By - Carfar1592
Just curious, what is your freelancing gig about ? And how to get started ?All the major freelancing sites are overcrowded with a billion profiles with zero gigs !!
Feel free to ignore this question in case if it is too personal for you
If you are good in some subject, try freelance tutoring websites. They pay you to solve questions. Its one of the few good things you get out of prepping for JEE, engineering and domain specific exams. Add to that the knowledge of computers, where you use software and scripts to automate most of the repetitive tasks.
Any specific site?
Coursehero, Chegg, Bartleby.........they were booming during COVID times when learning went online and hence handsome payments. Now, its all normal again.
Go 100% in equity because actual allocation to equity in NPS for Central Government employees is around 11%.
If you have adequate health insurance (don't bank on CGHS), you need to have emergency fund of only around a lakh or so at max.
Don't forget to enjoy your life. I mean, there is no point being filthy rich in old age when you can't enjoy anything. So be kind to yourself too. Don't deprive yourself too much. You will regret it.
Also, marry if you find the right person. Don't set anything in stone.
Thank you, they are some words to live by.
"pyar ko pyar hi rehne do koi naam na do" - Extended courtship
Anyhow, the moderate choice (LC 50) in NPS, which it claims is 50% equity, 30% Corporate bonds and 20% Govt. bonds isn't 50 % equity? Are you sure because I recently changed my scheme from the DEFAULT choice and Pension Fund Manager too, just for equity. I was willing for LC 75, but they don't allow so.
Can't find it right now. But the fund managers had not crossed 15% as per that article. Maybe NPS trust will have the data. And LC50 means equity is capped at 50% till age 35 and then it goes lower. In reality, most of it is debt.
Found it, its on their website
"*The contribution of all the Subscribers is invested in this default scheme. In the default scheme, the contribution is allocated to three PFMs, viz. SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited in a predefined proportion and each of the PFMs will invest the funds in the proportion of 85% in fixed income instruments and 15% in equity and equity related instruments.*
I thknk u havent experienced cghs at all. Cghs is the bets thing my father left for my mother from his govt job. It is far more superior than any insurance that market has to offer. Only caveat is that you to a rrputed hospital wiyha cghs rrferral and there is practically no medical expense for life.
Any rationale behind choosing only small cap funds? This is not the right time to take a sectoral bet, in my opinion. Better to buy a large index.
Bro I'm Opinion it's the best time to buy small cap stocks , because markets are down, and we get good companies with cheap valuations.
You're right in that they're more elastic to market moves, but in times of a recession, large caps have much more ability to weather the downturn and gain market share. Not saying there'll be one, but with the infusion and the rate increases, this is why I've got a portfolio that is overweight on large caps.
Picking individual small cap stocks is out of my skillset.
I am sure I can't beat the market consistently, and am not satisfied with index returns either. So small cap funds are a compromise between doing your own research (and hence dedicating the limited priceless time) and getting index returns. Also, I played safe with my career, it only makes sense to diversify by risking someplace else.
Worrying about the right time is kind of timing the market, a straight no no. Also, I don't believe small caps are sectoral. They are considered the broader market.
On a lighter note, I have masochistic tendencies, and what better than small caps to do that to you. (F&O guys laugh)
Thanks for explaining your approach. If you're not happy with index returns then there's not much to convince otherwise.
For those other than OP who are on the fence on smallcap, do consider reading this
Good to see someone else following Charlie Munger other than me. I love that quote a lot and can relate to it as well. Our 1st cr was tuf, but then the next 5 was a breeze. I wish the markets do their magic in the long run like they have done so for the last 100 years.
>now wish to go all in on small cap funds,
Trust another fellow public sector employee here.
Not all small caps sir, I first have to exhaust 80C and additional NPS contributions, which is about 1.75 L large cap. Add to that a 10 percent fixed income for rebalancing and emergencies.
After that, even small cap funds are only 65 percent small cap in reality.
What do you suggest?
Why not index investing (india/US/Europe/China) with say 80% of the remainder of the funds (after 80C, NPS etc removal) and 20% into risky asset classes such as crypto and small caps?
Because for the next 7 years or so, I can take as much risk as I want, as a free man with no responsibilities.
No crypto, banned by conduct rules regarding speculation.
I would say that small cap funds (and not stocks) are like FDs when compared to crypto. Have to say that crypto is a great psychological trainer.
Good to know you have same stance on crypto like i do being a public sector employee... That throws derivatives out of the window too .. small caps needn't necessarily rebound at all .. So putting everything there is risky
P.S : not a certified financial advisor!
Timewise will you still be able to continue working freelancing? You can't work or have a business in your name anymore but you can do it under a parent's or spouse's name.
Not much to advise you at this point. Looks like you already have everything sorted. If you are investing more than 50% of your basic in equity, you are required to inform your office.
Btw you can choose the aggresive option in NPS. Under this you start with 75% equity allocation which reduces as you age.
Central government employee cant choose aggressive option under nps in tier 1 account.
What you are referring is the civil service conduct rules, 1964. But they are rules, often not enforced. I bet you that none is even aware about that 'informing your office rule'.
I for now have given up freelancing. I have the head-start and working just for more money isn't worth it anymore. Plus, its unethical.
NPS caps equity to 50 percent for govt employees.
Why don’t you invest in passive index funds? And once comfortable with direct equity (provided you know what you’re doing), shift to stock investments.
Have done that for 3 years and I believe that small caps is the space where actively managed funds beat indices hands down.
No direct equity, because I know I cannot beat the market return, and have absolutely no desire to do so. That time will be better spent enjoying art and philosophy (movies, games, eroticism etc).
Provided you pick the right fund. Which is a gamble.
I had invested mostly in active funds, but shifting fully to passive low expense funds now.
Best of luck to you :)
How are you handling the taxation? Shifting in steps so that you don't hit the annual exemption limit?
Or are you so done with actives that you don't mind the tax?
Shifting in steps for now to avoid taxation. Getting rid of the worst performing first. The market downturn seems to be a good time to shift
If you are moving from one equity fund to another, how much does the market trend matter?
Since the markets are moving sideways, getting in at similar or lower market levels is achievable
You are earning very handsome amount being a government employee. I also recently change my fund manager under nos tier 1 to hdfc bcz after some research i came to realisation that uti and lic give abysmal returns over a long time.
About small cap, i think small cap funds correct 30 to 40 percent in just 2-3 months and u can't trust any mutual fund house for long term to perform well in small cap. So u should have 40 percent allocation towards large cap for stability. For rest 60 percent u can allocate 30 percent to small cap and rest 30 to flexi cap. As age is on your sode, I won't suggest you for debt fund and sovereign gold bonds. You should go 100 percent to equity as investment.
I wouldn't trust a government appointed fund manager either. We are insiders and we know how the work culture at these organizations is. Any inefficiency is indicated in the returns.
I too moved to HDFC.
I am not worried about the corrections of small caps, and not the fund house either. Invest in a fund segment, and not the fund. Equity is chaotic, and the same fund cannot top each time.
I think the mid caps and small caps inherently need to have some component of large caps as mandated by SEBI.
So do you have multiple small cap funds?
How did you select them?
atleast two, negatively correlated
To the OP, how much is the NPS contribution per month? I guess it is posisble to deduce this from the salary, but an explicit number would help.
I wanted to put that question first. I am impressed by the discipline that you have shown already and the clear thoughts. This would help you, much, much more than any level of income!
10 Percent of your (Basic + DA) contributed by the employee which is a part of the salary, 14 Percent of your (Basic + DA) contributed by the government, which is NOT a part of the salary.
Add to this the voluntary contribution to NPS, which is an instant 20 percent return.
Overall, this comes to about 20K pm.
What is the voluntary contribution to nps with instant 20% return that you speak of?
section 80 CCD 1B, that instant return depends on your tax slab
So the additional 50k nps contribution translates to 20% return? You mean the 20% is your tax bracket and you are saving 10k in taxes? Would you care to elaborate?
I am in 20 percent tax bracket. I invest 50K in NPS, which reduces my taxable income by 50K, thus reducing my tax liability by 10K. Thus, 10K/50K=20%
Any thoughts about having multiple small cap funds?
100k is not a crore. In the US 2M is like decent FIRE corpus, so if 100k was 1cr then in India you would need 20cr to retire. I would imagine 100k is a bit like 20L.
Yup. 100K USD is like a year's salary for alot of IT folks in US. Their median income is 60K. So based on that 20L is a good estimate.
A pure PPP calculation agrees with this too. $100k = INR 22 lakh
Wow! Thanks :)
The way inflation is running havoc, I feel we should directly equate 1mn usd = 10 cr inr if you want same standard of living like the US of A.
10 crore INR can comfortably get you a lot more than 1 million USD as of 2022.
The US has gone bat crap insane in the last two years with food inflation, delays everywhere, extremely unreliable transit systems (including flights), and the crazy housing and rental markets.
I just got back from a trip to Mumbai a few days back, inflation in India is nowhere near as bad as the situation on the ground in major US cities (real inflation is way way worse than CPI numbers indicate, mainly due to housing and travel costs).
Just visit tier 2 cities in UP or even Tamil Nadu (Coimbatore) ..life there is so peaceful cheap and with nature.
With all the chaos in USA, western countries now, it seems many would come to this realisation soon.
PS: I'm living in a western country.
A good meal in India is still 1 $.
Rent for a room in the premium places is still under 150 $
Car prices in India are way higher than US and Europe.
Cost of good quality food which is at par with food quality of developed world's is higher in India.
If we want an Indian life then 10cr is more than sufficient. But if we want to lead the life of a person from developed country then the cost for that is nearly equal to the real thing.
At the end of the day, personal finance is, well, personal. So I can't say much for your perceived conversion ratios, no matter how much I disagree with them.
I can definitely say that you might be a bit unrealistic in comparing or expecting a like-for-like lifestyle when you move countries. Even if it's from one developed nation to another. Eg. US and Canada houses will be much larger than most of Europe. Same for car sizes. Medical systems, city walkability / suburban sprawl etc. differ dramatically too.
You also might wanna reevaluate that food argument when you do visit India again, assuming you're an NRI. There are excellent organic and local produce options in most Indian cities now, for much more reasonable rates than in the past. Nature's basket for me was equivalent or better, plus much cheaper for non-imported goods, than my local NJ organic market.
Same argument for car prices, electronics etc. Imported stuff is much pricier, yes, but local equivalents are functionally perfectly adequate. Most FIRE adherents do strive for simple and fairly minimalistic lifestyles, unless of course you're aiming for FatFire (which is the "personal" bit in personal finance, tbh).
(Source on the home sizes bit: https://homescopes.com/average-home-size/)
>The US has gone bat crap insane in the last two years with food inflation, delays everywhere, extremely unreliable transit systems (including flights), and the crazy housing and rental markets.
Mass shootings too.
I guess the quotes need to be adjusted for inflation as well.
You’re killing it.
I hate mutual funds. Go ETF route. If not India market then US exchanges, US indexes or world indexes up to you. Recently set up a USD, US exchange account for a parent living in India. Used interactive brokers. Mutual fund fee is horrible. Those blood sucking buggers should get an extra paisa from your wallet.
It appears that you aren't aware of the etf situation in India. Mutual funds remain the best option for buying indices and other equity baskets in India owing to the etf market which often simply does not track the underlying instrument in its price action.
Read up psychology of the money. Don't go all in small cap. Be diversified.
Charlie also says tell me where I will die so I will not go there. From investing perspective small caps are the place to die during bear markets. If you think you will have the conviction to keep investing with discipline every month in them when they show deep red in your portfolio and exiting during bull market phase then go ahead. But it's extremely difficult todo this else the whole world would invest only in smallcaps.