Analysing the mistakes and getting rid of his portfolio’s shortcomings set in motion Iqbal Mohammed’s long-term journey

Iqbal Mohammed felt that the engineer in him was getting lost in the typical IT job he held for over 10 years when he decided to go his own way and focus on what he knows and loves best. Semnox Solutions Pvt. Ltd was born in 2008 and is a global revenue solutions provider for the entertainment industry. Even though he was confident of making a success of his business venture, he was not as sure that his financial life was on the right track.

While there was not much to save in the initial years of employment, once his finances stabilised and there was a surplus, like all young people, he gravitated towards the two asset classes with the most bragging rights: equity and real estate. His portfolio was a motley collection of products that were sold to him with no alignment to goals or needs. “There was a lot of needless activity in my portfolio with funds being moved from one product to another without any reason,” said Iqbal.

He was perceptive enough to identify where he was going wrong: there was no disciplined approach to investing and the portfolio was skewed towards risky asset classes. “In hindsight, it feels as though the entire approach was short term. If some of my investments were held till date, I think there would have been tremendous gains on most of them.” With the realisation of the errors came the feeling that his financial situation would be better served with professional management and that is when he got in touch with Naveen Julian Rego, registered investment advisor and certified financial planner.

Iqbal’s brief to Naveen was clear. He wanted to address the risks in the portfolio and set it on a growth path with focus on goals. Iqbal and his wife Sarwath want to provide the best possible education to their two children Sahim, 15, and Shahan, 11, and a retirement with no compromise on their comforts or desires. Iqbal and Sarwath want to give back to society too in a significant way and are still searching for a cause that speaks to them.

Rego did a thorough analysis of Iqbal’s holdings and classified the investments to give Iqbal a good perspective of the risks and shortcomings in the portfolio. “The lack of a coherent asset allocation in the portfolio and significant concentration in asset classes and securities was what struck me immediately,” said Rego.

Rego also focused on de-risking the portfolio from the effects of a downturn in equity and real estate markets and bringing balance.

As a first step, Rego advised terminating a slew of Ulips that were not adding any value either to the protection needs or to the investment needs of the family. The next was to reduce the proportion of real estate and equity in the portfolio and to make allocations to debt to diversify the portfolio and protect downside risks. Since exiting real estate cannot be done at short notice, it was proposed to be done in a phased manner as was the exit from ESOPs to reduce the concentration of equity allocation in the portfolio to a particular security. Rego created a model portfolio that was suited to Iqbal’s financial needs and set in motion a long-term systematic investment that would get Iqbal to his desired allocation.

A good income and prudent spending habits of Sarwath and Iqbal meant that the household did not have to cut back on current expenses to find the savings for the goals. Mutual funds are the preferred investment vehicle for equity and debt investments, though there are some direct equity investments being made too.

“He spoke less about returns and more about building wealth over a long run by appropriate asset allocation. It was simple to understand and yet had the maturity and wisdom,” said Iqbal about Rego’s approach. All investment decisions are mutually decided between them after discussions in two reviews each year.

“It is important to get good financial advice early in life and someone in the family can play the role initially,” said Iqbal. “Knowing that my finances are in professional hands gave me peace of mind. I feel secure in the hands of an able advisor,” said Iqbal.

While the civic body’s GIS-enabled property tax information system has identified 19 lakh properties in its limits, only 11.5 lakh properties pay the levy.

BENGALURU: Owners of two out of every five properties in the city continue to avoid paying the stipulated property tax promptly, according to BBMP officials.

While the civic body’s GIS-enabled property tax information system has identified 19 lakh properties in its limits, only 11.5 lakh properties pay the levy. If every property is tax compliant, then the BBMP can mop up over Rs 4,000 crore, officials said.

The BBMP is racing against time to meet its tax target of Rs 3,100 crore. With less than three months left in the financial year, the agency has collected Rs 2,220 crore in taxes. Parks, playgrounds, shrines, BBMP properties and traffic circles are not assessed for property taxes. BBMP commissioner N Manjunatha Prasad told TOI: “A large number of properties, especially vacant plots in new BBMP areas, are regular defaulters.”

Falling prices should ideally lead to production cuts by high-cost producers, bringing equilibrium to the market.

Even as the stimulus by China is yet to take effect, concerns are being raised about its impact and the possible support it can provide to commodities, especially metals.

Some brokers, including CGS-CIMB Securities International Pte. Ltd, are even advising investors to stay away from steel stocks for the next two years. “Falling steel prices in the domestic market, rising steel production in China, depreciating CIS currencies which make exports viable at much lower US$ prices and entry of new players in the Indian steel market are some of the headwinds for Indian steel players. It is not too late to sell steel stocks, in our view,” CGS-CIMB said in a note. CIS is Commonwealth of Independent States.

The impact of the price erosion could reflect in the December quarter earnings. Jefferies India Pvt. Ltd forecasts a significant contraction in earnings of the metal companies on a sequential basis. Worryingly, the earnings contraction is projected to continue through the current quarter (Q4 FY19) as well, as the firms face the full impact of the fall in prices. “Full impact should come through in 4Q. Domestic HRC (hot rolled coil) prices are around ₹2,800 per tonne below 3Q average. With domestic ex-mill prices at a premium to import parity and mill inventories rising, further correction is likely. Aluminium LME is down 5% versus 3Q average,” Jefferies said in a note. LME is London Metal Exchange.

Panvel has emerged as Navi Mumbai's key real estate market, on account of its comparatively affordable prices, infrastructure development and prospects of good future returns, by way of appreciation.

Recently, Navi Mumbai was graded the second-best city to reside, in the ‘Ease of Living Index 2018’, launched by the Union Ministry of Housing and Urban affairs (MoHUA).

Also, JLL India, in their report ‘Livability Quotient – A Paradigm Shift in India’s Emerging Cities’ had identified Navi Mumbai as one of the best satellite towns, offering relief from the growing densification problems of Mumbai. This reinstates the fact that Navi Mumbai is a well-planned and managed city, at par with international and national standards.

Navi Mumbai was developed with an intent to decongest Mumbai and one node in Navi Mumbai that is developing in a similar manner, is Panvel.

“Paucity of land and rapid urbanisation in Mumbai, are resulting in a roll-on effect and directing investors to turn towards emerging areas, which could ‘peak’ in the coming years. As more locations continue to go out of the reach of a certain cross-segment of buyers, Panvel is emerging as a favourite for buyers. The government has already taken several initiatives, to build quality infrastructure in Navi Mumbai, especially in and around Panvel. This has helped developers to set up projects here,” says Navin Makhija, MD of the Wadhwa Group, which is bringing quality affordable homes to Panvel with an integrated township project, to be developed in multiple phases.

When it comes to the temple or prayer area in a home, there are several Vastu Shastra guidelines that should be followed, to ensure maximum positive effects for the home’s inhabitants. We examine the dos and don’ts

The temple at home, is a sacred place where we worship God. So, naturally, it must be a positive and peaceful place. The temple area, when placed according to Vastu Shastra, can bring health, prosperity and happiness to the house and its occupants. Although a separate puja room would be ideal, this is not always possible in metropolitan cities, where there is space crunch.

The temple area, should be a zone of tranquility that is full of divine energy, says Mumbai-based Nitien Parmar of VastuPlus. “This is a space where one surrenders to the Almighty and gains strength. If one does not have the space to allocate an entire room for the temple, one can set up a small altar on the east wall, towards the north-east zone of the house. Avoid placing the temple in the south, south-west or south-east zones of house,” adds Parmar.

More cities are looking to opt for online property registration. The latest attempt to consider the online route was in Noida.

“In an endeavour to make property registration and related services more transparent and efficient, the Noida Authority has decided to completely get rid of the manual process. Earlier, consumers had the option of taking the online route of property registration since November 2018, or take the offline route. But from 2019, all property registrations and transfers of properties can be done only online. All payments must also be done solely online,” said Anuj Puri, chairman, Anarock Property Consultants.

According to experts, online transaction indicates transparency.

“Undoubtedly, there will be greater transparency and efficiency, provided the website is up and running and the process is user-friendly,” said Puri.

However, the implementation is unlikely to happen anytime soon. According to Sunny Katyal, director, Investors Clinic, Noidabased property brokerage firm, like RERA and GST, in case of online property registration there is still no clarity.

“There is no formal communication yet from the authorities on how to implement it in terms of website or transaction process. I don’t think it is even practical to go the online way because the paper work is complicated for real estate. Also execution is difficult due to lack of communication,” said Katyal.

In fact, online registration has not been successful in other parts of the country. Tamil Nadu, for instance, implemented online registrations but there were several critical issues which ultimately forced buyers and sellers to visit the registrar office.

“Thus, for them the online route was far more inconvenient than the offline one. Having said this, any new major overhaul does have initial teething issues which ultimately get resolved over time. Moreover, this move will make it much more convenient for property consumers as they will have the convenience to finish this uphill task from home. Earlier, it was a tedious task which could take up a major chunk of a working day,” said Puri. Even for builders, it could bring in some respite as far as time and convenience is concerned.

“Also, the bribes often given to officials at the registrar office for easy commencing of the registration process can be done away with. To all these effects, this process will be far better and a smoother ride for property buyers and builders alike. While there are talks of this process spreading its wings in the entire country, it is still largely the prerogative of the respective states to implement it in letter and spirit,” said Puri.

A few states such as Tamil Nadu and Punjab have already started online registrations and if we go by the reports then online property registrations are seeing a major rise with time.

However, at the moment going fully online for property deeds is farfetched.

Satellite towns, which started emerging around 15 years ago, to ease the mounting pressure on major Indian cities, are fast turning into real estate hotspots. We list some of the major satellite cities in the country, which are worth investing in.

The most important aspect that encourages the development of satellite towns, is the presence of good connectivity. Once easy accessibility is in place, other things like infrastructure, amenities, residential areas, etc., tend to follow. During the growth phase of satellite towns, property rates are lower than the prime areas and when the satellite towns themselves become prime areas, the rates increase.

According to Sunil Aggarwal, associate dean and director, RICS School of Built Environment, “Delhi, Mumbai and Bengaluru have benefitted the most, from the emergence of satellite towns. However, there is a need to utilise the land within cities more effectively. There is a lot of good quality land within cities that is either unutilised or underutilised and this has to change.” Given below, are some of the prominent Indian satellite cities that property investors can consider.

A single GST rate of 12% would work if the centre and states share 1/6th of this with local bodies, leading to an urban revolution.

By all accounts, Indian economy today is on a growth turnpike, not very different from the growth miracles experienced by Asian tigers as well as China in earlier decades. India has consistently accelerated its growth rate over the last three decades. Our country has not looked back since 1991 and has, in fact, become one of the best growth performers in the world economy.

The deep determinants of this remarkable growth experience of ours have been institutions, demographic transition, modern technology and accumulation of both human and physical capital. In my view, the most important of these factors has been our democratic framework, a key foundational institution. Our democracy has proved to be sine qua non for effectively formulating key economic policies and conducting policy reforms in a country that is so diverse.

It is also of fundamental importance for maintaining social harmony. I cannot overemphasize the need for maintaining continuous vigilance to safeguard social harmony in our highly diverse society. In this endeavour, the “majoritarianism” will need to be eschewed. As the proverb goes “United we stand and divided we fall.”

In a country as beautifully diverse as ours, federalism as an organising principle is clearly the only way to succeed. In the analytical literature, “coming together” and “holding together” are the recognized forms of federalism. United States is the classic illustration of the first whereas the erstwhile Pakistan or Yugoslavia perhaps could be seen as illustrating the second.

The Delhi HC in December 2015, ruled that a daughter can be the Karta of a Hindu Undivided Family (HUF). We look at the implications of this ruling, on the property rights of daughters in paternal properties.

In December 2015, the Delhi High Court gave a decision, stating that a daughter can be the Karta of an HUF (Hindu Undivided Family). The root of this decision lies in the amendment passed to the Hindu Succession Act, 1956, in 2005. The Hindu Succession Act is applicable to Hindus, Jains, Sikhs and Buddhists. The amendment drastically changed the rights of daughters in the property of the parental HUF.

If you are able to identify good mutual funds yourself that consistently beat the benchmark by at least 3 to 4 percentage points, it is worth your time to search for and invest in these schemes.

What would your face look like if you realised that your retirement corpus will lose about a third of its value due to the costs you’ve paid your mutual fund? You’ve begun to invest in mutual funds and collectively are pouring more than ₹1 trillion a year into equity mutual funds through SIPs. A mixture of reasons including successful awareness campaigns, low returns on real estate, gold and fixed deposits, better access through fintech and a big regulatory push towards making mutual funds safer for you caused you to invest almost ₹8,000 crore a month in these funds.

Most of you hopefully understood the magic of compounding and are committed to staying the long haul with the investment, but what you need to know is that compounding can multiply returns as well as costs causing very different outcomes for your money. A quick update on the costs you pay in a mutual fund: you don’t pay any commission on sales to an agent and a ₹100 investment goes to work fully. Unlike a traditional insurance plan, for example, where ₹60-65 goes to work and the rest as commission to the agent, a mutual fund is allowed to put all its costs under one head called the expense ratio and the regulator puts a limit on how much a mutual fund can charge. These expense ratios, therefore, range from about 10 basis points (one-tenth of a percentage point) to about 2%. It matters very much if you are invested in a mutual fund that costs you 10 bps or 2%.

A 10 bps cost over a 10-year period will reduce your total corpus by less than a percentage point. Over a 20-year period, it will reduce your money by just over a percentage point. And over a 30-year period, it will cost you almost 2% overall—in other words a ₹10 crore retirement portfolio will be ₹9.8 crore. Run the same numbers using a 2% cost per year, and your money reduces by 9% over 10 years, 20% over 20 years and a huge 32% over 30 years—or the ₹10 crore corpus will be worth just ₹6.8 crore due to the higher cost.

We know that an exchange-traded fund or an index fund are cheaper mutual funds that mimic an index. Since there is no cost of stock analysis and trading, mutual funds are able to whittle costs down to a wafer thin 10 bps or even lower. But what you get is the index return—say the Sensex or the Nifty. Managed funds, or funds where the fund manager takes a call and picks stocks cost higher—around the 2% mark. But unless they are able to beat the benchmark and give you at least 2 percentage points over the index, they cost you more than they benefit you.

So should you rush into index funds or ETFs? No. Because compounding works both ways. If your fund is able to give 4 percentage points over what the index fund or ETF gives, then over a 30-year period you will have more than double the money you would have had in an index fund. Indian fund managers have done quite well in beating the indices over the past 20 years. However, the extra return that fund managers are able to get in large-cap funds is coming down, but is still quite good in other categories of funds. Don’t look at one-year returns, but at least five-year returns to see the extra return over the benchmark.

If you are able to identify good mutual funds yourself that consistently beat the benchmark by at least 3 to 4 percentage points, it is worth your time to search for and invest in these schemes. Or if you work with a planner, ask to see the returns over time and compare these to the benchmark. Ask to see the pre- and post-cost returns. If you cannot do any of these, then you are better off in an index fund or ETF that just mimics an index. You can build a portfolio that has several kinds of ETFs to give the benefit of diversification. At the minimum, you will have a broad market index-linked fund, a mid-cap and a small-cap-linked fund. Remember to give a larger allocation to the broad market index fund and use the mid- and small-caps as a returns kicker. And do look at the expense ratios carefully—they matter.