Bungee jumping and Investment


I am sure all of you know about Bungee Jumping and am also sure that some of you must have tried it as well. It is an activity and you can feel the flow of adrenaline.
Some people call it a sport. This is for a very short duration.
The bungee jump involves, jumping from a diving platform with the ankles of the diver, firmly tied and held to a spring. As you jump from the platform, you fall by gravity and as you reach the bottom most point, you are pulled back by the spring force and you go up. On reaching a higher level, usually below the platform, you fall again and go up. This process gets repeated and slowly you stay at the lower end, where you are guided to the nearest landing point with help
What are the forces at play while doing a bungee jump?
There are three main forces at play. 
1. The gravitational force, which pulls you down as you jump
2. The force the spring provides which helps you from not falling and also enables you come up. 
3. The force or the resistance offered by air. 
But for the air resistance, you can keep going up and down. But the air resistance, acts on the spring force and reduces your ascent back every time when finaly the fall and climb ends. 
The important thing is that when the gravitation force does positive. work the spring does negative work and when the spring does positive work gravitational force does negative work. All the time air resistance does negative work.
This is akin to Your Portfolio appreciating or depreciating but inflation always does negative work and erodes the purchasing value. Your portfolio has to do super positive work to over come inflation and grow 
click on the link, to read more about the force 
This is classic conversion of potential energy to kinetic energy and back. 
But why we need to know this and what relevance it has got with investing. 
Market is a place where people buy and sell goods or services. In stock market, people buy and sell shares or other instruments. There is difference in perception of the buyer and seller and hence exists a price difference. 
Like three forces exists, In a market there exist
a buyer, a seller and volatility 
Appreciation, depreciation and inflation
What you buy may appreciate or depreciate in value depending upon the market forces
There are basically two energies on display. 
The potential energy, the height from which the jump takes place and 
The kinetic energy which is either due to the gravity or the spring force. 
However the level of energy gets reduced for every movement due to the air resistance
Markets see that  the stock prices or NAV of a fund, move up and down depending on the energies which is the momentum on selling side or purchasing side. And the air resistance is similar to inflation and does constantly erode growth in wealth.
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See how some stocks have done bungee jump in the last one year
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Who can do bungee jump?
Anybody can do bungee jump. 
a. IN bungee jump, there is a trainer who guides you and helps you, take the jump and also land safely after you finish your jump/
This is similar to an advisor, who guides you through the process of investing and enabling you to reach the goal or the destination. 
b. You get to experience the ups and downs and the resistance offered by air. You get to see the world with a different point of view. 
While staying the course of investing, in order to reach your goal, yet get to see all the risk, volatility, momentum and performance at play. 
c. Your behaviour is controlled and your are disciplined during the jump. If you can exhibit a similar discipline and behaviour in investing, you are sure the winner. 
d. Fortunately you dont get to hear any noise during the jump as you are isolated from the media. Avoid noise from the media while investing. 
e. More importantly you have to indulge in the activity to gain and like wise, you have to invest to create wealth. 
d. When to jump. 
You cannot take to bungee jump, whenever you feel doing it. It depends upon the weather, the time of the day, availbility of the trainer etc.
Follow the 5W 2h process in all activities you do
What, why, where, who, when 
How and the new one you add is ” How Much”?
I am your trainer and do contact me for the experience of bungee jump in investing. 
Varadharajan VS

Heads I win! Tails you lose!!


The subject says it all and that is what every investor expects.
Before that let us read a small story. This story is a little old when not much transportation was available.
A man set out on a long journey, say dream journey, to fulfill his goal and starred the journey with all preparations. The story should be read keeping in mind, that the travel is not modern day travel, but by walk. He was very happy and made quite a progress and stopped midway to rest.  His journey was also very smooth. He just turned back and looked at the path he traveled. To his surprise he saw two pairs of foot prints on the pathway. He was very surprised, as to,  who was the other person following him. He was worried and shouted as to who was following him.  A voice, answered him.  “It is me” , God  said and continued that he has been with him.  The man was very happy to know that God was with him and that he need not worry.
After the break, he set out again on his journey and this time, the journey was not very smooth. He faced lot of problems some being trivial to some being severe. He got tired of facing and overcoming the problems. He once again stopped to take rest. This time, he looked back to see the path, he traversed. This time he saw only, one pair of foot prints. He got shocked and thought God had left him and that is why he was undergoing all the problems, he had been facing. He shouted and asked “God. Where are you? ”  God answered him and said that he was very much with him.
The man then, asked, if that is so, why only one pair of footprint.  God replied, ” The foot prints you see are of mine”.  You were very tired and exhausted midway. I had to carry you on my shoulders and that is the reason why you see only one pair of foot print.”  The man realised and thanked God for being with him throughout.
Sometimes, while investing, many an investor, feel their portfolio, showing positive returns, as the market goes up and are very happy to see that growing every day. At that time, they think, it only due to the market and no effort of any body else is involved.
When the market comes down, they see their portfolio, come down or in the red, they think of the advisor and some even blame him for choosing bad stocks or funds.  They follow the headline statement.
Tails I win!  Heads you lose!!
But the investor advisor relationship has to be like the relationship as mentioned above and the advisor stays with the investor till the goals are realised. He handholds, the investor when needed, discourages emotional decision and encourages rational thinking. Have faith in your advisor, trust him.
In dynamics, the law of motion says
V = U + AT
the relations ship between the advisor and you as an investor is
We  = You  + Me too
All the advisor does, make your travel like travelling in the mumbai suburban train.  Either to board the train or alight from the train, you need to be in the right place at the right time. The crowd take you in or out of the train.  If you are at the wrong place, you will be thrown out of the train, in a destination, which was not your intended one.
Have a safe investing journey.
Do stay in touch.
varadharajan VS

Kaju, Kismiss & the Dilemma


This is about a leading company, in India making innovative products and their latest innovation was a new machine.
It was called “The Rat killing Machine”.
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This is a very simple machine. The rat in search of the food comes to the position as shown in the picture.
It is drawn into the position by attracting with kaju (cashew)  at one end and Kismiss (Raisins) at the other end.
It turns its head, looks at Kaju and then Kismiss and when it does three or four times, its head moves against the blade and gets killed.
This company is a established firm and good sales team and launched the above market to be a pioneer and market leader. Initially the sales was very good and over the years, there were lot fo competitors who could produce this cheaper and the company was losing share.
The sales team wanted the company to make a low cost machine so that it can increase the sales based on the price.
The company did come out with a Rat Killing machine (Economy Version)
This machine is the same as the earlier version, except that there is no Kaju and No kismiss.
The rat comes to the same position as it is used and finds that there is no Kaju and No kismiss and like in the earlier case, after three or four times the rat gets killed.
Though this works on the principle that every one falls for a bait and given options, are in a dilemma and unable to choose one of the options.
We as investors are also perennially in a dilemma
Is it Kaju or Kismiss?
Is it a bull market or a bear market
Is it Kaju or Kismiss?
Should I buy or Sell?
Is it Kaju or Kismiss?
Should I buy Debt or Equity?
Is it Kaju or Kismiss?
Should I buy equity funds or Direct Equity?
If we keep pondering over the situation, we will always be in a dilemma and never invest.
Like the rat gets killed, the value of our money will get killed by inflation.
Dont try to time the market. Rather the time in the market.
We all know that
A = P ( 1+ r/100)
We constantly worry out r the rate of return than  n the no. of years.
A small “r” with a big “n”  will earn much more than a birg “r” and a small ‘n”
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Be different. Think differently.  You can create wealth.
Start your investments today. Do contact me.
Varadharajan VS

Inventory & Investment – Don’t spend money. Use it!


What ever is bought with money needs to be monitored and managed. You cannot manage if you don’t monitor it effectively.

Both inventory and investment are bought with money and how they help you earn returns is measured. In inventory, the  turn over of the inventory or the rate at which the inventory is rotated is a measure. Many traders and distributors operate on a thin margin of as low as 2% and rotate the inventory multiple times with the same capital to maximise their returns.

Similarly, Return of Capital employed is a measure and this for investor means Return on Investment ( This is the sum of capital appreciation and dividend earned)

Inventory management is an important one in all organisations and also households.

Though inventory is counted as current assets, it will become a liability if not managed effectively.

We don’t buy anything because we have money.

Understanding of Inventory Management 

Let us understand how inventory is managed.

There are different control mechanism and methods in managing inventory. At least you can count 9 important ones.

The most common ones which we can look at are

ABC analysis

VED anallysis

FSND analysis

ABC analysis.

This is done based on valuations of the individual parts. Generally 20% of the parts constitue 80% of the total value of inventory and major attention is given to manage the parts of high value which are known as A. The least value items are classified as C

In the second one, VED analysis, the classification is done based on importance of the part. A part which is when not available, can halt a manufacturing process, or difficult to get, and a combination of these determine its vitality and Similary, E is essential and D deisrable.

This analysis supercedes the previous one, as it is on vitality and not on price.

The FSND focuses on the rate of consumption of the parts whether they are fast moving, slow moving or even Dead inventory.

Understanding of Portfolio management

Like wise when you do an investment, do you review your portfolio.

VED analysis.

Construct a portfolio and identify the stocks you must hold, which are vital for the portfolio.

This may vary with individuals as the investment horizon, objective and risk tolerance would vary.

 Having too many desirable stocks, compromising on vital stocks, may lead to lower portfolio return.

 This is normally done, drilling down sector wise and picking the stock that you must have in your portfolio.

For example, you may identify L&T in the capital goods sector which could be vital for you, Siemens could be an essential stock and stocks like, VA Tech vabag or carborandum universal could be desirable one.

2. FSND Analysis

 Though this cannot be adapted like inventory management, identify stocks which are not performing well and see no scope but you have in your portfolio.

 Some of you may still be holding Jayaprakash associates, Unitech, Indian overseas bank. Which or either dead or recovery would be very long. These are Dead and D in the FSND technique.

 FSN, can be us can also be linked to the ability to liquidate  the stocks at the earliest, large caps, midcaps will have a great liquidity. There are few illiquid stocks, like Benares hotels, which is a TATA group stock and trading thing. Depending on the return, liquidity and availabilty of capital

3. ABC analysis

 Unlike in inventory, this is redundant. Our primary focus would be earn return and reduce risk and reduction of risk done using diversification.

But generally investors have myth and that is stocks which are over say Rs. 1000 are costly and stocks less than 100 or even 50 are cheaper.

 Bajaj Finance moved from 4000 in April 15 and is now at 10000 though it is trading trading at 1000 after bonus and split.

Have ABC in relation to the value the stock offers and not the price.

 Therefore to sum up, use the grid below and pick your stock.


Summary & Takeaways

Know what you want to do with your investment.

Clarity of purpose  and clarity of action are

There are three types of assets

A appreciating asset which creates wealth over time

A depreciating asset, which depreciates your investment, but does not erode the wealth.

A dead asset, depreciates and becomes a liability. Know what you have, monitor and manage it

It is possible you may not know and understand the above. Have a chat with your advisor

Do contact me for any clarifications.

varadharajan VS


Catch this “Snake”

Just wanted to share this story.

Once there lived a businessman. But he lost lot of money in the business ventures and became bankrupt. He was under pressure from his lenders and was not able to bear the pressure or pay up. He prayed hard to God for money so that his problems could be solved. This did  not happen but he continued praying.

He decided to commit suicide and one day he bought  a bottle of poison after deciding, that was the best way to die, that night. He however decided to sleep that night one last time and die the next day morning as it would not make any difference.While he slept that night he  had a dream.

God appeared In his dream and told him that he wanted to help him. He asked him what he wanted. The merchant told God  he wanted  Gold and money so that he can clear his loans and start a new life. God told the merchant that next day morning when he wakes up, he should go to the backyard of his house,where a small garden was there. He will see a snake coming. All he has to do is to catch the snake. Once he does his problems would be solved. Stating this God disappeared.

The merchant woke up the next day and remembered the dream and what God had told him. He wasn’t sure. But decided to go to the backyard. After some wait he saw a snake coming from one corner. As things were happening as per dream now he had to go and catch it.

He was still not sure of the dream and secondly he was scared to go near the snake. Time was ticking. He was in a dilemma but the snake was moving from one corner to another. Still nothing happened and time as running out.

The snake by now had crossed the garden and slowly started entering a hole near a tree . Still the merchant was scared and unsure. The snake was on its last leg and had almost entered the hole.

Now the merchant mustered courage and decided to test what God had told him and he rushed to the hole near the tree. As he neared the hole the 6 feet long snake had entered completely except the last few inches of the tail. The merchant put his hand and caught the snake’s tail.

Guess what happened??

The inches of the snake’s tail turned into Gold. He was surprised and very unhappy. He thought,if only, he had caught the whole snake he would have got more Gold which could have rid him of all problems.

Now, what has this to do with our investing?

Most of us, while investing, we behave like the merchant. We want the best but we are scared. I remember this quote

All investors want to do today what they should have done yesterday” – Larry Summers

Some the lessons we can infer from the above story

a. There is a risk to every reward. This does not mean that high risk will always yield high reward.

b. Even if God, says something, we don’t have faith. Therefore it is human not to believe or trust the advisor who gives you options.

c. We always want to enter the investment at the end of the cycle, when we should not be entering and blame our luck.

d. Don’t time the market. Time in the market is very important.

e. More importantly act. Start early to get the benefit of time invested, or the power of compounding.

f. Have a financial goal.

g. Review at least once in a year.

If you follow the above guidelines, you can also be a “Midas, with the Golden Touch”

Please do contact me for any assistance to build your portfolio


varadharajan vs


Demonetization – An investor’s view point.

Greetings of the season. It is 10 days since the announcement of demonetization of Rs 500 and Rs 1000 notes was announced by our PM. Life has changed for all of us in the last 10 days and we get to see, read and hear so many information on the subject which are both for and against demonetization.
However, a major decision, like this would have been made after careful thought and at this stage, there is no looking back on this. We have been reading about the effect of this and who stands to gain or lose on this.
I am not going to broach on this aspect. However, I thought, what this decision, offers to us, as investors. I enclose with this a one pager, where I have tried to capture the effect of this into four buckets. Basically have done a SWOT analysis. Strength and weakness can be read as positives and negative effect of the decision. Please read this and do contact me for any clarification.
Most Important.  Don’t panic. Stay calm. Educate yourself and take an informed decision.
Now how you are likely to be affected as in investor.
a.  FD rates will come down. Some banks have already cut the fixed deposit rates. This is mainly due to the inflow of approximately 2 lac crores in the banking systems till yesterday. This reduces the income for people who are dependent are interest income.
These people can consider moving to debt funds, which can give around 2 to 3% more than the bank FD. These are not exposed to equity markets and are relatively safer.
b. You can see considerable drop in the post office savings rate, which is adjusted every quarter. You can see upto 0.5% drop in PPF, NSC, KVP rates. For investors, who park their funds, in PPF for future, can consider ELSS funds, which give the same tax benefit, higher returns and lower lock in.
For your information, in the last three decades, the FD rates on an average has been as follows.
1981 to 1990————- 10.5%
1991 to 2000—————11.525% ( Crisis in 1991, 1997,2000)
2001 to 2010 —————6.6% as the rates touched a low in 2004 to 2007
2011 till date —————7.26% and is likely to come down thanks to inflation and demonetization.
c.For investors, who are willing to take minimal risk, MIPs could offer a good entry point now and in the next few months, whereby, the market rise in the next two to three years could be rewarding.
Please note that the India Growth Story is intact but this is a correction.
d. For equity investors in both direct equity and mutual funds, this gives a great opportunity to invest
However before you choose your instrument for investments, please go through my mail on Investment ladder, ascertain your risk capacity and risk tolerance and invest accordingly.
As always, I am available to help you choose the investments. Do contact me.
VS Varadharajan

Investment Ladder – Use REF LIST to climb it.


It is always a difficult decision to make, whenever you want to invest your money. Many a times, we are influenced, in our decision making, by our friends, well wishers and relatives. Sometimes, the investments are emotional and spontaneous.
I thought of putting a structure so that, one can use this as a guideline before making an investment.
I have written earlier about the REF LIST but it is worth while repeating this.
R –  stands for Risk involved in the investment. Risk means getting not what you expect.  For example if you expect a 10% and get 8% even then the instrument carries Risk. Mostly we are not worried about the reduction in returns, but alarms us when the return is negative. In the above example if your investment instead of generating a positve 10%, the capital is down by 2% , it is a negative risk.
In risk – you must know the risk, willing to take the risk and must have the capcity to bear the risk.
Just see the picture below with the ascending risk levels.
see attachment investment-ladder
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Risk and Volatility
There are few instruments which give assured stable returns.  Like FDs, NCDs, Government securities.
Any assured income which is paid at the specified rate is deemed as interested and taxed  as nominal income. It is added to your total income.
Other returns may not be same, it can vary. The degree of variation is measured as a volatility.
Risk, in equities is there in the short term and generally there is no risk, if invested over a long period of time, say, 7 years and above.
News about any organisation may be increase or decrease the risk and the returns in the short term could be volatile.
E – stands for Exit options. For all investmennts, you must know when you want to exit. If you don’t know this, you may be making a mistake and could lose the capital. If you are investing for a duration of one or two months, you should not be investing in an equity fund. As any volatility in the markets in the two months, could reduce your capital.
Also you must understand if this is closed ended fund or an open ended fund. You cannot exit a closed ended fund or redeem it unlike an open ended fund, as the name implies, it can be redeemed any time.
Next thing you must keep  in mind is the penalty or exit load, which you have to pay, in case you redeem before the maturity period or any other period as specified by the instrument.
F- Stands for flexibility.  This is a facility for one to add or reduce investment amount to the initial amount invested. If one invests one lakh, he may want to withdraw say only 10 thousand for an emergency and not the full amount and want to put it back.
Also this gives facility for parking unexpected surplus funds like, Bonus, incentives etc to the investments.
L –   Liquidty is the time frame you will get credit of funds from the time you redeem or sell your investments. You can close your FDs and get the money credited the same day. In liquid funds, it happens the next day, known as T+ 1 and most of the other funds it is T + 3.
Real estate is very illiquid as you cannot sell it that easily and the get the money. While you can pledge gold easily and take loan, you cannot sell it easily unless you sacrifice on the price.
Closed ended mutual funds can be sold through stock exchange. But they suffer from two important factors, liquidity – ie very poor volumes of trade and more importantly the price.
I – stands for income or the returns we get out of the investments. Though it is said that the higher the risk, higher the returns, it may vary. Your knowledge about variability of returns is important.
IN the picture above, the risk, generally correlates with the income or return positively. It means the higher the risk, the higher the returns.
All of us want the highest returns possible with zero risk and immediately.
S – Safety is denoted with S and normally it is more, if the risk level is low. In the picture above, FD is green in color, because it scores high on safety whereas equity investments are less safe as they are risky in the short term.
T –  Tax efficiency of the income. Some returns are taxable, some returns are treated differently and one can get tax effcient return. Given below is an example where debt funds score over FD. This is just ot make one unerstand indexation and not for any thing else

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Understand the various investment options available.
Know the investment ladder.
I have mentioned to the extent possible about each instrument using REF LIST
In case you don’t understand this mail, no problem, pick up the phone and call me.
Varadharajan VS