Salesmen hurry you to take a decision!

I recently had to visit a bank and being a long time customer they took me to the manager's room for a quick chat; a chat to get me to buy some new insurance/savings product. Later during the chat I came to know that they wanted to reach their year end targets and so were forcing me to buy this before year end - I guess it's performance appraisal for them and some bonus perhaps!

When salesmen start pitching their product it all sounds rosy; they throw in terms like guaranteed benefits, maturity benefits, assured bonus, regular addition and what not. Even if you say that you will get back to them, they'll say that it will be good to take it right now!

Analysis

Back home, I looked closer into the product - out of the 3 amounts that they promised, 2 are dependent on what they announce at the start of every year! So it's not really a guarantee! Anyway, assuming that it is, I compared of what we would get if we were to take the traditional route: regular fixed deposit (FD) in the same bank along with a term insurance (insurance where you don't get back your premium).

And lo behold - it turns out that even after considering tax deductions on the FD interest, you would still do better to take a FD and term insurance rather than their new product. It confirms to the age old advice I've heard from people who analyze investment products - "Don't combine insurance and wealth generation; keep them separate - take 2 separate products." 

But it is disheartening that many people still buy these products; and those in a lower tax slab will feel a bigger pinch - because the lower you're tax slab, the more money can make by going with the traditional route of FD + term insurance.

I wonder what the salesman would say if I showed him my calculation; I didn't have the time to sit with him, put a spreadsheet and do a comparison in the manager's room. 

Well, I'm still tempted to do it - perhaps he would say that, "This reduces hassles because it is a single product" or perhaps he hasn't given this a thought.

Poem: Primal nature

Long long ago in an age primal,

violence was used for survival,

but even now there is a suppressed animal,

acting on desires that are carnal.

Emotional and impulsive in day and night,

not caring about the other person's plight.

Every action is done without a fright,

even though we are under Someone's sight.

Why do the eyes rave in lust

Why do we find it hard to trust

Why do we treat others unjust

Why do we worry when we're dust?

Why within us does jealousy arise

Why do we deceive with many lies

Why don't we see another heart's cries

Why don't we cherish life like a prize?

Meanings:

• carnal - relating to the body/materialistic
• primal - near the beginning of time

A day in the city - 12 lakhs bedroom!

An interesting day that started out with a movie in the morning. After lunch, the guys said they wanted to go on a long drive. And so we went - we stopped at Loyola to catch up with a friend before going on a loooong drive where traffic cops were surprised seeing us stop for red signals that were not meant for us! 

We covered around 40 kms within the city. A couple of things that made the day eventful. Our last stop was in a relatively unknown mall in the city.

12 lakhs for my dream bedroom!

We saw a Tempur shop - a company specialized in memory foam mattresses and pillows (the ones which regain their shape). My friend wasn't interested in stepping in because he felt it would be expensive. A memory foam foot mat welcomed us. We enquired about the rates and he said about 4 lakh rupees for a double bed mattress. It did feel awesome - firm but soft. You would most certainly have a very good sleep on it and probably less neck or back pain as the posters illustrated. In case you didn't want to buy a full Tempur mattress, they had a top-up version which could be placed on top of regular mattresses - the top-up is thinner version and a single costs just Rs.78,000 or so. After sitting on it and testing it, we left the shop with a determination to buy it someday! It does come with a 15 year warranty and they say it should last for 30 years!

Next stop in the same mall was a Philips LED shop with a tag line that said something like "See what light can do". The ambience inside was nice - one area bright, one area dim like the setting in a bedroom or a home theatre room. On enquiring we learnt that all the lights were LED, they could be controlled and they changed colors. It wasn't just the lights but along with the lights they had glass items like tubes which were used as reflectors to add to create different effects. They provide customized solutions and the setup they had in the showroom cost Rs.8 lakhs. So that's Rs.12 lakhs for my bedroom!

The small things matter

We jumped into a coffee shop that was advertised as being specialists in coffee/tea. But what we found interesting was something else - after finishing our drink, the owner asked us if we wanted anything else. We said no and assumed that they would bring the bill. For 15 minutes we kept talking and there was no sign of the bill. We asked the owner for the bill and he immediately brought the bill - he was waiting for us to ask because he didn't want to interrupt our conversation; giving the customer the bill is as good as asking the customer to leave soon - instead over here they waited till we were ready to leave; we found it touching; maybe we'll visit them again.

What would you do?

Scenario: You did something which is unfair - it gets you 'credit' and leads to someone else missing out on the 'credit'. The other person doesn't know about it. When you are officially given the 'credit', what would you do? Would you own up saying that the credit really belongs to the other person or would you just leave it?

I wondered about it a few minutes after the incident occurred. It reminded me of a parallel - in cricket whenever we see a batsman walk off on his own even though the umpire didn't give him out, we usually feel good about it - you feel happy that the batsman did the right thing because he knew that he edged the ball, he knew the bowler was better than him and he knew it wasn't fair for him to stay.

It's easy looking into someone else's life and commenting on what they should have done; but what would you really do? I think most of us wouldn't own up; and it frightens me that since we don't own up for something that is minor, what if the stakes were higher?

The other aspect is how can you tell what is right and what is wrong? Something that my conscience feels is right, yours might feel is wrong and vice versa. So the person who got the credit might not even have felt that it was wrong; the batsman who nicked the ball, but didn't walk off, might feel that in the grand scheme of things everything will even out. The umpire didn't catch him today but on another day the umpire might give him out even though he wasn't out - the plusses and minuses even out in the end! Do they? Maybe they do, maybe they don't... what if they don't?

What if the stakes were higher? What if your decision to leave the situation as it is, ends up doing harm to the other person who deserved the credit? Do you still consider yourself right?

It is strange how we act and react in different circumstances; anyway, keep pondering... time to hit bed; time to step into the other world...

The 'buy and hold' policy!

It'll take me a while to get into the grove of writing travelogues - so till then, I'll ramble about a few other things.

Recommendations

I was talking to an elderly middle class man who takes care of carpentry work (he employs a few guys) was asking me what stock to buy; it's a little worrying when you recommend a financial investment to someone - especially if they don't have surplus money. What if your recommendation goes wrong? In that case, just because of you someone else loses their money! A frightening thought due to which I hardly give a stock reco; another reason is that without giving such tips, people can't judge whether you are a good stock picker - and when there is no data to look at, they assume that you are very good at it :-)

Buy and forget

So rather than flatly say 'no, I don't give recommendations', I moved our conversation away from that area. He told me about how he he buys stocks and then forgets about it. And then after a few years, he will take a look at his portfolio. And to his surprise he saw that a few companies have completely disappeared from the market! 

It made me wonder about the policy of 'buy and hold'. Does it really pay off? Well, maybe and maybe not - if you had bought an Infosys 15 years ago and forgotten about it, you will be sitting on a nice little fortune today. 

But for every such multi-bagger stock (stocks which increase your wealth) there are plenty of multi-beggar stocks (stocks that wipe out your wealth). I just went back through our stock market index (the Nifty which tracks some of the 50 biggest companies in India) - in 2007 December, the Nifty was at 5900. And now in 2012 December, the Nifty is again at around 5900! 

So that means that if you bought a mutual fund that tracked the Nifty or a combination of stocks that closely resemble the Nifty, then in a period of 5 years your wealth has increased by Rs.0! 

Yikes - alright, I know that a few of you will say "Hey, you can't just look at a 5-year period. Give it some more time." Well, maybe in another 5 years the Nifty goes to 12000 and in that case your returns aren't that bad. But if you take a look at some of the company stocks, you will find that the price of many have gone down by 80% or so - and it doesn't seem like they will ever regain their old highs.

And at this point, those of you who have never invested in the stock market will say, "Gee... this is exactly the reason that I stayed out of the market"!

Anyway, in the end I avoided giving any recommendations and told him to look at his holdings at least once a month to see how his portfolio is doing and take decisions based on that.