund that only invests in an asset with an expectation of earning returns in the long run by staying invested. They are not allowed to short-sell securities.</li><li>A long-short AIF is a fund where the fund manager can stay invested for long in a security, and is simultaneously allowed to short-sell a security as well. These funds have the added flexibility of being able to benefit from rising as well as falling markets.</li></ul>&nbsp;Big names like Aditya Birla, Abakkus, Emkay, Marcellus, Kotak Mahindra, Nippon India, IDFC, Edelweiss, Avendus and more operate under this category.&nbsp;EndnoteAIFs are a lucrative investment instrument for HNIs who are keen on diversifying their portfolio, and capturing opportunities that are not available in public markets. Having said that, there are also large risks associated with investing in these funds, and only an investor with a capacity to stomach high risk should venture into these funds. &nbsp;&nbsp;

Alternative Investment Funds or AIFs raise money privately from investors.

Total Investments in AIFs at around Rs. 4 Lakh Crore!

India's stock markets are going through a bullish phase, prompting dozens of companies to float initial public offerings. Last year, for instance, there were 59 IPOs on the main board and 127 on SME exchanges, or the junior bourses of the BSE and NSE meant for small and medium enterprises. That’s nearly one IPO every other day. &nbsp;&nbsp; &nbsp;Companies that wanted to raise money or whose founders and other shareholders were looking to monetise their investments did not want to miss out on the IPO frenzy. Just like the venture capital investors were affected by the fear of missing out or FOMO syndrome to bet on startups during the go-go year of 2021, a large section of stock investors was hooked onto the reports about listing gains. &nbsp;The frontpage headlines on IPOs were mostly about the main board. But if you were to sift through the inside page there was another opportunity waiting to be tapped, powered by smaller companies that tapped investors on the two SME exchanges of BSE and NSE. &nbsp;SME IPOs The two junior exchanges, BSE SME and NSE Emerge, have a history of just over a decade. But they have been kicking dust. They have brought a new set of companies to the public market that may not have otherwise made the cut due to strict criteria for listing on main exchanges. &nbsp; &nbsp;SME IPOs are now seen as an alternative mode to raise capital as investor lap up such issues with as much gusto as those on the main board And, there is also the possibility of migrating to the main board in the future. &nbsp;Risk-Reward Tradeoff The modern portfolio theory syncs with the principle of risk-return tradeoff where an investor can be pushed to take a higher risk if there is a possibility of a higher reward. If we apply the same principle to what is happening in the two sets of primary markets- main boards and SME exchanges- we get to see how it is playing out in the country. There are some caveats, however, that we shall come to later. &nbsp;Data on IPOs in 2023 gives an insight into how the probability of one making positive returns from investing in the public issues on the SME exchange is relatively lower with around a quarter of the companies turning a flop show while the ratio was just one in twelve on the main board. &nbsp;In simple terms it means that the empirical evidence from 2023 shows that if one invested in all SME issues, one in four of the bets would have turned bad.&nbsp; &nbsp;But what piques one’s interest is this: The rest would have spun big profit. Mostly bigger than mainboard IPOs. A reasonable outcome one would say. &nbsp;The median returns after listing, on the listing day, as of January 1 (before the new year rally took the benchmark indices to new highs) on the junior exchanges of NSE and BSE has been a little over 47%. This means that gains after listing on half the SME IPOs was less than 47% and of the other half was more than 47%. &nbsp;This implies that on an average if one made a punt on companies going public on the SME exchanges, he or she grew the value of investment by nearly 50% within months. Even if one chose to monetize the investments, after 30% short term gain, capital gains tax on the gains made would have been around 33%. &nbsp;This is much higher than what one would have made on the larger companies that went public on the main boards. The median returns for the IPOs on BSE and NSE was 32% and post-tax returns would work out to be around 22.4%. &nbsp;To be sure, the average listing-day gain on the SME exchanges was lower on average compared to the main board. &nbsp;This means, the probability of making money on first-day first-show was higher for the IPOs on the main exchanges but the percentage gain on SME IPOs was higher on average. One reason for this might be lower valuations of SME companies in their IPOs.&nbsp; &nbsp;Endnote As in all things in life, in the world of finance too, higher returns come from taking higher risks. The same analogy is at play in the primary markets in India. SME exchanges, seen as a hotbed of small unproven companies with lower corporate governance benchmarks and market making by punters is no pushover when it comes to generating wealth and returns for an investor. Hard data shows that new companies making their debut on the SME exchanges churned out more returns than bigger peers listing on the main boards.&nbsp; That said, one should play the game with a high dose of caution as the smaller companies do face a tougher challenge from larger competitors, lack of low-cost credit and in attracting talent to make it big. Corporate governance risk may also be higher in the case of smaller companies. This makes them a riskier value proposition for any investor.

India's stock markets are going through a bullish phase, prompting dozens of companies to float initial public offerings.

SME IPOs: Higher Risk, But Rewards may be higher too

Retail investment in financial markets in India took off after economic liberalisation in 1991, but has mostly remained limited to investments in the equity market. The bond market, which is one of the bedrocks of an economy, has largely remained outside the realm of retail investors in India. Even whatever little retail investment that has gone to bond market is mostly through mutual funds.&nbsp; &nbsp;The bond market in India primarily consists of two segments – corporate bond market where companies raise funds and government bond market where the government raises funds to finance fiscal deficit. India has a thriving government bond market, which is dominated by institutional players like banks, insurance companies and pension funds. Comparatively, the volumes in corporate bond market are much less. &nbsp;But things are changing slowly but surely with the Reserve Bank of India starting the Retail Direct Scheme, which has allowed individual investors to access government bond market directly.&nbsp; &nbsp;The recent interest rate hikes by the RBI since 2022 to moderate inflation has also whetted the appetite of retail investors in bonds as evidenced in the number of retail bond platforms that have come up in recent years. &nbsp;Why should one invest in government bonds? Investments in governments bonds are an effective way of diversifying one’s risks. They are virtually risk-free as there is a sovereign guarantee to these bonds. Government securities carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. &nbsp;Though corporate bonds offer higher interest rates compared to government bonds, they carry much higher credit risk and are less liquid – higher the credit risk of a bond, higher the interest rate that it offers. There is virtually no risk if the government bond is held to maturity. One can be assured of a steady stream of interest income from a government bond. There can be capital gain or capital loss, if one sells the bond before maturity, depending on the prevailing interest rates. &nbsp;What are government bonds? Government bonds are securities issued by the Central government and state governments to fund their fiscal deficit or other expenditure needs. These can be dated government securities, state development loans, or treasury bills.&nbsp; &nbsp;Currently the longest maturity government bond is 50 years. The coupon payments on these bonds can be fixed or floating. In a fixed rate bond, the coupon will be fixed for the life of the bond whereas in a floating rate bond, the coupon is re-set at regular intervals. The government also occasionally issues capital indexed bonds, inflation indexed bonds, sovereign gold bonds and sovereign green bonds. Sovereign gold bonds are government securities denominated in grams of gold. Investors pay the issue price in cash and the bonds, which were introduced as a substitute for holding physical gold, are redeemed on maturity in cash at the prevailing price of gold.&nbsp; &nbsp;There are also short-term instruments called treasury bills with original tenors of less than a year. The three tenors in which the government issues treasury bills are 91 days, 182 days and 364 days. Treasury bills are zero coupon securities issued at a discount. The government also occasionally issues cash management bills to meet the temporary cash flow mismatches. These bills are similar to treasury bills but have tenures of less than 91 days. &nbsp;State development loans are bonds issued by state governments. The state bonds offer a slightly higher interest rate than government securities since they are sub-sovereign. Typically, the spread between 10-year state development loans and government securities is around 50 basis points. However, state development loans are less liquid than government bonds as the total outstanding in such bonds are much less than government bonds. &nbsp;In addition to these securities, there is a separate market for STRIPS. In STRIPS, the interest payments of the government security is stripped and sold separately. In this case, the principal payment part essentially becomes a zero coupon bond.&nbsp;Government Bond Market Government bond market, which is regulated by the RBI, is dominated by institutional investors such as banks, insurance companies, provident funds and pension funds. Foreign investors in government bond market are likely to increase substantially in the coming months with global bond indices like JPMorgan Government Bond Index-Emerging Markets and Bloomberg Emerging Market Local Currency Index likely to include Indian government bonds in their indices in 2024. Market estimates suggest the inclusion in bond indices will bring in inflows of $25 billion to $30 billion. &nbsp;There is a steady demand for government bonds from banks as the RBI rules stipulate that banks have to maintain certain part of deposits in liquid assets in the form of cash, gold or government securities, known as Statutory Liquidity Ratio. Currently banks are required to maintain a Statutory Liquidity Ratio of 18% of the deposits. &nbsp;Why invest in government bonds now? The prevailing interest rates are quite attractive with the interest rate cycle in India having peaked. The current 10-year benchmark government bond offers a yield of around 7.1-7.3%, which is more than what most banks offer for fixed deposits. Government bonds allow you to lock in the interest rate for a long time. The longer the maturity, the higher yields are likely to be. With interest rates likely to head south in the coming months, there is a chance that investors can make a capital appreciation on their investments in the medium-term – bond prices and yields are inversely proportional, that is, when yields (interest rates) fall bond prices will rise. Since RBI has inflation as a mandate, it is reasonable to presume that inflation in India will not rise sharply in the future, unless there is an exogenous event like the COVID. If the inflation rate in India remains moderate, the current yields will become very attractive in the medium-term to long-term. Outlook on interest rates It is widely believed that interest rates have peaked in India. The RBI is likely to start cutting rates in the second half of 2024 with inflation projected to move closer to central bank’s medium-term target of 4.0%. Once the US Federal Reserve starts cutting rates in May or June, it will be question of time before the RBI follows. Also, the inclusion of Indian bonds in global bond indices will increase demand for Indian bonds and push up their prices, or in other words, bring down yields.&nbsp; &nbsp;How to Invest? One can easily invest in government bonds through <a href="https://www.rbiretaildirect.org.in" target="_blank" rel="noopener noreferrer">RBI Retail Direct</a>, which allows retail investors to maintain a direct retail account with the RBI. The account allows you to make non-competitive bids in primary government bond auctions and trade in the secondary market through the RBI bond trading platform NDS-OM. RBI Retail Direct does not charge any fee. Alternatively, investors can invest through brokers of any of the many bond platforms which allow investors to buy and sell government bonds. &nbsp;Taxation on Government Bonds There are two types of tax on government bonds - one on interest income and the other on capital gains. Interest earned on the government bonds will considered as income and will be taxed as per the income tax slab of the individual. The investor will also have to pay a short-term or long term capital gains tax if he or she makes a profit in trading the bond. Short-term capital gains tax will be applicable at the income tax slab of the individual if the bond is sold before a year. On the other hand, trading of bonds held for more than a year will attract long-term capital gains of 10% without indexation benefits.&nbsp;Conclusion For an investor who is looking to diversify risks, government bonds offer one of the safest bets. It is virtually risk free with the sovereign standing guarantee. They allow investors to lock in funds for a long-period, assuring steady source of interest income. Also, it is probably the best time to lock in the prevailing interest rates as interest rates are likely to ease from here.

Retail investment in financial markets in India took off after economic liberalisation in 1991

Why Investing in Government Bonds is a Good Option

Even top-notch industrials make the mistake of not making a clear succession plan or will during their lifetime. As a result, after their death, squabbles start among their family members regarding who will get what. Whether you are a rich industrialist or a middle class person, getting a clear will made during your lifetime is important.&nbsp;In the absence of a succession plan and any declaration regarding the distribution of assets, the provisions of the Indian Succession Act, 1925 will come into play, and a legal battle may ensue among the family members of a person after his/her death.&nbsp;Ways of successionFollowing are some of the ways to smoothen the succession process –&nbsp;Nomination: While investing, an investor needs to declare the name(s) of one or more persons as nominee(s) to ensure easy transfer of assets in case of unfortunate death of the investor. Options are also given to opt out of nomination at the time of investment. Investors may change their nominee(s) any number of times during the investment tenure.Although, the investment assets are transferred without much hassles to the nominee(s) after the demise of an investor, a nominee, however, is just considered the recipient of the money/asset and not the ultimate beneficiary. So, nomination doesn’t provide a clear title to a nominee and he/she is bound to transfer the benefits to the legal heirs of the deceased person as in most cases the provisions of the Indian Succession Act prevail over nomination.&nbsp;Will: A will can override a nomination as it’s a legal document containing a declaration made by a person during his/her lifetime regarding the distribution of his/her wealth after the death of the person. Will is important for HNIs and UHNIs to ensure that their wealth, property, and assets are distributed to the intended persons without much hassles and that their legal heirs don’t get into fierce legal battles to get the lion’s share of their wealth. Will may be changed any number of times by a person during his/her lifetime. If a person makes a number of wills, it’s the last will that will be considered valid after the death of the testator (i.e. creator of the will). The rights of the beneficiaries mentioned in a will are absolute as the Indian Succession Act, 1925 can’t take away the rights of the beneficiaries.&nbsp;A will should contain the details of the testator, his/her declaration that the will is being drafted in sound mind and free of any coercion, details of the beneficiaries and their relations with the testator, details of the wealth, properties and assets, division of share among the beneficiaries, specific directions, if any, how the liabilities of the testator to be paid back, details of the executor, who will execute the will after the death of the testator and the signature of the testator and at least two witnesses.&nbsp;Although a will may be written on a plain paper and registration is not mandatory, it’s better to register it to prevent it from effects of instances like getting stolen, destroyed, disfigured, tampered with, etc.Another way to secure a will is through probate. It’s a legal process, in which, apart from protecting a Will, the content of the will is also reviewed by the authorities.&nbsp;Need for RingfencingWhile the main motive of a succession plan is the smooth transfer of assets from one generation to the desired members of the next generation, there may be other complications in a succession process. For example, if a person names his children as beneficiaries to get all his real estate properties, they may not allow their mother to stay after the death of the person. On the other hand, if a person remarries after separation and hands over the properties to the second wife in his will, she may deprive the children of the first wife of getting the benefits of the father’s property after the father’s death&nbsp;So, in such a case, to ensure equitable treatment, the person needs to ringfence the right of his wife while making his children beneficiaries in the will.&nbsp;Similarly, in order to ensure a gradual handover of wealth to the children after his/her death, a person needs ringfencing to protect his assets in his/her absence till beneficiaries get the entire benefits.&nbsp;However, for this, it’s better to include a trust in the will to ensure the protection of the properties and assets and ensure the intended distribution of wealth over a specified time period through the trust.&nbsp;Ringfencing through TrustsTrusts are legal entities set up under the provisions of the Indian Trusts Act, 1882. Apart from creating a private trust for succession purposes, a Hindu Undivided Family (HUF) may also solve the purpose. While an HUF is run by the members of the family, a private trust may be managed by non-family members as well. An HUF not only enjoys income tax benefits like an individual, but also saves the hassles and costs of transition of properties from members of one generation to the next generation as HUFs never die and hold assets perpetually. Even though HUF enjoys tax and other benefits, all the family members have rights over the assets held by such a trust.&nbsp;So, to divide the assets as per the will of a person to the intended beneficiaries only, setting up a private trust – like a Private Family Trust – would be a better idea. Under such a legal arrangement, the properties and assets of a person are transferred to a family trust, where the trustees act as the representatives of the actual beneficiaries and transfer the assets to the beneficiaries as per the terms mentioned in the trust deed.&nbsp;As properties and assets need to be transferred to the trust to make such an arrangement work, it involves significant costs and stamp duties. So, creating a family trust for the purpose of succession makes sense, if the amount of wealth is very large and there is a need for ringfencing for conditional transfer. Otherwise, writing a Will and registering it would also solve the purpose.

Even top-notch industrials make the mistake of not making a clear succession plan or will during their lifetime.

How to ringfence your will?

Investing often feels like navigating a stormy sea, with alluring sirens of short-term gains and treacherous reefs of fear and uncertainty.&nbsp;While technical knowledge and sound strategy are crucial, many overlook the most potent compass on this journey: your purpose.&nbsp;Finding Your North Star: Why Purpose MattersHaving a clear purpose for your investments isn't just about ticking a box; it's about injecting meaning and passion into the process.&nbsp;Imagine the difference between investing for an abstract notion of "financial security" versus saving for a tangible dream: buying your dream home, retiring early, or taking that unforgettable world trip.&nbsp;Finding purpose ignites a desire that fuels consistent saving and wise investment choices.&nbsp;Beyond the Numbers: The Power of Purpose in ActionThe power of purpose in investing is multifaceted:&nbsp;Guiding Your Strategy: Different goals demand different approaches. A closer goal, like a down payment for a house, requires a conservative approach, favouring secure assets like bonds or cash.&nbsp;Long-term goals like retirement can tolerate higher risk in pursuit of potentially greater returns, favouring stocks and ETFs. Defining your goal clarifies the path you need to take.&nbsp;Anchoring You in Volatility: Market fluctuations can trigger fear and greed, urging impulsive decisions.&nbsp;A well-defined goal acts as an anchor, reminding you of the long-term vision. Instead of reacting to every blip, you stay focused on the bigger picture, ensuring your strategy remains on track.&nbsp;Combating Emotional Spending: Goals act as a shield against impulse purchases. With a clear purpose in mind, every dollar saved and invested carries added weight. You become less susceptible to temptation and more committed to staying the course.&nbsp;Defining Asset Allocation: The distribution of your investments across different asset classes, should be tailored to your goals and risk tolerance. Understanding your investment purpose helps you determine how much risk you can comfortably handle, guiding your asset allocation strategy.&nbsp;Fuelling Happiness: Reaching your goals isn't just about financial achievement; it's about fulfilling a cherished desire. When you use your accumulated funds to embark on that dream vacation or celebrate in your new home, you experience the true joy of your investment journey.&nbsp;Psychological Hacks for Taming the Inner Trader&nbsp;While purpose acts as your compass, psychological hacks can help you navigate the turbulent waters:&nbsp;Embrace Automation: Set up automatic contributions to your investment accounts to stay disciplined and avoid emotional decisions.&nbsp;Accountability and Support: Share your goals and progress with trusted individuals or seek guidance from a financial advisor. Having accountability fosters transparency and motivation. &nbsp;Remember: Purpose isn't just about the destination; it's about the journey itself.&nbsp;Consistency and Compounding: The Steady Path to WealthWhile purpose sets the course, consistency in your actions serves as the steady winds propelling you forward.&nbsp;The key to unlocking the complete potential of your investments lies not just in selecting the right assets or timing the market, but in the power of compounding, enabled by consistent investing.&nbsp;The Compound Effect: Small Steps, Giant LeapsCompounding is often hailed as the eighth wonder of the world, and for good reason. It's the process where the earnings on your investments begin to earn their own earnings.&nbsp;This exponential growth, however, is not a quick sprint; it's a marathon. It requires time and, most importantly, consistent investment.&nbsp;1. Start Early and Invest Regularly: The earlier you start, the more time compounding has to work in your favour. Regular contributions, even if they're small, can lead to significant growth over time. &nbsp;2. Reinvest Your Earnings: Allow your interest, dividends, and capital gains to be reinvested. This reinvestment is a key driver in the compounding process, turning your investments into a snowball that grows larger as it rolls down the hill of time. &nbsp;3. Stay the Course: Market fluctuations are inevitable, but consistency in investing smooths out the peaks and valleys. By continuing to invest regularly, regardless of market conditions, you benefit from dollar-cost averaging, reducing the impact of market volatility.&nbsp;The Synergy of Purpose and ConsistencyPairing the clear vision of your purpose with the steady rhythm of consistent investing creates a powerful synergy. Your purpose keeps you motivated and focused, while consistency in your investing behaviour ensures that this motivation translates into tangible financial growth.&nbsp;1. Aligning Actions with Aspirations: Consistent investing in line with your purpose reinforces your commitment to your goals. Each investment becomes a step closer to realising your dreams, whether it’s a comfortable retirement, a child's education, or financial independence. &nbsp;2. Building Resilience Against Impulse: Just as purpose shields against impulsive spending, consistency fortifies your resilience against impulsive trading. Regular, planned investments keep you anchored to your strategy, reducing the temptation to chase market trends or react to short-term volatility. &nbsp;3. Creating a Habit of Wealth Building: Consistency turns investing from a sporadic activity into a habitual one. This habit, rooted in the fertile ground of purpose, is where the seed of wealth is sown and nurtured through the magic of compounding. Investing is not rocket science, but it requires you to have the discipline that a science demands. With consistency in your investing habits, you turn the act of investing into a powerful tool for wealth building.

Investing often feels like navigating a stormy sea, with alluring sirens of short-term gains, fear and uncertainty.

Tame the Inner Trader, Fuel Your Purpose: A Psychological Guide to Successful Investing

In the dynamic world of investing, it all comes down to understanding two key games – active and passive investment strategies.&nbsp;Each of these has its own perks and pitfalls, shaping up differently based on what you want from your investments.&nbsp;This article will cover all aspects and give you some tips so that you can sail smoothly towards your financial goals.&nbsp;Active Investing: Steering Your Financial DestinyIt needs a dynamic approach - you can't just sit back and let things happen; it's all about taking charge and steering towards success.&nbsp;But remember, every decision counts! Unlike passive strategies that rely on market indices as their guiding stars, active investing demands a more involved role from its practitioners.&nbsp;This involves not just a cursory glance over financial news or periodic portfolio rebalancing but diving deep into the intricate world of finance. This strategy, at its core, is about doing your homework.&nbsp;We don't just skim the surface by understanding current market trends and how they impact each opportunity. We also consider things like company performance, economic indicators, geopolitical developments and much more.&nbsp;For instance, if certain sectors show signs of weakening due to economic downturns or regulatory changes, an active investor might reduce exposure there and instead capitalise on emerging opportunities elsewhere&nbsp;It takes time and effort but can maximise returns. By using an array of&nbsp;tools such as fundamental analysis—evaluating companies' financial health through balance sheets and income statements—and technical analysis—the study of statistical trends from trading activity—one can make informed decisions.&nbsp;Also active investing has higher transaction costs due to frequent buying/selling activities which can eat into profits if not managed wisely.&nbsp;Advantages of active investing include: • Potential for Higher Returns: By targeting market inefficiencies and undervalued stocks, active investors often strive to outperform market benchmarks, potentially leading to higher returns. &nbsp;• Flexibility and Adaptability: Active investors can quickly adapt their portfolios in response to market changes, taking advantage of emerging trends and shifting economic landscapes. &nbsp;However, active investing also presents challenges, such as: &nbsp;• Higher Costs: This approach often incurs more significant expenses, including management fees and trading costs, which can impact overall returns. &nbsp;• Risk of Underperformance: Despite the potential for higher returns, there's always the risk of not meeting market benchmarks, leading to possible losses.&nbsp;Passive Investing: Embracing Market RhythmsPassive investing is often characterised by a "set-and-forget" mentality and is not aimed at outperforming the market. Instead, it's focused on moving in tandem with it.&nbsp;Passive investors typically channel their funds into index funds or exchange-traded funds (ETFs) that aim to replicate the performance of specific market indices or asset classes.&nbsp;For instance, an investor interested in mirroring the trajectory of the Nifty 50 would invest in an ETF that tracks this index and achieve broad market exposure through a single investment.&nbsp;Cost-effectivenessActive fund management involves higher operational costs due to frequent trading activities and exhaustive analysis performed by fund managers—expenses which are ultimately borne by investors through higher fees.&nbsp;In contrast, passive funds boast lower expense ratios since they involve less trading activity and require no such intricate decision-making process.&nbsp;Moreover, even champion investors argue for passive investing’s potential to yield consistent long-term returns—a claim supported by numerous studies indicating that actively managed funds frequently underperform their benchmark indices over extended periods.&nbsp;This is partly due to cost differences but also reflects inherent challenges faced by even seasoned professionals when attempting to consistently predict market movements.&nbsp;Despite these benefits, critics point out limitations within this approach—including reduced flexibility during turbulent markets—and advocate for a balanced portfolio incorporating both strategies according to individual goals and risk tolerance levels.&nbsp;Key benefits of passive investing include: • Lower Costs: Passive strategies typically involve lower fees and expenses, as they require less frequent trading and management. • Consistent Market Returns: By tracking market indices, passive investing offers returns that closely align with those indices, reducing the risk of underperformance.&nbsp;However, it's not without its drawbacks: • Limited Control: Investors have minimal influence over the individual securities in their portfolio, as these are dictated by the tracked index. &nbsp;• Vulnerability to Market Downturns: Passive portfolios are subject to market fluctuations, which can lead to declines during bear markets.&nbsp;Balancing the ScalesBoth investment strategies have their merits and limitations.&nbsp;Active investing offers the potential for higher returns and adaptability but comes with higher costs and risks.&nbsp;Passive investing, on the other hand, provides simplicity, lower costs, and consistent returns but lacks flexibility and control.&nbsp;Tailored Investment PathInvesting isn't a one-size-fits-all scenario. The choice between active and passive strategies depends on individual goals, risk tolerance, and investment preferences.&nbsp;While some may prefer the active route's excitement and potential rewards, others might find solace in the stability of passive strategies.&nbsp;A blended approach, incorporating elements of both strategies, can also create a more balanced and diversified portfolio.

In the dynamic world of investing, it all comes down to understanding of active and passive investment strategies.

Should You Be An Active Investor or Stay Passive?

Apart from investing in conventional instruments such as fixed deposits (FDs), bonds, shares, mutual funds (MFs), gold etc, investors can also invest in real estate to diversify their portfolios. But traditional investing in real estate needs a substantial amount of money which can get locked into relatively lesser liquid assets for a long time.&nbsp;Despite having the potential to provide long-term appreciation in the capital invested, investments in physical real estate have some challenges, like –&nbsp;a) Large investment: Buying a real estate property usually requires a very large investment. So, it takes a considerable time to choose the right property and to arrange the money. A bad investment may not only generate poor returns, but also mar the chance of utilising the money somewhere else more profitably. Due to the involvement of a large amount of money, reselling a property also takes time. &nbsp;b) Poor liquidity: As finding a good property to invest in and getting a buyer while reselling are time-consuming affairs, liquidity is a big issue in real estate investments. &nbsp;c) Maintenance: Real estate – especially buildings – needs regular maintenance, involving money and time. During a change in tenancy, it’s a must for the owner to colour walls and do other necessary maintenance work before putting a building on rent again. &nbsp;d) Occupancy: To ensure regular rental income, a building can’t be left vacant due to want of tenants. So, after a tenant vacates a building, the owner should look for another tenant, negotiate for rent, and complete the rental agreement, which may be a time-consuming assignment.This is where modern alternatives such as Real Estate Investment Trusts (REITs) come into play.&nbsp;What are REITs? Suppose you see a property that can generate huge rent. But it is very costly. So, you pool in money from 10 people and the rent, as well as the property’s cost gets divided among the 10 investors. This would a be a crude example of how REITs work, more or less like a mutual fund.&nbsp;There are both listed and non-listed REITs. Of course, the listed REITs have offer higher liquidity.&nbsp;The four listed REITs in India are:<ol style="list-style-type:decimal;"><li>Brookfield India REIT</li><li>Embassy Office Parks REIT</li><li>Mindspace Business REIT</li><li>Nexus Select Trust REIT.&nbsp;</li></ol>&nbsp;While the first three are office-backed, Nexus Select Trust is India’s first retail-asset backed REIT. In our next article we will delve deeper into the returns generated by the particular REITs. For now, we will focus on the broad REIT market.&nbsp;According to rating agency CRISIL, India’s top 10 commercial real estate owners have the potential to raise as much as Rs 1.5 lakh crore through the real estate investment trust (REIT) route. REITs helps developers get money to deleverage their balance sheet, while providing public an opportunity to take part in the commercial real estate market.&nbsp;Provide higher upfront cash to asset holders, which will help partly ease the pressure on their balance sheets. They can use the divestment proceeds to reduce debt and sustain construction activity. This will also improve their credit profiles, as seen in India’s first REIT, Embassy Office Park REIT – listed in&nbsp;Benefits of REITs&nbsp;Following are the benefits of investments in real estate through REITs:&nbsp;(i) Small Investments: Like mutual funds, REITs pull small amounts of money from several investors and invest the collected corpus in lucrative real estate properties. So, investors don’t need to lock large amounts of money in a single property. (ii) Diversification: As REITs invest the pulled corpus in different real estate projects, investors enjoy the benefit of diversification without investing big amounts of money. So, REITs lower the risk of locking large amounts of money in a single property, which may turn out to be a bad investment. &nbsp;(iii) Liquidity: As units of REITs are traded in the markets, investors may sell any number of units whenever they want and get the entire or a portion of the money back. So, REITs provide much better liquidity to the investors, compared to purchasing a single property with a large amount of money and waiting for a purchaser, who is willing to buy the property at a competitive price and can afford to pay the amount. &nbsp;(iv) Professional Management: Under REITs, an investor needn’t worry about searching for the right property, doing paperwork, searching for tenants, negotiating for rent, ensuring good occupancy rate and maintenance as all the things will be taken care of by a team of professionals. (v) Returns: Along with capital appreciation by investing in properties with good prospects, REITs also provide regular payout by distribution of rental income. As per the SEBI guidelines, REITs are mandated to invest at least 80 per cent of their corpus in constructed properties and 90 per cent of the rental income generated from such properties has to be distributed to the investors. As most of the corpus of REITs is invested in constructed properties, it safeguards the investors' money by not allowing them to divert it for funding constructions. On the other hand, distribution of 90 per cent of rental income among investors ensures a regular cash flow for them.&nbsp;Taxation&nbsp;Regular income and sale of the units of REITs are taxed differently.&nbsp;Tax on regular income: Regular income distributed in the form of dividends are tax free in the hands of investors, distributions of rent or any other income are taxed as per the marginal tax slab of the investors.&nbsp;Tax on sale of units: Tax rates are different for short-term and long-term capital gains.&nbsp;Tax on Short-Term Capital Gains: If any gain arises out of the sale of any units of REITs before the expiry of three years from the date of purchase of the units, such gains are considered short-term capital gains and are taxed at a rate of 15 per cent.&nbsp;Tax on Long-Term Capital Gains: If any gain arises out of the sale of any units of REITs after the expiry of three years from the date of purchase of the units, such gains are considered long-term capital gains. Such gains up to Rs 1 lakh in a financial year are exempted, while gains above Rs 1 lakh are taxed at a rate of 10 per cent.&nbsp;Endnote Buying a real estate property for self-occupation provides a person with his/her own sweet home and relieves him/her from the burden of paying rent. However, for investment purposes, instead of locking large amounts of money for buying subsequent real estate properties, investing in REITs may be a better option.

Apart from investing in conventional instruments investors can also invest in real estate to diversify their portfolios.

Own a real estate without burning hole in pocket

Around two years back a Tata Group business jet took off from Mumbai for Delhi carrying Tata Sons chairman N Chandrasekharan in it. But it was not just another quick private flight to Delhi. Chandra as he is fondly called, was heading to the capital on January 27th to take over something that had once belonged to the group - Air India. &nbsp;After meeting Prime Minister Narendra Modi, Chandra happily took over the airline from its then-chairman Vikram Dev Dutt creating history once again.&nbsp; &nbsp;Chandra could have flown Air India itself, which he has always been flying right from his days as the former head of software major TCS, but he probably took the business jet also because it has become popular for high net worth individuals to take a safer mode of traveling post the pandemic of 2020. &nbsp;People who operate these business jets say many who started taking to business jets during the pandemic have not only stayed with this mode of travel but have only increased their sorties. &nbsp;An official who runs such jets said they have noticed another shift. While earlier business jet hiring used to dip in the summer season that is no more the case. The dip was largely seen because, during that time, schools used to shut down in north India, and many HNIs flew off to Europe or the US with their friends and family. &nbsp;Now they want to travel not just domestically on business jets but also to Dubai, and Maldives, and are even fine taking one-stop (as most business jets have limited range) to London. &nbsp;To be sure business jets don’t come cheap. While a Delhi-Mumbai business class ticket can cost you Rs 25,000 one way the same flight on a business jet will take around Rs 21 lakh for a return trip on a 12-seater plane like the Falcon. &nbsp;Business jets also charge you for a two-and-fro trip even though you may be planning on staying back the night at your destination. &nbsp;The current going rate for business jet flights is around Rs 3.5 lakh to 5 lakh an hour depending on the trip, schedule, etc. There are other administrative costs to be paid as well. &nbsp;For a trip to Dubai, the operators could charge you as much as Rs 45 lakh while a London sortie could come for Rs 1 crore. &nbsp;“Dubai and London are really popular, most of the HNIs seem to be having a second home there,” a person who interacts with them said adding, “Maldives was also very sought after during Covid but has taken a backseat because of the recent controversy with India.” &nbsp;The business jet fleet in India has grown 0.5% CAGR between 2011 and 2020 rising from 131 to 145 but then going to around 137 as the pandemic struck. Nearly half of these are so-called heavy jets (like the Falcon 900XP). Another 30% are mid-size jets like Hawker 900XP while light jets and corporate jets like Citation M2 have a 20% share of the Indian market. &nbsp;Heavy jets and bizliners have higher operating costs and hourly costs per passenger than turboprops and mid-sized and light jets but heavy jets and bizliners have a higher flying range, speed, and greater cabin space for passenger convenience and comfort. &nbsp;India's business jet fleet is expected to grow to around 200 from the current levels by 2030. Business jet prices have also shot through the roof globally post the pandemic because of the increased demand as also because of supply chain issues that have dented their manufacturing. &nbsp;Still, the rise of this so-called “private flying” is also visible from the launch of India’s first – and jazzy - FBO or fixed-base operator at Delhi Airport in late 2020. The 550-sq-m terminal, which was sanctioned in 2016, and its hangars were built exclusively to handle business jets at around $7 million. It can handle as many as 100 flights a day. &nbsp;This exclusive haunt for business jet travellers has a common lounge that can accommodate up to 50 people, a crew lounge, shower facilities, and amenities such as a food and beverage counter, besides a small retail area with duty-free shopping. There is also a 2,600-sq-m parking area which can accommodate 50 vehicles while fifty-five aircraft can be parked on the 65,000-sq-m apron. &nbsp;“The opening of the FBO has also led to a surge in interest because people don’t have to walk through the long terminals but quickly get out of their car and aircraft is right there almost in front of them and then they leave for their city,” one of the officials at another business jet operator said. &nbsp;Not to be left behind Gautam Adani-led Mumbai’s Chhatrapati Shivaji Maharaj International Airport (CSMIA) has also upgraded its business jet terminal in 2022. The terminal is capable of handling over 50 passengers every hour for a quick check-in and has specially trained staff to receive passengers around the clock. There is also a luxurious lounge with a stylish bar, and a buffet serving global cuisines. The terminal also provides butler service for its guests who can book meeting and conference room facilities with state-of-the-art audio and video aids.&nbsp; &nbsp;Clearly with more disposable incomes and a growing list of millionaires more and more Indians will be taking off on their private flights avoiding the increasingly chaotic airport terminals. Just like Chandra did to get back Tata Group's crown jewel Air India.

Around two years back a Tata Group business jet took off from Mumbai for Delhi 

Private Jet Usage Has Increased Among The Wealthy

Stories abound of investors who have amassed wealth through meticulous strategy, keen analysis, and extensive research. These financial wizards have unlocked the secrets to navigating the market's complexities for remarkable success.&nbsp;However, emulating their triumphs is no small feat for average investors—it demands extraordinary perseverance and an understanding that each path to success is distinct.&nbsp;Investing is akin to traversing a labyrinth with its unforeseen challenges; it involves not just ambition but also enduring commitment and the insight that everyone's journey is individual.&nbsp;However, attempting to directly mirror the portfolios of these financial legends is a strategy filled with hidden risks.&nbsp;The Risks of Imitating Investment GurusIn today's digital age, numerous online personalities openly share their investment choices on platforms like X (formerly known as Twitter), Instagram, and YouTube.&nbsp;Television business news channels often feature 'stockpickers' who are revered by anchors and viewers alike.&nbsp;However, attempting to replicate the trades of such 'experts' can lead to significant losses, especially when these role models shift from conservative strategies to more controversial positions.&nbsp;What works for one investor might not yield the same results for another.&nbsp;Financial freedom, though seemingly elusive, can be more attainable with an open-minded and persistent approach.&nbsp;The Evolution from Harshad Mehta to Digital InvestingThe investment landscape has undergone a dramatic transformation from the era of Harshad Mehta to today's world dominated by online trading apps.&nbsp;While Mehta’s shenanigans led to the advent of electronic trading in India, today’s landscape is significantly different.&nbsp;In the past, investment tips and strategies were exchanged in informal settings like bars, trains, and social events.&nbsp;Now, digital platforms have emerged as the new arenas for sharing financial information, altering the way we seek and follow investment advice.&nbsp;Despite these changes, one principle remains constant: successful investing demands a personalized approach rather than mere imitation.&nbsp;Balancing Risk and Reward in Asset AllocationMany market-related websites feature stock screeners with labels like 'Super Investors' and 'Guru', focusing on stocks owned by prominent investors.&nbsp;Cloning the portfolios of these successful investors might seem like a quick path to wealth, but this approach overlooks essential differences in financial goals, investment opportunities, and risk tolerance.&nbsp;For example, large investors often have the advantage of investing substantial sums over extended periods, a luxury not shared by many retail investors.&nbsp;Adopting Intelligent Investment Practices for Personal FinanceEmbracing smart investment strategies requires a deep personal reflection on your financial goals and crafting a plan that aligns with your unique situation, rather than blindly following the successes of others.&nbsp;It emphasises patience as crucial in navigating the market's volatility and underscores the importance of diligent research across various assets to make informed decisions.&nbsp;Effective risk management through diversification and disciplined investing, like rupee-cost averaging, is vital for mitigating losses and steadily building wealth over time.&nbsp;Ultimately, adopting these tailored principles enables individuals to become wise managers of their finances, focusing on long-term achievements instead of short-lived trends or external influences.&nbsp;The Importance of Diversification in Investment StrategiesYou may find it profitable to emulate the portfolio of successful investors, but prudence lies in diversifying your portfolio.&nbsp;Diversification involves spreading investments across various asset classes, such as stocks, bonds, real estate, and commodities to minimise risk and promote steady returns.&nbsp;It works on the principle of balancing losses in one area with gains in another to ensure more consistent portfolio performance over time.&nbsp;While renowned investors successfully employ this tactic by navigating different market conditions, retail investors face challenges like limited capital and lack of expertise required for managing diversified portfolios effectively.&nbsp;Crafting a Unique Investment Strategy Inspired by ExpertsAspiring investors should take inspiration from the success stories of market experts but tailor their strategies to suit their risk profiles and financial goals.&nbsp;This involves thoroughly understanding your financial situation, staying informed about market trends, and making investments based on this knowledge.&nbsp;Becoming a savvy investor is not about blindly following others.Learning from the best in the field of investing is valuable, but it's crucial not to mimic their actions blindly.&nbsp;Intelligent investing is not about emulating someone else's strategy.It's all about picking up tricks from the big players, you know? Crafting your personal strategy for investing that fits just right with how much risk you can stomach. You've got to factor in your financial goals and time frame too.&nbsp;You are not simply mimicking but building a game plan tailored to your needs.&nbsp;Think of it as learning chess moves from grandmasters and then adapting them to your own risk comfort level.&nbsp;Remember, it’s about understanding and embracing the rhythm of the market dance while staying true to yourself – recognising when to be bold and when it makes more sense just holding on tight!

Stories abound of investors who have amassed wealth through meticulous strategy, keen analysis, and extensive research.

Should You Be A Copycat Investor?

Credit card users in India have jumped by 70% since the COVID pandemic and this is only expected to grow as income levels rise. &nbsp;Many people often use credit cards to just pay their bills and are not even aware that they can get so much out of them that it justifies keeping up with their mailers, annual fee reminders and “payment due” alerts all so often. &nbsp;But to get there you will have to spend some of your quality time identifying the right card based on your spending and thereafter - preferences for burning your points. &nbsp;You may, for example, like business class travel but someone may prefer a luxury hotel stay. You may like the touch of an Apple iPhone but someone else may prefer to get a Tanishq voucher and buy jewellery for the points earned. &nbsp;It all depends on you and your family's needs. &nbsp;Therefore, it is important to start by understanding your credit card very well. &nbsp; For example, an American Express Membership Rewards card gives you 1000 bonus points for swiping Rs 1500 four times a month besides giving 1 point for every Rs 50 spent. Not to forget you get another 1000 bonus points if you spend a total of Rs 20,000 in a calendar month. &nbsp;After you have reached 18000 points you can redeem these for a Flipkart or Amazon voucher worth Rs 6000 or a Taj Hotels voucher worth Rs 9000. &nbsp;And if you can wait a little longer and let 24000 points accumulate you can get a Taj Voucher worth Rs 14,000 or a Flipkart / Amazon voucher of Rs 8000 or a Tanishq diamond jewellery voucher worth Rs 9000. &nbsp;Many, however, miss out on benefitting from this because they will hardly have the time to look for the "Gold Collection" tab which is often not easy and will not be the first option thrown up when you try to redeem on the Amex website or app. That miss may hurt you because you end up paying around Rs 4500 in annual fees for this card. &nbsp;On the other hand, if you take the American Express Platinum Travel card with nearly the same annual fee you get 15,000 points for spending Rs 1.9 lakh in a year which is worth Rs 4500 on Flipkart. If you spend Rs 4 lakhs then you get another 25,000 points worth Rs 7500 on Flipkart. You will also get a Rs 10,000 voucher for usage at the Taj Group when you spend Rs 4 lakh. Besides, the card gives you get 8 complimentary airport lounge visits per year.&nbsp; &nbsp;But you have to make the right choice – do you travel and spend a lot? If not, then the first card may work well for you because airport lounges are already available on most debit cards. &nbsp;For those flying with a lot of baggage or with elderly parents travelling to meet their children on long-haul flights, you can train your eyes on the Axis Magnus card, with an annual fee of over Rs 12,000 that offers “meet and greet service”.&nbsp; &nbsp;This gives you a porter and a smooth entry or exit out of the airport. The card allows this service up to eight times a year. Given that Delhi Airport charges Rs 2600-4500 for a similar service when you are travelling domestically and Rs 4000-6500 when flying internationally, the card would be worth the price tag. &nbsp;Always read the fine print of your credit cards carefully. Your SBI Air India co-branded miles card, for example, may offer you the luxury of not just traveling on Air India but because Air India is a member of the largest airline alliance called Star Alliance you can redeem those points to fly on most of the two dozen airlines part of the alliance including Turkish Airlines, Singapore Airlines, Lufthansa, and United. &nbsp;Most premium credit cards come with hefty annual fees but often if you bargain with the firm at the time of renewal these fees will be waived. Typically, credit cards do this when you reach a certain threshold of spending every year but also bend backwards to retain customers. &nbsp;Remember credit cards in India have become a cut-throat business even though only around 3% of the people – around 77 million or just about the size of Germany’s entire population - use them.&nbsp; &nbsp;Credit card users in India jumped by 70% between 2020 and now despite the pandemic and the economic contraction that followed but there is tough competition to gain market share. HDFC Bank has a 20% share of the Indian market but others are not behind - SBI Cards, ICICI Bank and Axis Bank have 19%, 17% and 14% market share as of August 2023. &nbsp;To get the most from your card you will have to also keep only two or three cards and concentrate spending on those cards based on their features – an American Express swipe at a non-HPCL petrol station, for example, will cost you additional fees. Many credit cards give spends-based bonus points which can make or break your return on the card especially if you are paying hefty annual fees. &nbsp;One also needs to choose credit card firms that are more lenient with customers. For example, some global firms often waive the late-payment fees on request while others will not even give a patient hearing. Users should also make credit card bill payments from platforms that have no hidden fees. Paytm, which earlier used to give cashback for making credit card bill payments, has instead started charging a “platform fee”. Using net banking or apps like Cred, which offers points to pay your bills but asks for access to your email data, is a better choice for now. &nbsp;Those who use a lot of credit cards should also keep an eye out for offers from their credit card companies like a hawk. Some offer bonus points if you take a no-fee supplementary card. Similarly, they will offer vouchers or accelerated points for shopping during a certain month but you can only get those points if you enroll in the promotion when that offer hits your inbox. &nbsp;Clearly, if you want your credit card to work for you, you have to sweat out a little bit too.Some of the popular premium credit cards in India include American Express Platinum, HDFC Bank Infinia, Axis Bank Magnus, SBI Aurum and ICICI Bank Emerald Private Metal.&nbsp;Most of these cards are meant for high spenders because they come with sizeable annual fees. Amex Platinum for example comes with a Rs 60,000 fee but offers access to premium Amex airport lounges, Rs 45,000 worth of Taj vouchers and several other travel and dining benefits.&nbsp;The same is true for Infinia and Magnus which cost Rs 12500, Aurum which comes for Rs 9999, and Emerald at Rs 12499.Some of them are by invite only and are also based on your net relationship value with the bank or in other words your fixed deposits, mutual funds holdings etc.&nbsp;The most premium credit card, of course, is the Amex Centurion or the "Black Card" as it is widely known which is given to very few and costs an astonishing Rs 2.5 lakh annually.&nbsp;BOX: What can you do with your premium credit card?Lounge access at premium airport lounges, free hotel and air ticket upgrades, and baggage and travel insurance&nbsp;Concierge services for your travel bookings, hotel reservations, entertainment booking arrangements, and help to pass through airports&nbsp;Access to Michelin-starred restaurants and exclusive fine-dining establishments&nbsp;Rewards and points for spending, often in the form of airline milesAir accident insurance cover, overseas medical insurance cover, travel insurance cover, and more.

Credit card users in India have jumped by 70% since the COVID pandemic.

How to make your credit card work for you?

Conflict in Middle East has escalated. On the night of 13th April, 2024, Saturday, Iran launched some 300 drone attacks on Israel. This was done in retaliation to Israel’s attack on Iran’s consulate in Damascus. Israel has said that it was able to successfully intercept and shot down 99% of the 300 drones. Damages were extremely limited. Nevatim air base in south of Israel suffered minor damage. A girl, 7 years old, also died. &nbsp;The risk of an Israeli retaliation to maintain its deterrence The risk now is Israel retaliating to the attack. Israel may have to do this to maintain its deterrence. By attacking it, Iran has breached its deterrence. Deterrence means a country attacking an adversary simply to discourage it and others from future attacks. The probability of such a retaliation cannot be completely ruled out.&nbsp; &nbsp;Both stock markets and oil markets are currently more inclined towards the probability that Israel will not resort to such a retaliation, at least in the near term. Benny Gantz is the main political opponent of Israeli Prime Minister, Benyamin Netanyahu. He is a key member of Israel’s war cabinet. He has said that Israel can wait before launching such a retaliation. He asserted that Israel should launch such an attack only when the time is right. A prevailing view in the markets is that because Israel’s defense forces are already exhausted due to 6 months of war in Gaza, Israel may stay away from immediate retaliation. US is also putting pressure on Israel to not go for any such retaliation. The above expectations explain why oil prices have not shot up in the past 2 days, after the Iran attacks.&nbsp;<img src="https://azprdbrkiiflsecurities.blob.core.windows.net/%24web/assets/image_6806b2aeab.png"> Source: <a href="https://www.cmegroup.com/markets/energy/crude-oil/light-sweet-crude.quotes.html#venue=globex" target="_blank" rel="noopener noreferrer">cmegroup.com</a>&nbsp;Impact on Indian stock markets An escalation in the conflict due to Israel’s retaliation will adversely impact a number of Indian stocks. Oil prices will definitely shoot up. This will put upward pressure on inflation. This will in general be bad for the Indian economy. RBI may use this as a reason to postpone interest rate cuts further. Stocks of oil marketing companies such as Indian Oil etc. will definitely be adversely impacted with increase in oil prices. &nbsp;On the other hand, stocks of oil &amp; gas production companies such as ONGC will benefit from the rise. Oil refiners, such as Reliance Industries, use crude oil as their input. Rise in crude oil prices will hurt them and their stocks if they are unable to pass on the increase, fully, to their customers.&nbsp; India’s exports &nbsp;to Europe and Middle East will be adversely impacted. Freight costs may go up further. Already, air freights costs are up after Houthi rebels of Yemen started attacking cargo ships in Red Sea. Due to the risks in Red Ship, more goods from India are getting exported through the air route. Rise in freight costs will push up the overall costs of Indian exports. This in turn may make them less competitive. Stocks of companies in export-oriented sectors may therefore get adversely impacted in the foreseeable future, if the conflict escalates. For the same reasons, the price of India’s imports may also go up. This may increase the cost of inputs for a number of companies that use imported goods as components. This may again push up inflation. &nbsp;It may also have an adverse impact on the profit margins of companies.&nbsp; &nbsp;USA has said that it will not be part of any retaliation against Iran by Israel. If USA, in spite of this assertion, gets pulled into the conflict then it will have a much wider impact on the global economy, including that of India. This in turn may have an impact on much wider set of India stocks, from across sectors. &nbsp;Impact on commodity prices and stocks of commodity companies The conflict is likely to have significant impact on commodity prices. Gold is already at all time highs. Its demand has gone up because of its safe haven status. In times of conflicts such as wars, investors buy more gold. &nbsp;Prices of some other metals have also gone up after new sanctions by US and UK on metals produced in Russia. Any further shock because of escalation in conflict between Israel and Iran may roil commodity markets. Indian commodity stocks should be watched out for.&nbsp; &nbsp;Foreign Portfolio Investors may become more risk averse A conflict between Israel and Iran will make foreign institutional investors (FIIs or FPIs) more risk averse. This may see selling by them in Indian stock markets. This selling pressure may put significant downward pressure on Indian stock markets. On Friday, 12th April, 2024, FIIs were net sellers of Rs 8,027 crore in Indian stock markets. &nbsp;High valuations at which stock markets are trading On 15th April, 2024, &nbsp;Nifty 50 closed, down by 246 points or 1.10%. Sensex closed, down by 845 points or 1.14%. Japanese Nikkei ended the day, down by 290.75 points. Stock prices in major countries, including India, are already at high valuations. Average P/E ratio at which stocks at NSE are currently trading is around 31. 84. This high valuation means that if tensions escalate the decline in Indian stocks’ prices may also be much sharper. &nbsp;Buying opportunity too ! Any such declines due to escalation of conflict may also be a buying opportunity for investors with long term investment horizon. They can buy good blue-chip stocks or stocks with high growth potential, at lower prices. &nbsp;Indian economy has performed relatively well in the past one year, when compared to many other economies. There is therefore good reason that Indian stock markets may be less adversely impacted when compared to many other stock markets because of this escalation.&nbsp;

Conflict in Middle East has already escalated. Will it escalate further?

What may be the impact of escalation of conflict in Middle East on Indian stock markets?

US dollar has strengthened against major currencies in the past few months. According to data from The Economist, in 2024 till date, the US dollar has appreciated by an average of 4% against the currencies of its major trading partners. The Japanese Yen is trading at its lowest level in more than 3 decades against the dollar. &nbsp;In the past 1 year, dollar has appreciated by more than 1.7% against the Indian rupee.&nbsp;A strong US economy is causing appreciation in dollarOne reason for this appreciation of dollar is that American economy remains strong when compared to other economies. It seems that the decision of many US States to not go for lockdowns during the Covid years has given an edge to the US economy against economies of other countries. In the December quarter of 2023 , US GDP grew y-o-y by 3.4%. In the same quarter, Germany’s GDP contracted by – 0.2%. In the September quarter Germany’s economy had contracted by -0.3%. UK’s GDP growth in 2023 stood at a measly 0.1%. Unemployment rate in India in March stood at 7.6%; in US it stood at 3.8%. Some are going to the extent of saying that American economy is booming currently when compared to those of other countries. &nbsp;<figure class="image"><img src="https://azprdbrkiiflsecurities.blob.core.windows.net/%24web/assets/image_eb02362a02.png"></figure>Source of Data: ICE&nbsp;Postponement of interest rate cut by US Federal Reserve The higher interest rate that is being kept by US Federal Reserve has also contributed to the appreciation of US dollar. When interest rate in a country rises in comparison to that of another country, its currency tends to appreciate against the currency of the other country. Many central banks, such as RBI in India, have kept pace with rise in interest rates in US. They increased interest rates in their own countries, so that dollar does not strengthen further against their own currencies.&nbsp; The US Federal Reserve has indicated that it is unlikely that it will go for an interest rate cut before September 2024. This means that dollar is likely to remain strong against other currencies in the near term. &nbsp;Increase in global uncertainty Dollar is also considered to be a safe haven asset. If global uncertainty exacerbates then too dollar will appreciate further. Worsening of conflicts in Middle East or Ukraine will increase global uncertainty. Investors will then pull more of their money from other countries and invest in dollar assets. Indian markets saw significant pulling of money from foreign portfolio investors, when uncertainty increased due to Iran’s drone attack on Israel. US dollar index rose sharply after 10th April, when situation in Middle East worsened. AI boom also contributing to strengthening of dollar The Artificial Intelligence (AI) boom has also contributed to the strengthening of US dollar. AI is expected to bring a kind of revolution in future. Much of the AI development is taking place in US technology companies. Nvidia, a major maker of chips for AI &nbsp;is an American company. Microsoft is at the head of the AI thing with its billion dollar investment in Open AI, the owner of ChatGPT. Google, another major player in AI space, is an American company. Global investors are putting more of their money in American technology stocks after pulling them from stock markets of other countries. This has increased demand for dollar against other currencies.&nbsp; &nbsp;The Indian Summer! A stronger dollar makes India’s exports cheaper in dollar terms. Exporters such as those of IT services may see their revenues and profits going up in rupee because of dollar appreciation. But India’s imports also become more expensive because of a stronger dollar. For much of its imports, India pays in US dollars. Similarly, Indians opting for foreign travel are now paying more. Parents whose children are studying in American universities are having to shell out more because of dollar’s continued appreciation against rupee. Indian companies that use imported components in their products are seeing their cost of production go up. India is dependent on imports for 80% of its oil needs. An appreciation in dollar has increased the amount that India pays in rupee terms for its oil imports. This means that Indians are having to pay more for oil products such as petrol. If RBI or any other central banks cuts interest rates before US Federal Reserve starts doing so, then the risk is high that their currencies will depreciate further against the dollar. Foreign investors will further pull out money from assets denominated in currencies such as rupee and invest them in dollar denominated assets. This, because of the relative increase in yields in dollar assets due to cutting down of interests in other countries. The path ahead still looks to be in favor of dollar! &nbsp;

US dollar has strengthened against major currencies in the past few months. 

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