Fixed deposit options

My dad is 80. Not the most financially savvy person I know of.

Last year, when I took a look at my dad’s finances, I noticed deposits in small and cooperative banks.

Why? Because he’s treated like a person there. With higher automation (and hence, more DIY) and retirement of people he knew at the banks, places like SBI are uncomfortable. It has pushed him more into places like the co-op.

Also, the 1-2% higher interest rate is a good bait.

He doesn’t realise the risks:

  • a less reliable, less compliant bank
  • carrying most of his savings

This is for those who have money in such small banks. Not all are bad, not all are mismanaged. But banks are highly leveraged businesses that a few bad mistakes can cause a run on the bank. So, it is better to go with the conservative banks that are also large. Why go through all the pain for just a small incremental gain?

Personally, if I invest for less than 10% returns, I look first for safety – return of capital with absolutely lowest risk. A safe bank at 5% is any day better than a so-so bank offering 8%. Especially if that money is hard to earn back (esp retirees).

Personally, as of today, I’d keep FDs only in these banks – SBI and HDFC. If you still need to diversify, maybe Kotak and ICICI. That’s it.

As for making banking easier for senior citizens… I feel sorry for them. The best I could do for my dad was to enable internet banking and do it on his behalf. Every now and then, he sees that as loss of control over his money, but quickly gets over it. Until the day we squabble, at least ūüôā.

EDIT: I am aware of post office schemes such as SCSS and POMIS. They don’t suit his needs – he needs a good place to park funds for liquidity. Should be available immediately when needed for exigencies. For monthly expenses, he uses his pension. The post office term deposit is an option too – but unless the online facilities are good enough, won’t use them. Also, there’s a limit of 15 lakhs on it as of today.

Walking away from a wrong table

Several times in life, I’ve sat at the wrong table and waited for things to get better. A wrong¬†job, a bad investment, a bad industry… to list a few. Talk about table selection and I’ve made all mistakes one could!

2 years in a job I hated. 3 years with a significant investment I wasn’t sure about. 2 years in an industry that I knew would take me nowhere.

I waited.

Nothing really happened!

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The ethics of money and business

Ever since 2005, I have really enjoyed studying businesses and have kept my money mostly in publicly listed stocks and since 2011, been interested in building one myself. At the same time, I love and seek inspiration from nature.

I’ve had trouble keeping them together because capitalism and its main cogs – business and finance, seem to be largely working against nature. I find it disturbing and hard to balance.

Several years ago, I owned ITC shares – a friend questioned how I could make money from smoking and tree-chopping (paper). I got out (though my reasons are ambiguous at best).

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Never play the Russian roulette

Charlie Munger often says, “tell me where¬†I’m going to¬†die, so I will never go there”. Avoidance of terminal risk is of great importance to him (and to Warren Buffett).

That is a very important thing to follow in life.

A Russian roulette is one game that is simply not worth playing at any price, even though the odds are in your favor. (There is a 5/6th chance that you will survive and¬†there is a 1/6th chance that you’ll get the bullet, if the chamber is reset every time.)

Source: Wikipedia
Image Source / credit: Wikipedia

Any game that can get you killed is just not worth it! Even if there is a good chance that you might survive and win a hefty prize.

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True financial freedom

A friend and I were discussing money and financial freedom, amongst other things in life.

“How much is enough money to be¬†financially free? How do you decide?” I asked my friend.

Is it a fixed number? The ability to not work for money and have enough of it to pay all your bills through your lifetime? Is it 30 times your annual expense? 50 times? Having a good part of it in inflation beating investments? Or having a business that has good free cashflow and longevity?

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Track your expenses without sweating it out

For several years, I used to track my expenses religiously – partly because of my interest in personal finance and largely because I have an OCD on maintaining data, esp numbers.

From 2003 until 2007, I used excel sheets to manage my accounts. From 2008 onwards, I used Gnucash. Whichever the system or tool, the data is only as good as the data entry. And that can be time consuming! By 2012, I was pressed for time and it no longer made sense for me to track my expenses so religiously. Especially since I had good control over it and roughly knew my numbers. (I realized its way better to spend time on investments than on expenses.)

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A decade of investing

I just realized its been exactly 10 years to the day since I first entered the stock market. Being risk averse and skeptical, I equated stock market to casinos and thought I’d never touch it with a long pole.¬†Little did I know that a large part of my own life would be devoted to studying and investing in that very same treacherous market.

The date was May 17, 2004. A senior colleague looked very pale and I came to know that he had lost a lot of money that day in the crash. I was perplexed as to why people invested in risky things such as the stock market and vowed that I would do no such stupid thing.

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The decision to allocate capital

Last year, in June, I liquidated most of my debt investments thinking that I would invest it in my own company.


In that period, I also read this book –¬†“The Outsiders”. I really liked the modus operandi of the entrepreneurs featured in the book. They were all capital allocators and had done very interesting things – many a time going against conventional ‘grow big’ logic.¬†Those guys often would ask themselves, ¬†“which is the best option¬†to put my next Rupee¬†into?”. They would always seek an edge. And got out of businesses with leaky-boat economics. And invested heavily into businesses where they could build more competitive advantage.

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Thoughts on Mahindra holidays business model

I have been following Mahindra holidays for quite a while.

They do have an interesting business model.

  • Customer pays upfront for timeshare ownership
  • Mahindra holidays builds resorts
  • Customers get to stay at these resorts for 1 week every year for 25 years (it was 33 years few years ago)
  • customer also have to pay an annual fee (increases with price index) and for food and beverages at resort creating an additional recurring revenue stream
  • unused rooms are rented to non-members

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