Wednesday, February 26, 2014

Foreign Authors

If you ask experts on how to acquire knowledge on personal finance or money, most people would suggest you to read blogs and books on finance. This statement is true. However, they follow this line with: "Make sure you read books and blogs by Indian authors only. Foreign authors do not understand the Indian economy". This advice is rubbish. Personal finance has got nothing to do with the country.

Personal finance is never about comparing yourself with others. It is all about common sense applicable to you and common sense cannot be distinguished by LOC. Some argue that mentality of foreign authors is not suitable to Indian people at large. Foolish advice.

Let me share my own experience. I have read wonderful books like Retire rich by Subramoney, Jago investor by Manish Chauhan, Rich dad Poor dad and Cash flow quadrant by Robert Kiyosaki, Think and Grow rich by Napoleon Hill. The crux of all the books is common sense and power of thinking. Every good book encourages you to think. These books do not teach us about taxation, labour laws, list of stocks listed on NYSE or NASDAQ, criminal laws, etc.. Such things vary from country to country. If you are human, you are governed by same personal finance laws across globe. These laws are start early, compounding will aid you, maintain positive cash flow, avoid debt, PE ratio, PB ratio, expense ratio, index fund, compare insurance with your liabilities, etc.......

India had stock market crash, so did USA.
India has its share of housing bubble, so does USA.
India consumes gold, so does China.
India banks on IT companies, so does Philippines or Brazil (to some extent).
India has chit funds, so does the world

The conclusion I would like to draw is do not get biased based on his nationality or gender. Read all the books and blogs that you think would make a difference to you. Do not think on irrelevant issues like nationality. Happy Reading.

Friday, February 21, 2014

Need for emergency fund -- Response received

I got some feedback on my earlier post Need for emergency fund. This feedback/discussion was with my very good friends. I did not argue with them right away. The reason was simple: I got matter for another post :)

And the winner is:

1. "Viren, tell me how can a middle class person with home loan and car loan EMI, build an emergency fund" By AR.
My take: Ridiculous. I know your cash pattern. Here it is:
You go out for party once in two weeks. This would definitely cost you 3.5k per month. You lend your money to your friends and hesitate to ask it back. I know you are very good at heart. However, this kindness costs you around 1.5k per month. How about the picnics that you go? Would cost you around 1k per month. Total it costs you 6k per month. Yearly, it costs you 72k per month. Need I say more?

The 1st consolation prize:

2. "Viren, I agree with you completely. Emergency fund is absolutely essential. I liked your article. I too maintain my emergency in XYZ instrument. This instrument matures next week. I am planning to upgrade my phone. I really need Galaxy. As I said, this emergency fund really helps in such situations."
My take: My earlier post was complete waste :( Emergency fund is never to be utilised for phone upgrade, pc upgrade, buy tab, go on picnics, etc.... Go get dictionary and check the meaning of 'emergency'.

The 2nd consolation prize:

3. "Why can't I keep my emergency fund in equity mutual funds? Won't I get good returns if I am not supposed to touch it for long period? "
My take: Lovely. Standard deviation and market volatility might have fallen from their chairs laughing.

And the last consolation prize:

4. "Is it really necessary? I mean, I think you wrote that to increase the contents of your blog"
My take: Awesome. What would I get if you DO/DO NOT create emergency fund? I would have considered this response for post MF not via SIP, since this post was born out of personal conversation with my close friend and everybody would not be able to relate it. However, for emergency fund post, your comment is like what we have 'no ball' in cricket.

Prizes end here.

One of my very close friend requested for follow up on the earlier emergency post with more details on the instruments to be used. This was constructive and good. (@US: let me know if more details are needed)

1. SB Account: Saving bank account. Enough

2. FD/Auto-sweep: Bank people may also call it as Term Deposit as you deposit your money for some term i.e. period. It is also called as Fixed Deposit as you deposit fixed amount of money for fixed tenure at fixed interest rate. Hence, premature withdrawal would either attract penalty or loss of interest. Auto-sweep is the facility provided by many banks wherein we can define a certain threshold value of amount. If the money in SB account goes above the threshold then automatically excess cash is considered as FD. Example: you have salary of 30k. You mention the threshold as 20k. Now, at every first of month, you would get a FD of 10k
All banks offer more or less similar interest rate. SBI offers 8.75%, Vijaya offers 9 and so on. Senior citizens may get 0.25 - 0.5% extra ROI.
The best way to use FD as emergency fund is to divide the entire amount in small FDs. Example: you have 1 lakhs, get 4 FDs of 25k each.
Cons: Managing multiple FDs
Pros: If situation demands of 50k, you can simple break 2 FDs and get interest on other 2 FDs. If you have lump sum FD, you stand to loose interest on complete 1 lakh while your need was only of 50k.

3. Liquid Fund: These are the mutual funds which invest in money market instruments. These instruments are treasury bills, CDs and CPs. The maturity of these instruments are generally less than 91 days. This ensures liquidity and safety of the capital as well. If currently, you invest in particular MF, go for liquid fund of that AMC.
These funds do not have exit loads and you can get your money in T+2 days max in your account.

4. Arbitrage Fund: These funds take advantage of the arbitrage opportunity available. Pattu has given wonderful example for this fund:
Suppose price of a commodity is 10 rupees in Mumbai and the same commodity costs around 3 rupees in Thane. Then we can take arbitrage opportunity by buying from Thane and selling it at Mumbai with increased price. Tomorrow if price of that commodity becomes equal in Thane, I do not loose any thing. I simply do not buy it anymore. I then look for other commodities or other places.
These funds invest in forex, metals, commodities, etc..

5. Short term and ultra short term mutual fund: These are similar to Liquid Funds. However, they can invest in instruments with more than 91 days. They also have exit loads and hence may be little less liquid.

6. Debt Mutual Fund: This category is not recommended for emergency funds. However, since I had used it in my last article, I am writing few lines on it. These funds invest in FMPs, MIPs, Bank FDs, Treasury bills, CP, etc.. G-Bond fluctuation can destroy their performances.

Let me know if you find any of the information incorrect or partially true. I would be happy to correct it.

Wednesday, February 12, 2014

Need for emergency fund

Recently on some forum, I saw a person wanting advice if he can withdraw from the GPF for some emergency. I do not know what he did. However, that question made me think about emergency fund.

Photo Credit: Flickr - Eric Flexyourhead

Emergency fund is the most neglected area for majority of people. Here, the majority is from the people who invest money. Those who simply stash their money in SB account, they need not read further. For them, their SB account will act as emergency fund. Investors generally put their money in long term MFs, PPF, GPF. Some may argue that I forgot to mention LIC. It does not matter, I am talking about illiquid products. So you may add LIC to that list if you think LIC is investment.
Several people argue that they do not need emergency fund as they regularly exercise and would not be hospitalized. Now, even though this statement is highly controversial, even if we consider true; still that person would need emergency fund. Please note, it is not for a single person as such. Emergency fund is for complete family. A single person staying healthy in family, need not ensure that all are healthy and would not need emergency fund. (Accidents have got nothing to do with exercises. Viral flues, epidemics have got nothing to do with exercises or jogging or gym)

Moreover, we have got enough examples of people excersising regularly and still dying early. Forget dying, hospitalization  is where you would need emergency fund (in death case, you need insurance). 2 months back, my relative had to operated for 15 minutes and the bill was 30k+. Add multiple followups and medicines to that amount. These days, one week of hospital stay would make huge hole in pocket. Health insurance (if bought) may come to rescue. However, they too have their exclusions, limits, caps and terms and conditions.

For such emergency situations, if you disturb/destroy compounding of your long term investment instruments, then the situation gets worse. Hence, it is always advisable to build emergency fund first and then think about investment avenues.

How much amount should be in emergency fund account is again subjective. Thumb rule is to have 6-8 months of expenses in emergency account. As
Pattu says, in some cases thumb rule sucks, get your own figure.

Next question could be where to park the emergency fund. This list can be pretty exhaustive depending upon one's knowledge in finance and lifestyle.

For the beginners, a simple SB account can be your emergency fund account. Here the interest rate earned would be 4% only. For those who are interested to earn more interest, they can park their funds in liquid or arbitrage funds or bank FDs. We also have short term and ultra short term mutual funds which can be used as emergency funds. Just remember that while selecting instruments, returns should not be the first look out point. Liquidity should be first look out. Liquid funds can be redeemed in T+1 or T+2 days. Reliance has come with a money manager mutual fund and an ATM card along with it. This ATM card can be swiped in emergency situations (Note: SHOPPING is NOT emergency).

Some people choose to park their funds in debt mutual funds. Although, they may give better returns, these funds can be risky than those listed above.

Note: For some people, buying furniture, TV, iPhone can be an emergency situation. For them, I do not have any advice (not that they ask me. LOLs)

Read the response I received on this post here

Sunday, February 9, 2014

Couple Story -- Part 3/3

Continued from Part 2:

Uncle took transfer to the government hospital in son's city and plan had begun.

The sister 'co-incidentally' got job in same company as that of son. Sister made her moves to perfection and son fell in love with her, almost swept off his feet. They got married in few months and she left the job to take care of his house and his parents. The son's parents i.e. couple were impressed with the devotion showed by the sister towards their son. However, they tried counselling her to take job and be independant. Sister thought otherwise, she ought to.

One fine day, sister introduced her friend to the son. This friend was a phsychiatrist. He constantly reminded son about his sins in college and attacked his brain and will power by illustrating how his sins had crushed a young man's dreams, parent's dreams and so on. This frequent conversation made his mind fragile. This is what the sister and doctor wanted. Once the mind of son was on the verge of break down, phsychiatrist planted a theory in son's mind that the couple were not his real parents and they had actually killed his real parents for the sake of money. He was systematically brainwashed to believe the theory. This is also a form of hypnotism.

The plan was to kill the couple with help of son and then reveal the true picture to the son. This was their revenge. This could ensure that son died daily thinking of what he had done.

Once, the son was on doctor's (aka uncle) side, the rest of the plan was simply a cake walk. The daughter in law (aka ragged boy's sister) brought kerosine can from the doctor and hid it in couple's home. She then asked couple to check what was in that can. Unsuspecting couple, opened the can to see what was it. This got their finger prints on the can. Wooden stick which belonged to the couple, was used by the doctor for evidence. He brought an unclaimed women's body from morgue and beat it with that stick. Rest all was managed by doctor's false report, watchman's testimony and son's statement against the couple. The so called dead victim or the daughter in law
was found by police in doctors house. 

All these facts along with the signed confession of doctor was presented before the same court and judge. Judge was shocked to see the facts and thanked ACP for his dedication for achieving justice and his keen eye for criminals. The revised judgement was:
  • Couple to be set free immediately. 
  • Son to be in jail for abetment of suicide case (college case reopened) and abetment in crime. 
  • Doctor was ripped of his degree and was to spend 10 years RI in jail. 
  • Victim/sister/daughter in law too had to accompany the doctor in jail for 10 years. Watchman was caught from his home town and was supposed to give doctor and sister company for next 5 years. 

Everybody understood that revenge is the dish better left un-eaten. Revenge in cold blooded plans or in spur of movement always have repercussions. Though couple felt relieved after the judgement, the also felt the grief for their son who was supposed to spend next 10 years in jail. They could not complain, they knew the reason and sympathised with the sister.
Case was closed, the ink pen nib was broken :-)

Thursday, February 6, 2014

Couple Story -- Part 2/3

Continued from Part 1:

The judge on the basis of statements given by the doctor, watchman and the couple's son, pronounced the couple as guilty.

Judge asked if the couple had to say anything. The husband said, if their son thinks that they have killed their daughter in law, they have nothing to say. Considering the age of the couple, the quantum of sentence was 10 years of rigorous imprisonment. The media rejoiced. The people were celebrating the punishment meted out to the criminals. Every newspaper highlighted how our country too can deliver speedy justice. Every media channel showed all the history of the judge, public prosecutor and defense lawyer. Every citizen hoped that such speedy justice would deter potential criminals from doing anti social activities.

One of the newspaper captured a photo of watchman, doctor, public prosecutor, son of the couple and an unknown man celebrating the verdict outside the court
premises. Although, they were quick to walk off their own paths, the damage was already done.

ACP Gokhale while having his morning breakfast and tea, happen to get a glimpse of the photo in newspaper. In all circumstances, this photo would not have
rang a bell in ACP's head. However, he could not understand how on earth can a son celebrate his parent's judgement. 

ACP Gokhale is much like Om Puri of Gupt movie (if you have not watched Gupt movie, don't be bothered to watch Bobby Deol). When he is on duty, every other
case bothers him. He has minute details of all the cases that happen in his jurisdiction. In no time ACP got into this case. ACP's thought process was why would son say to the victim that 'we would talk when i return home' when his wife was beaten, why did his own police force act in haste and how the CCTV could not capture the couple's movements.
ACP was sure that there was more to the picture than what was visible to the naked eye. 

However, he was not sure from where to start. He first tried to speak to the building watchman but he was absconding and untraceable. ACP decided to get to the truth from either the doctor or from his own men in uniform. He knew, it was easy to make doctor talk the truth than his own hardened men. In no time, the doctor spilled the beans. ACP need not go to the third degree methods. The coldness of the revolver on his forehead was enough for the doctor to realize that ACP meant business. It was also clear that ACP's business would draw curtains on doctor's plan. Now the complete picture was clear. ACP himself was surprised by the amount of planning that these people had put into. Below is the confession of doctor:

The story goes back to the days when the son of the couple was in college. Son had beat a new comer in his college under the cruel practice of ragging. He then went ahead and humiliated that boy by taking calling entire college around and laughing on him. The trauma of beating and humiliation took toll on that boy's mental fitness. Next day he commited suicide. Son paid handsome money to the policemen and got the case closed as suicide due to over burden of studies. His parents died of shock. His younger sister got a permenent mental scar. She was raised by her uncle who happened to be a doctor in rural 
hospital. Although, both the uncle and sister lead a normal life, every minute was spent in thought of revenge. While all this happened in remote place, media did not get the news of it.

To be continued in Part 3 (last part of the series).

Monday, February 3, 2014

Remove waste time in a transaction

In load testing, we all start and end transactions to measure the time of particular activity. 

For example: We may invoke HDFC netbanking site. Enter User name and Password. Now, we wish to measure how much time does it take to login and then click on View Mini Statement link. What we would do is, insert Start Transaction just before hitting the Login button. Click on the Mini Statement link and insert End Transaction.

However, in real life, we may have to insert few validations on the page viewed after Login i.e. before clicking Mini Statement link. We may wish to check that the correct person name is being shown, Welcome message is displayed, Mini Statement link is available, etc.. All these validations will eat up some micro or milli seconds of time.
Hence, the transaction timing noted would be combination of actual transaction and time spent in validating few strings.

If, we want to measure actual time, Load Runner has provided below approach (from Wilsonmar).
Double time_elapsed, duration, waste; //Variable declaration
Merc_timer_handle_t timer;
timer = lr_start_timer();
// Do all the validations
time_elapsed = lr_end_timer(timer); //Calculate wasted time
waste = time_elapsed*1000; //Convert milliseconds to seconds
lr_wasted_time(waste); //Remove wasted time

Saturday, February 1, 2014

How to create database in VSTS 2010

If you are using VSTS 2010 for your load testing project then, you got to create database for your testing.

Traditional load runner users like me knew that, once the scenario is ready, we just have to click on start button and give the path where we want to store the results. However, people developing VSTS thought that we must have some adventure while storing results. So in VSTS, mandatorily we will have to create SQL database and then link it with VSTS. We would have to give the path of the database instance to the VSTS and then the VSTS would store the results in that database. Ufff...

So now, we go and download SQL Server 2008 R2 version (Can somebody smell cross-selling?). Install the SQL Server. Here, restarting the machine may be optional, but since it is MS product, I suggest you restart your machine.

Fortunately, the script to create database and valid tables is given by the MS along with the VSTS installation. The file name which contains this script is by below name (note the extension): loadtestresultsrepository.sql

Path: <>\Microsoft Visual Studio 10.0\Common7\IDE

Open command prompt and navigate to the path where the sql script is stored. In command prompt window type below line and press Enter:

Cd c:\Program Files\Microsoft Visual Studio 10.0\Common7\IDE

After this, you can see that the cursor in command prompt points to the IDE folder. Now, we want to run the sql file from this IDE folder. Hence, now type below line and press Enter:

SQLCMD /S localhost\sqlexpress –i loadtestresultsrepository.sql

Here, the localhost implies the name of the computer like MYMACHINE001. Database schema by name LoadTest2010 would be created.

Some times, we may get error on executing SQLCMD line. In that case remove ‘sqlexpress’ word.

SQLCMD /S localhost –i loadtestresultsrepository.sql

This should work.

Now, go to VSTS 2010. Click on Test menu and select Manage Test Controller link. Another pop up should open. Beside the edit box for connection string, you can see small box with 3 dots on it. Click it. In next pop up, give server name as localhost i.e. MYMACHINE001 or localhost\sqlexpress (depending upon what worked for you). Click Refresh button. Use Windows Authentication. In connect to database dropdown, select LoadTest2010 option. (If the LoadTest2010 option does not come, repeat all the process again). Click on Test Connection button, you must get Success pop up.

If that too does not work, come till step of selecting LoadTest2010 option. There click on Advance button. In that pop up, you would get list of settings. In that, select redirection setting (last one). Make it false (if it was true).

Now, if that too does not work, go to load test settings. In Storage Results, select None. This would enable you to continue testing, however, you will have to save the results manually. In parallel, raise Microsoft ticket.

Note: All this information was collected from the MSDN forums and help files. This worked for us and in all probability, should work for you as well.