Algo Trading in India |
  • December 19, 2019
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Credit card.

I have a friend who earns Rs.20,000 and spends lavishly with credit card. He buys expensive stuff just because its on OFFER. By the end of month, he calls other friends for money to pay debt. That’s utter stupidity. When I ask him, he says he is living life.

Think about it, why do credit card company exists? Its not because of people who use credit cards carefully, its because of those who spend more than they can afford and end up paying a huge interest.

Buying apartment with home loan. As soon as someone starts making decent money like Rs.50,000+, they start thinking about buying apartment. They get blinded by marketing strategies like “don’t pay rent, pay EMI”, like EMI is same as rent. Home loan is a biggest liability and you will get trapped for the next 20–30 years while Artificial Intelligence eats your job.

Till you pay the loan, it is NOT YOUR HOUSE. It is bank’s house. Agreement may have your name but it is legally owned by bank. You are the tenant who is renting bank’s home. Don’t agree? Stop paying interest for few months, you will understand.

Appreciation. If you buy individual house its value may increase in future but we can’t say the same about apartments. And stop saying that I bought an apartment for 30 lakhs, 10 years ago and today its worth is 1.5 crore. Unless someone is ready to give you 1.5 crore RIGHT NOW for your apartment, it won’t worth much. Its all just some fancy numbers you keep saying to yourself.

If you want to buy house, buy with your own money. My current salary is not enough to buy house, what should I do? Well, then make more money. Who is stopping you?

Buying home will put you in endless spiral of expenses. Wood works, decorations, big size LED TV, surround system, sofa, dining table, cot, etc., Believe me there are people who buy car just because their apartment comes with parking spaces.

Another reason i hear for getting home loan is to reduce tax. There are so many ways to reduce tax. Most of those options give you amazing returns like investing in ELSS (more than 10% return). But many choose home loan, here you are giving return to bank. Of course you can reduce tax, but there are lot of limitations and you are still going to spend a lot of money in interest. Other than taking risk on home loan why not take risk in investing in small cap funds which gives more than 20% returns? If you invest wisely you can buy home with your own money (may take some years of course) without breaking your back.

Buying car. Unless you are a millionaire or if you travel A LOT, car is a worst financial mistake. In long term, you are going to lose a lot of money in car. And driving car in metro cities is worst nightmare and don’t get me started with parking

I have a family with 2 kids. Car is necessary. Well, my grandparents had 13 children, guess how many cars they had? ZERO. We are not living in 1800’s. Its 2017, there are so many transport options like cycle, two wheeler, cabs, metros, volvos, trains, flights, etc.,

Buying expensive gadgets. I know a guy who makes Rs.30,000 per month and bought a headphone for Rs.23,000. People this stupid shouldn’t be allowed outside. If your colleague bought expensive phone, it is not necessary for you to do the same. If your salary is 2 lakh/m, it is OK to buy iPhone worth 60,000. But if your salary is 30,000/m and if you buy iPhone worth 60,000, you may call it as living but I will call it as being stupid. We all know phone these days are made to last for 2 years. After that it gets heavily outdated, battery backup goes down, phone will become slow, etc., now you think about buying another phone. It is like rat race.

Health, health, health: This is not exactly a financial mistake, but health has big impact on finance. Lets take a successful IT employee. He own 3 BHK apartment worth 2 crore and drives high end sedan. This will be his daily routine. He wokes up at 7.30 AM, brush, bath, breakfast, get ready, take lift and gets down to parking, get in car, drive to office, take lift, go to his cabin, sit in his chair and start working, eat lunch, work, drink tea/coffee, work, by 7 PM he winds up his work and takes lift, gets down to parking, get in car, drive back to home, take lift, get inside home, sits in sofa, watch TV, eats dinner, social media, goes to sleep. Next morning, same routine. He may be successful in this job, but health wise he is doomed. Many successful people live their life without even a tiny amount of physical activity. Worst, Physical activity is just a part of the story. Another part is junks we put inside our body. Pizza, burgers, chemical filled foods, fried foods, fast foods, etc., They are nothing but poison. We put them inside our body without second thought.

Your money may buy car or house but not a healthy body. Take care of your health now or end up paying crazy hospital bill. One thing I can say with 100% guarantee is that Sedentary lifestyle + Junk foods = Cancer, heart disease, diabetes, BP, knee pain, etc.,

More points:

  • Rs.1 lakh invested today in small cap mutual fund will become Rs.30 lakhs in 20 years.
  • If you invest the money you spend on car or home loan interest in Small cap mutual fund (return more than 20%), in future you can use that money for your children education and wedding.
  • To reduce Tax invest in ELSS, not in home loan.
  • Start a mediclaim insurance as soon as possible (things we eat these days without doing any physical activites).
  • Remember, every year thousands of people default their home loan and banks put those houses for auction (you will find that info in newspapers).

Home loan

  • Everyone needs roof over their head. I want a house too. Everybody does. But I prefer buying it with my own money so that I won’t be putting myself and my family in financial risk. Though it may take some years, I personally find it as the wisest thing.
  • Liquidity. A house may be a good asset but when comes to liquidity it is the worst.
  • Interest rates are going down and my salary is increasing. Well your expenses also increasing. To be exact your expenses are also increasing a lot, like parent’s medical expense, children’s expense (and their future), inflation, your health, etc., To give you an example when you are 25 years old you need to pay Rs. 5000 per year for mediclaim insurance (5 lakh coverage). But for some above 70 it is 25,000 per year.
Author –  Ashok Ramesh, Intraday Trader

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