Money is a means, not an end!

I can recollect hundreds of people who have amassed a lot of wealth and still are not able to enjoy the benefits. They do not use it for any constructive purpose, not even for improvement of their standard of living, or for their family. Their corpus is beyond what they require and may last several generations but still they follow their pursuit of money passionately. For them, it seems that money is an end and not a means to an end.

As of now, about  ₹1,56,539 crore is lying with various financial institutions as unclaimed money with small savings plans, Employees' Provident Fund Organisation (EPFO) and banks leading the list; was reported in a news report in 2015. 

Over ₹ 15,000 crore of unclaimed insurance money is lying with 23 life insurers, according to latest data from insurance regulator IRDAI. India’s biggest life insurer LIC or Life Insurance Corporation of India is sitting on over two-third of that unclaimed money. 

A sum of  ₹ 27,000 crore is lying as unclaimed amount in the Employee Provident Fund accounts as per a report in 2015.
One unconfirmed estimate has pegged the unclaimed amount and inoperative accounts in the Public Provident Fund (PPF) at Rs 22,000 crore. 
As much as  ₹ 11,302 crore belonging to over three crore-account holders is lying unclaimed with 64 banks. The largest amount — ₹ 1,262 crore — is lying with the State Bank of India.

There are several reasons why the money does not get claimed. As mentioned earlier, you might have lost track of the funds owed to you. Or a company/financial institution might have failed to locate you for payment as contact details change over the years but are not updated on a regular basis. Even nominees and legal heirs may fail to stake a claim if they are not aware of such assets - it is often the case if one dies without making a will. 

As per another report, 70% of the PPF money goes to the nominee, i.e. the account holder doesn’t use it himself.

All of the above cases are of hard earned money of hard working people but somehow they have not gone to the investors or legal heirs. 

What is the purpose of this investment made by investors, after compromising on their current needs, just to invest money?

Why are you investing? It's OK if you have many different answers to this question, but there is a big problem if you have no answer at all. 

Investing is like driving—it is best done with your eyes open! Without purpose, investing is like taking out your car and going for a drive without actually knowing the destination you want to reach and when you want to reach.

Like training in a gym, investing can become difficult, tedious and even dangerous if you lack focus.

Having clear reasons or purposes for investing is critical to investing successfully. 

You don't always have to think long-term. Investing is as much a tool for shaping your present financial situation as it is for forming your future one. 

Do you want to buy a BMW next year? 

Do you want to go on a cruise? 

Wouldn't a vacation that was paid for with dividends feel nice?

Investing can be used as a way to enhance your employment income, helping you to buy the things you want. Because investing changes along with the investor's desired goals, this type of investing is not like retirement investing. Investing to achieve financial goals involves a blend of long-term and short-terminvestments. If you are investing in the hope of buying a house, you will almost certainly be looking at longer-term instruments. If you are investing to buy a new computer in the New Year, you may want short-term investments or some high-yield bonds.

The caveat here is that you need to pinpoint your goals first. If you want to go on a vacation in a year, you have to sit down and figure out the cost of the vacation and then come up with an investing strategy to meet that goal. If you don't have a set goal, the money that should be going into that investment will doubtless be used for other purposes that seem more pressing at the time.

Your reasons for investing are bound to change, as you go through the ups and downs of life. This is an important process, because the only alternative is to invest with no purpose, which will likely result in investing practice that reflect your uncertainty and cause your returns to suffer. Your reasons and goals will have to be reviewed and adjusted as your circumstances change.

Always think and decide on the Why of Investing before you start on the investment journey. This will not only help you to decide the best route and the speed with which you need to travel but also the risk that you need to take and what you will do at the end of the journey when you achieve your goals.

Happy Investing!

Stay Blessed Forever!

Sandeep Sahni

You may contact us at:

91-9888220088, 9814112988

sandeepsahni@sahayakassociates.com, info@sahayakassociates.com

Follow us on:

www.sahayakassociates.in, www.facebook.com/sahayakassociates, www.twitter.com/sahayakassociat, https://www.instagram.com/sahayakassociates/https://sahayakgurukul.blogspot.com

Note: All information provided in this blog is for educational purposes only. They don't constitute any professional advise or service. Readers are requested to consult a financial advisor before investing as investments are subject to Market Risks.

Wars, Terror and the Stock Markets ?

There is an old stock market proverb, which advises "buying to the roar of cannons and selling to the sound of trumpets." 

Nathan Rothschilds old Maxim also states, “that the best time to buy stocks is when blood runs in the streets.” 

The stock market reaction during recent incidents like Kargil conflict also prove the above.

At present, Indian financial markets are in a state of mild trepidation. The dastardly attack in Pulwarma, occurring ahead of crucial Lok Sabha elections, has put pressure on the government to retaliate. 

There was a heavy retaliation from the Indian side to the 2016 Uri attack. The war of words and politics surrounding the 2019 attack may compel the government to do something. Prime Minister Narendra Modi in a public speech a day after the Pulwarma attack, announced, “a free hand has been given  to the army to decide the Indian response to Pulwarma.

This may have implications for the Indian markets; Should investors really panic with the recent escalation in Indo – Pak tensions after the Pulwarma incident? If one looks at the way markets reacted during Gulf War, Pokhran nuclear bomb tests in 1998, the Kargil war in 1999, or the 26/11 terror attacks, the answer is clearly no. 

In 1990, during the Gulf war period (August 1990-January 1991), the BSE Sensex fell sharply just after the war, but recovered soon. From a low of 982 in the beginning of January 1991, the Sensex jumped to 1,220 at the end of February and by the end of 1991, it crossed the 2,000-mark.

The two Pokhran tests were carried on 11th and 13th May 1998 and the Sensex lost 7% in those three days and recovered 5% in the next three trading sessions. 

The market reaction during the Kargil war was even more surprising. The war started on 3rd May 1999 and continued till 26th July 1999; and between these dates, the Sensex gained 38% in a period of less than three months. The Indian stock market was hovering around 3600’s when the news of incursion in Kargil initially came in. It dipped to around 3300 at the start of May but then kept on going up and ended around 4500 by the end of war. But, one should also remember that, 1999 was early stage of the dotcom boom, so global sentiments overshadowed Indian war and thus it did not have a large impact but that may not be valid now.

After the 26/11 attacks, the stock markets were closed the next day, and when they re-opened on November 28, most people feared disaster on that day, but after a bad start the Sensex actually gained 66 points, ending up at 9093. By the end of December it climbed further to 9647, and then crossed 10000 in Early January.
The reaction of Foreign investors after the 26/11 attack was also very different. From the start of 2008, they had pulled $13.5 billion out of Indian markets, sending the Sensex crashing from a peak of 21,000 to barely 9,000. However on Nov. 28, in the middle of the Mumbai gunfight, they bought $151 million worth of Indian stocks and bonds. And then in the first 12 days of December, they injected another $524 million into India’s equity and debt markets.

There is a similar pattern for each conflict involving the United States. 

In 14 incidents dating back to the attack on Pearl Harbor in December 1941, the median one-day decline has been 2.4%. The market shocks, which also include the September 11th terror attacks and the 1962 Cuban missile crisis, lasted eight days, with total losses of 7.4%; The market recouped its losses 14 days later.

Similar patterns of decline occurred during several Middle Eastern conflicts such as Desert Storm in 1991, the Iraq War in 2003, and the Syrian Conflict in 2011. Leading up to each of these events, the market dropped, but recovery happened shortly thereafter.

The US figures must be read with the caveat that the US was pitted against less powerful countries and the conflicts were not taking place on American borders, which would have carried a greater risk to industrial capacity and other key economic factors. 

Things would be quite different in case we were to see an escalation of hostilities between India and Pakistan.

Short-term conflicts typically have a short-lived impact on the stock market. As such they shouldn’t change an individual’s investment philosophy or cause one to “abandon ship.”

However, the Indian markets are afraid that retaliation from the Indian side may snowball into a bigger battle and full-blown conflict. 

Major wars fought between India and Pakistan have rarely been a weekly affair. The First Kashmir War started in October 1947 and the ceasefire was declared on the night of January 1, 1949. The Indo-Pakistani War of 1965 was an outcome of skirmishes that took place between April 1965 and September 1965. The 1999 Kargil conflict was two months long (May–July 1999). Only, the Indo-Pakistani War of 1971 was one of the shortest in history as it started and ended in 13 days.

One of the most harmful economic effects of war is a supply shock. A major shock in the supply of goods or labor can severely impact economic productivity. Sources of these setbacks include economic sanctions, manufacturing destruction, infrastructure damage, etc. 

Another typical impact of major conflicts is inflation. This is due to the increase in government spending through various financing methods. While inflation may be good for reducing debt burdens, high inflation has many harmful effects, such as exchange rate impact and erosion of international competitiveness.

From a foreign funds view, of late, FPI/FIIs have been showing some renewed interest in Indian stocks in 2019, after pulling out around $ 5 billion in 2018. Global factors and Wars do impact sentiment and flow of foreign capital to any country including India. While foreign funds know military disputes persist between India and Pakistan, a threat of aggression in the region could hinder the development of the Indian economy and also affect the inflow of both FPI and FDI

A prolonged conflict will have a bearing and will affect the markets considerably, whereas a limited military exchange will help market recover faster.

To put things in perspective, global markets have survived two world wars, Vietnam, the Gulf Wars, 9/11 attacks in the US, and many other military conflicts around the world. In the recent past, India too has survived Kargil, attack on Indian Parliament, 26/11, Uri and many such incidents.

No one likes a war, including markets. But they are part of reality and markets eventually learn to live with them.

As can be seen from the examples, the traditional notion that War can lead to a stock market crash is not true. Long term trend and trajectory of the market is what precedes everything else.

In an interview with CNBC on 3^rd March 2014 Warrant Buffet quoted:

” During World War II the stock market advanced. The stock market is going to advance over time.” What Warrant Buffet was emphasizing is that the longer term trend of the market takes precedence over everything else. Yes, there are going to be short term jerks in the market on news of war, but the trend of the market will take its due course. 

It is tempting to extrapolate past wars and other such incidents like elections etc and predict the course of the Sensex in the next few weeks or months. But in the short term, markets have a way of charting a course of their own and having bouts of volatility due to various reasons, it is the long term and the trend which finally matters. 

For an investor the best thing to do is to look at his investment goal and investment horizon. If long term, don’t panic and continue your investments and SIPs. 

As always, it is prudent to seek advice from an experienced investment professional and advisor, which will help you plan and navigate your own voyage through the uncertain time.

Happy Investing!

Stay Blessed Forever!

Sandeep Sahni

You may contact us at:

91-9888220088, 9814112988

sandeepsahni@sahayakassociates.com,info@sahayakassociates.com

Follow us on:

www.sahayakassociates.in, www.facebook.com/sahayakassociates,www.twitter.com/sahayakassociat,https://www.instagram.com/sahayakassociates/https://sahayakgurukul.blogspot.com

Note: All information provided in this blog is for educational purposes only. They don't constitute any professional advise or service. Readers are requested to consult a financial advisor before investing as investments are subject to Market Risks.