Weigh the risks of EB-5 citizenship route

Originating in Africa, Humans migrated to the remotest corners of the earth primarily to find food, avoid the threat of deadly predators or the danger from domination by other human species or due to dramatic changes in the climate. There is an intriguing scientific theory that unforced migration is motivated by simple curiosity and boredom, what is often called wanderlust. This is credited to a variation in the human DNA (DRD4-7R) now dubbed the “wanderlust gene”. Present in about 20% of the population, it impacts dopamine levels, increasing the person’s tolerance for risk taking including exploring new territories. Those willing for (or seeking) greener pastures in other countries have a larger capacity for risk taking. But can that innate larger risk taking ability justify staking your life savings in an “risky investment for citizenship” plan like US’s EB-5. Harsh’s article in Business Standard today. Your feedback most welcome.

Appeal to ‘slow mind’ to wean investors off F&O

Can you solve this puzzle : A bat and a ball together cost ₹ 1,100.
The bat costs ₹ 1,000 more than the ball.
How much does the ball cost?

If your answer was ₹ 100, that´s incorrect.
The right answer is ₹ 50.
Nobel Laureate and behavioural economist Daniel Kahneman cites this example in his book, Thinking Fast and Slow, to introduce the concept of the ´fast mind´ (which provides intuitive answers without conscious deliberation), and the ´slow mind´ (which is supposed to deliberate and endorse or reject the fast mind´s intuitive answers).
The fast mind´s immediate answers can be frequently wrong.
The slow mind is lazy and prone to biases.
Yet, with the right training, the slow mind can be tutored to amend the fast mind´s intuitive answers.
So what does this interesting puzzle have to do with weaning Individual Indian investors away from speculating in Futures & Options ? Read Harsh’s article in Business standard to know more..

Index fund or ETFs? Compare total cost

Harsh’s article in Business Standard on how a fixation on expense ratio has led to a preference for exchange traded funds over comparable index funds among some investors. In the case of ETFs the NAV is only of guidance value and the market price paid by investors buying the ETF is higher than the NAV and the investors selling the ETF is lower than the NAV. The difference between market price and the NAV imposes an additional cost. Besides, there is brokerage fee, which amplifies an ETF´s tracking error
Hence the tracking error based on market price is way higher than the tracking error of comparable index funds. The incipient movement towards Fund of Index funds across asset categories has been the inadvertent victim of the hastily introduced tax amendment targeting debt funds in the last budget. Hopefully we should see this corrected in the next full budget and index based FoFs will play a pivotal part in passive investing in the future.

Disclosing conflict of interest builds trust

Regulations require that Investment Advisers fully disclose any conflict of interests they have while advising their clients. Far from being an hindrance, a transparent disclosure of the conflict can assist in building the trust of clients. Disclosure of “no conflict” in situations where investors have inbuilt perceptions of conflicts of interest such as referral to Insurance specialists/law firms also help in building trust. Harsh’s article in Business Standard…

Investor education can´t be left to finfluencers

Finfluencers have a large influence on investors which can be used both for educating them but also for misdirecting them. given their larger than life impact on investor education some form of regulation is a must. Many learnings are available from the experiences of Pranjal Kamra a “Finfluencer” with very large fan following whose firm has a RIA License from SEBI. Harsh’s article in Business Standard on how relatively relaxed regulations coupled with a strict scrutiny of those with large number of investor complaints may be one possible route to bring the “finfluencers” within the regulatory ambit but retaining their ability to educate investors. Its a complex issue and Harsh is aware there is no magic bullet solution so this is a suggestion that can be considered along with many others that the regulators must surely be examining.

An innovative approach to domestic staff loans

Middle class households are used to giving advances against salary to their domestic staff who do so much to make their day to day life easy.
spurred by a challenge thrown to Harsh by Harsh’s spouse Harsh proposing a solution that can transition these advances (and it’s repayment) to India’s formal credit system giving a big boost to availbility of formal credit to trustworthy low income domestic staff. Please assist in influencing the policy makers to consider the suggestion. It will convince his spouse that he can actually make sensible suggestions in household matters as well :). Harsh’s article in Business Standard today

Have realistic expectations from your investments

Clients are always amazed when we tell them that looking at how the investments have fared for them is not the right way to review their continuance or otherwise. Using cricketing analogy Harsh explain why looking at moving long term performance of the investment vis-a-vis its peers is a much better way to review the continuance of any investment – rather than the performance experienced by them. In fact the focus on reviewing investments (reviewing the performance of the selected batsman) takes the focus away from reviewing the performance of the entire plan itself. Harsh’s article in Business Standard.

High pension recipients can get short-changed in bailouts

Do not transfer large sums of money from your tax free Employee Provident Fund to the Employee Pension Account in the hope of getting a large pension in the future. As per the EPFOs own calculations the deficit was Rs. 15,000 crores as on March 31, 2017. The deficit position for the years ended March 31, 2018 and 2019 has not been released by the government but is likely to be much higher. Even the calculation of the deficit figure has not been made for the last 4 years. A pension fund that has not even calculated its liability is a scary place to invest your hard earned tax free Employee Provident Fund money. Those people depending on government bailout should be aware of the precedents whenever governments have stepped in to protect pensioners – those entitled to larger pensions inevitably get shortchanged in the process”.

Wealth creation is simple but not easy, requires discipline

“Sleep well, eat healthy and exercise regularly” are the “simple” rules that enable a healthy life. However it is not “easy” to follow these simple rules. Similarly wealth creation has simple rules which require discipline and patience. Most people prefer complex solutions in their search for faster results and it takes a dedicated coach to keep them on the path (pardon this bit of self promotion for our profession). Harsh’s article in Business Standard. Your comments welcome as always..

Searchable database for unclaimed shares needed

Check on this link for the names of any investors who were active in teh stock markets in the 1980s/1990s . The link will provide details if any investor has unclaimed shares or dividends that have been transferred to IEPF. Around 48,000 crores are currently deposited with Investor Education and Protection fund (IEPF). IEPF does not have a functional search facility & investors are left to use private searchable databases.
Once discovered there are long tedious processes to recover the shares/dividends. Whilst action has been initiated by the finance minister to create an integrated portal to make the refund process simpler I make a plea in this article in Business Standard that a transparent searchable database is a must to reduce the mountain of unclaimed assets. comments welcome.

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