Investors are getting nervous over this US election! Here is why you should not worry.

As we are reaching closer to the result of US presidential elections, most markets are experiencing great volatility. Investors  are nervous over the  outcome. People are hoping for their favorite candidate to win so that they can feel more secure about their future.

But I believe that the only person that is responsible for your future is you.
If you believe that the leader of your country can make your future smooth and easy, then I am sorry to say that, you are wrong. It's only your actions that can lead you to success.

In the history, we have seen some great leaders and bad ones as well, heading the country. And we have also observed people achieving their goals in both types of leadership. There is no guarantee that the best leader will lead you to success. It's mostly dependent on your decisions.
Simple advise would be to keep calm and don't get too nervous or excited or emotionally unstable that you don't have control over your actions.
 

So, no matter who wins the election – Clinton, Trump, or someone from mars – keep in mind that you win by ultimately controlling yourself.

There is lot more about gold!

In my last post, I promised to share the best way (remember, its according to me) to invest during market turmoil. And that was gold.

The most common way we see people investing in gold is via jewellery or simply gold ornaments. In India, the demand for ornaments fluctuates depending on the festive season, wedding season rather than on economic conditions. Buyers frequently splurge on gold jewellery by convincing themselves that they are investing rather than spending, since the value of the ornaments is likely to increase in the future. While the justification isn’t entirely incorrect, it lacks some important considerations.

Buying jewellery is different from investing in Gold. There are additional caveats attached to it like making charges, which ranges from 5 - 15% and can reach up to 20% which are irrecoverable when we wish to divest from this investment.

The other option is investing in coins and bars. But one should be aware that it comes with a slight premium and the premium increases with the decrease in denominations. Lets take a hypothetical example, 10g of gold coin can be bought at 30,000 INR. And now, if you want to buy 5g coin, its price comes around 15750 INR instead of 15000. That 750 INR is the premium added due to decrease in denomination.

Then what is the better option to exploit the opportunity of investing in gold? That's Gold Exchange Traded Funds (ETFs).

Gold ETFs are mutual funds that invest in physical gold. Each unit of a gold ETF represents 1 unit (or in some cases 0.5 units) of gold. Investors in gold ETFs do not bear making charges associated with physical gold.

Moreover, gold ETFs are traded on the exchange at the prevailing market price of physical gold, which implies that investors can buy or sell their holdings at prices that are close to the market price, without worrying about paying a significant premium on purchase or selling at a discount.

Given the high trading volume at national exchanges, there is no liquidity risk attached to it. Investors can expect the resale value to mirror the market price of physical gold.  Below is the list of Gold ETFs listed on NSE.

Synopsis

Gold is a safe haven asset, which makes a portfolio more diverse. It’s thus prudent to allocate 10-15 percent of your portfolio investments to gold; however that should be done after proper consultation with your financial advisor. 

However, the potential to earn higher returns should be evaluated in the context of other important considerations. Liquidity is a key factor that should be considered while making any investment. Investors should be able to encash their holdings at any time without compromising on the value.

Easy availability is another important consideration. The investment instrument should be easily available so that investors are able to deploy their funds without any delay. In these aspects, gold ETFs are better than sovereign gold bonds.  

Are you ready?

What if I tell you that I will be discussing about risk today? Nobody wants to talk negative and everyone is happy to discuss rosy imaginary things.
But reality is tough if faced unprepared.

Let's go back in 1999, what if I told you about tech bubble. You would have laughed as everybody was ready to sell their houses and invest in tech companies that time. Or I said about housing bubble, in 2007. The reaction would have been same.

Always remember, problems starts unveiling when least expected.

What could be the reason for next market collapse? Cheap money ? Subprime auto loans ? Or some chain reaction? Indian market is vulnerable to events happening around developed countries. Anything big happens there, will have an effect here. I have an interesting graphic to show you for better understanding of upcoming danger.

Stock markets are reaching heights, people are spending easily on the cheap money, potential Eurozone exits, struggling china etc. All these indicate that we are heading closer to another meltdown.

So what can be the way to avoid it? Unfortunately, there is no way we can avoid next collapse. But we can shift our investment to some other source to continue our investment objectives on track.

That's why I told you to stay liquid in my previous blog post.

So what can be your next sweet spot ?

Gold. Yes, you heard it right, it's gold which can save your hard earned money from diminishing.

Unlike stocks, gold doesn't pay out dividends, don't give you bonus or advantage of right issues. Investing in gold is quite old and remained constant over long time, buy low and sell high. But it's easier said than done. There are plenty of options available in market that let us invest directly or indirectly in this precious metal. I will share the best way (at least according to me) to invest in gold in my next post. Stay tuned..

Did you kept your cement premix dry?

Is liquidity a real thing?

When we have money, it’s hard to find anything to buy that has real value.When we don’t have money, enormous opportunities appears and we are unable to pursue them.
As an investor, all we want is to exploit the opportunity of buying low, and later selling it at higher price – and repeat that process as often as possible. That’s the way compounding returns are created that grows throughout the life.

A Local Bar

Ever went to a bar for ‘happy hour?’

The drinks are cheap, the bar is half full, and the bartender is ready to fill your glass in a flash.

Now, what is that same bar like at 9pm?


The bar is packed. There is nowhere to sit, people are stepping on your feet, the drinks are expensive, and you can’t get the attention of the bartender if your life depended on it.

It’s a stretch of a comparison, but I find it odd that people flock into crowded bars for poor service and expensive drinks. They could’ve showed up earlier for happy hour.

The reason for this is because of human nature. We all want to be in the herd with everyone else. It makes us feel comfortable and safe.

Unfortunately, this strategy does not work in the investing world. When we follow the crowd, we lose the ability to stay liquid for opportunities.

Stock Market

Today what we witness is that stocks and indexes are reaching historical highs almost every day – everything is expensive!

In addition, lots of people have money to spend. They have taken loans out from their highly valued homes; they’ve borrowed money from banks at extremely low rates, and investors are buying stocks on margin because brokerage houses are willing to lend.

This cheap and easy money is allowing everyone to buy stocks – which have made most markets very expensive.

What’s going to happen when the next market decline comes?

Who’s going to have money to buy stocks when they are cheap?

Maybe you will, if you have any dry cement premix.

So, I encourage you to look around and take an honest view of what is going on. Is there an opportunity? Should you be buying? Or should you just be sitting patiently and waiting for your opportunity?

Just like in the construction field… keep your cement dry and be prepared to add water and build when everyone else can’t.