DON'T RETIRE RICH

Wednesday, 24 November 2021

CRYPTO BOMB

"Srikanth Sir, why did you never suggest us putting money on Crypto?"

This is a standard question I get from many of my YOUNG clients

My standard response is "Anything which is attracting your attention only because of its PRICE movement and not because of its UTILITY and Usefulness does not deserve your hard-earned money. If you still want to go ahead...invest only that money which you are ready to lose 100% "

 

 

THE BIRTH OF CRYPTO :

𝐎𝐫𝐢𝐠𝐢𝐧𝐬: Crypto (rather Bitcoin) was born in chaos, in the aftermath of the 2008 financial crisis – banks collapsing, counterparties abetting on contracts, and declining trust in Central banks. It was designed as a peer-to-peer decentralized monetary system devoid of intermediaries.

And gradually it grew worldwide mainly because Govt could never find who owned Crypto coins and this made people with ulterior motives (Terrorists, Drug Traffickers, Crime Syndicates, and Black Marketers) adapt Crypto and promote them

 

The anonymity of the Holder is the biggest attraction of CryptoCurrency.

 

 

WHAT IS MONEY :

Money has 3 purposes. It serves as:

A medium of exchange

A store of value

A unit of account

 

While CryptoCurrency is definitely a unit of Account

whether it’s a medium of Exchange or a Store of Value is a question mark

 

It’s not yet a medium of Exchange because Govts all over the World do not want to let go of their hold to print money and are hostile to the CryptoCurrency.

(For example, RBI would not let its hold to let of printing Rupee)

 

It’s not a Store of Value because it’s very volatile

Going up 1000% in a month

and

equally crashing by 99.99% within 10 minutes !!!

 

 

And to create Crypto, technology is used, and this uses loads and loads of energy.

In fact, BITCOIN CONSUMES MORE ELECTRICITY THAN ARGENTINA.

 

 

SHOULD I INVEST IN CRYPTOCURRENCY:

Any investment for that matter should always be done on 3 parameters

1. Risk

2. Return

3. Liquidity

 

 

 

RISK :

What is attracting loads of people to Crypto is purely the Price Movement and  Risk is definitely the least item on their mind.

In fact, RBI Governor and even Indian Prime Minister too have warned about Crypto Currency and advised people at large to be careful about putting money in CryptoCurrency.

 

You would have read many news items of CryptoCurrencies being lost due to THEFT from the Digital wallet, Computer Failure, even loss of passwords.

Yes...if you forget your password of Bitcoin then that money is GONE FOREVER as getting a password is next to impossible.

 

I am reminded of the incident of one Mr.Stefan Thomas

Thomas lost over 200 million dollars because he has forgotten the password to his secure hard drive that allows only 10 attempts.

 

RETURN :

You get a return on any asset when the underlying either produces something of value or grows in value due to its utility.

Sadly, CryptoCurrency is just a digital token.

Shares have underlying companies which make products and services and generate profits.

Bonds have borrowers and lenders

Gold has intrinsic value

Metals have usages.

 

CryptoCurrency has NO UNDERLYING ASSET and get this basic fact CLEAR in your mind.

The price is going up...well...because of Demand (feeling of limited supply).

Once this false notion goes...the pain could be unimaginable.

 

 

 

 

LIQUIDITY :

Constraints on liquidity

Lack of legal tender status will constrain cryptocurrency liquidity compared to traditional portfolio hedges such as Commodities (Gold), Currency, Bonds, or real estate.

Any asset that can generate cash for you is said to have liquidity.

Some like Bonds, Gold, Stocks give instant liquidity

Some like Land, Art gives you delayed liquidity.

And I always give liquidity priority on how quickly I can get money when there is emergency or a crash.

 

In this case, even though land appears illiquid, still you do get cash even if it is some discount to its perceived value (if you sell in a hurry)

Sadly, Crypto Currency right now faces the issue of finding a GREATER FOOL to pass on the egg to.

This is due to variety of reasons like regulation, limited reach and shallow understanding of Crypto Currency.

 

 

UNREGULATED :

Crypto Ads are here, there, and everywhere

The ads clearly show that Investing in Crypto is UNREGULATED.

What this means is, in case if something goes wrong with your buy or sell trade, no one....I repeat, no one be it SEBI, RBI will take your complaint and help you get back your investment,  as Crypto is Unregulated.

Is Crypto Currency regulated?? ....NO!!!

You want to invest in something where there is no one to go to in case of a fraud?? NO...right. Then stay away

Moreover there are 6000 odd varieties of crypto Currency and 1 getting launched virtually every day.

and even as former RBI Governor Raghuram Rajan said..."only an handful will survive" which means more than 5990 Crypto Currency could become ZERO and who knows the Crypto Currency could well be the one which could go down all the way to Zero.

 

Crypto Currency is as unregulated as your next-door CHIT FUND which take money from people and vanishes. There have been too many scams involving Crypto Trades.

 

Yes....scams are there even in stock markets. but at least we have SEBI, RBI, Finance Ministry who get involved and help the investors.

But where will the Crypto investors go?

Whose door they will knock if there is a scam?

 

China has already banned all forms of Crypto Currency in September 2021

More and more Governments will probably go on to make Crypto Currencies illegal or very expensive to deal with in practice.

 

 

 

CANT PASS IT ON:

Like your land, mutual fund, FD or any other investment, Crypto Currency CANNOT be passed on to your dear chosen nominee after your death, except by handint it over yourself, which you cannot do if you are dead. This is because Crypto Currency has a Cash-like-feature.

 

 

ACCEPTANCE :

BITCOIN NOT YET ACCEPTED

Someone said Bitcoin is now accepted at many places!

Seriously?

after 10 years of launch, out of 6,20,907 restaurants in USA, only 6,20,822 DO NOT ACCEPT Bitcoin, and you call this Acceptance !!

Just ask your servant whether he wants payment in Rupees or Gold or Bitcoin.

 

 

IN CONCLUSION :

 

Just because more and more Retail investors are putting money in Bitcoin does not mean it’s should be made legal.

 

In fact, right now there are more Crypto Traders (10 crores) than Mutual Fund investors (6 crores)

Does that mean Crypto is good?

For them, I have a question

Just because you find more WINE SHOPs than YOGA CENTRES does that mean WINE SHOPs are more beneficial than Yoga Centers.

 

If you do want to put some money as every Tom, Dick and Harry is putting money in Crypto...then PUT ONLY THAT MONEY WHICH YOU ARE READY TO SEE IT BECOMING ZERO. Do not put your parents Hard Earned Money into this Tamasha.

 

 

Having said this....Cryptocurrency could become legal going forward and could come under regulation but till then I follow the principle of A BIRD IN HAND IS WORTH MORE THAN 2 IN THE BUSH!!

 

For me, BITCOIN is a game of GREATER FOOLS THEORY.

Someone buying only in the hope that there will be another person who will PAY MORE for it and this cycle as long as its running the dance goes on. Its just trying to find the next big fool.

The day fools end, the bubble bursts.

The moment the music stops we may well see LOTS OF BLOOD on the street.

 

Yes...some people have made money in Crypto Currency

People have made money even in Casinos

People have made money even in Races

That does not make Casinos and Races a place to INVEST.

They are good for Gambling. The same goes for Crypto Currency.

Crypto Currency is good for GAMBLING and not for Investment.

 

I rest my case.

 

 

Regards,

Srikanth Matrubai

Author - Dont Retire Rich

 











All the best,
Regards,
Srikanth Matrubai
MUTUAL FUND DISTRIBUTOR
REBALANCE VOLATILITY CERTIFIED COACH
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH


You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

 
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on Amazon. https://amzn.to/3cHUM6M/ 

You can purchase the book on Amazon and Flipkart 

For the best of ideas on where to invest to create Mountains of Wealth 
join my TELEGRAM channel
WEALTH ARCHITECT
    https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/

Monday, 22 November 2021

PGIM INDIA GLOBAL REAL ESTATE SECUTIEIS FUND OF FUND


Looking to take exposure to Real Estate?
Then consider REITs !!
REITs offer part ownership of Rent Yielding Properties. 


PGIM India has come out with an Exotic fund named PGIM INDIA GLOBAL SELECT REAL ESTATE FUND OF FUNDS

The name *REAL ESTATE* will clearly catch a lot of investors attention and *GLOBAL* is quite fancy these days

With this heady cocktail, is the fund worth your hard-earned money?

Let's try to understand

WHAT IS REIT?

REIT is Real Estate Investment Trust, which is similar to Mutual Funds wherein the money is pooled and invested in Commercial Real Estate Assets. REITs earn rental income from their properties, which is distributed to the Unitholders.  So, while MF invests in Stocks, gold, bonds, etc, the underlying asset in REITs gets invested in actual physical Real Estate.

Exactly similar to a Mutual Fund, REIT too will have a Sponsor which establishes a Trust.

REIT thus is a company that owns, operates (finances in some cases) Real Estate producing Rental Income and possible Capital Appreciation. 

SO, HOW EXACTLY DOES A REIT WORK : 

1. A REIT (like a Mutual fund) collects money from Investors.
2. These monies are invested across Rent Generating Properties.
3. The REIT collects the Rent
4. The REIT distributes the Rent to Investors via periodical Dividends.
5. The Capital Value is reflected in the NAV


In India, there are 3 REITs listed on Stock Markets namely
Mindspace
Embassy
Brookfield



PGIM INDIA will invest in PGIM GLOBAL SELECT REAL ESTATE SCHEME (PGSRES) fund which in turn will invest in multiple REITs across the Globe including the USA, Europe, Japan, Australia,  etc giving exposure to high-quality rent-yielding properties across geographies. 

And since it's a FOF, unlike a typical Real estate, liquidity will not be an issue.

We have covered REITs and their methodology in our earlier article. (please read the same for a better understanding of REITs)



HOW WILL AN INVESTOR MAKE MONEY :

1. The money you invest in this fund will be invested in the parent fund which is called PGIM GLOBAL REAL ESTATE SECURITIES FUND (PGRESF) which is also a Mutual fund
Now, this parent PGRESF will then REITs wherein the underlying asset get returns in terms of RENT
2. Further these RENTs increase annually
3. The underlying assets of REIT being land could also see a rise in capital appreciation resulting in increased NAV 
(albeit over the long term)
4. REITs have to distribute 90% of the rent but PGIM GLOBAL REIT being a Mutual Fund does NOT have this obligation and thus the rent received keeps getting accumulated and reflected in the NAV. 

TAXATION : 
The fund will be treated like a Debt fund investment. 
Meaning, holding above 3 years will give Indexation Benefit
Holding below 3 years will mean taxation at your slab rates. 




WHAT'S GOOD : 

1.
Owning Real Estate is a challenge both financially and in legal hassles, REITS is an easy simplified asset class to own the same without owning it Physically.
Investing in REITs fund for long term is a good way to have an exposure to REAL ESTATE 

2. No Lock-In

You as an Investor can enter or exit the fund as per your wish and convenience, unlike an actual Real Estate which has its own problems thus making it very very liquid. 



3. the Best way to have exposure to Real Estate. Affordable as you can buy a fraction of the property by buying just a few units


4. Real Estate is one of the Most non-transparent asset classes and this fund being a Mutual Fund is the MOST TRANSPARENT way to have Real Estate Exposure.


5. PGIM REIT fund will be investing in Different Geographical locations and mostly in Rental generating assets, it offers Investors a Good Diversification Option. 




WHAT’S NOT GOOD :
 
1. Typical Real Estate Industry Issues like a Bear Market could affect Capital gains

2. The Average Rental Yield may become unattractive due to Covid effect of Work From Home resulting in low office demant

3. Since the fund will invest in REITs that are further listed in Stock Markets, the typical demand/supply mechanism could affect the price of the listed entity and it could be quite volatile. The returns WILL NOT BE IN 1 STRAIGHT SINGLE UPWARD LINE!

And Short-term performance could be awful.
In fact, in the US, Dow Jones REIT Index fell 17% in 2007 and 39% next year!



IN A NUTSHELL, 
Investing in REIT is like investing in a combo of Equity and Fixed income.
Though it has more or less a stable return in form of regular dividends, it also has price volatility in stock markets too.
In fact, in the US, the REITs have been MORE CONSISTENT in delivering top performance than even the S&P 500.
In fact, FTSE Nareit All Equity REITs have beaten Russell 1000 Large Cap Stocks by a good margin even over a 30 year period. 


SHOULD YOU INVEST?

1. The records show that in the US and other developed markets, investors invest in REITs not to beat the Stock Market but for regular income as by Law, REITs have to mandatorily payout at least 90% of their net earnings as Dividends.

2. REITs, although listed, do not always move in the same direction as the stock market as the underlying asset is Commercial Real Estate and thus provides Good Diversification.


3.  REITs in India invest in Commercial Real Estate but this particular fund PGRESF invests in across the category of Real Estate like Healthcare, Warehouses, Server Data Centres, Logistic Centres and thus truly diversified. 

4. The fund could also benefit from Rupee Depreciation as typically Rupee tends to get depreciated vis a vis Dollar

There were earlier offerings from Kotak MF and Mahindra Manulife MF in the same category but they were restricted to the Asia Pacific and this particular PGIM Reits fund invests across the United States (59%), Japan (12%), UK (6%), Australia (4.5%), etc


5. The parent fund PGSREF has given a CAGR of 7% in Dollar Terms since inception. 


6. REITs come in between Equities and Debt and must have a place in All Portfolios. 

Low Correlation with Equities, Diversification across Geographies, Visible Cash Flow to underlying investments make PGIM India Global Select Real Estate FoF worth considering 

7. Most important.......
Returns could fluctuate as the REITs are listed in Stock Markets and various factors including demand/supply of securities could affect prices resulting in a volatile NAV. 
so, Not to be co




nsidered as an alternative to FIXED INCOME. 



INVESTMENT EXPERTS ARE OF THE OPINION THAT INVESTORS LOOKING FOR A SAFER AVENUE TO PARK THEIR MONEY (COMPARED TO EQUITIES AND ACTUAL REAL ESTATE) CAN CONSIDER INVESTING IN THIS FUND
INVESTORS ARE ALSO ENCOURAGED TO LOOK AT THIS FUND MORE AS A DIVERSIFICATION TOOL THAN AS A WEALTH CREATION TOOL

BTW, the Fund has NOT invested in China 

REQUEST YOU TO PLEASE CONSULT YOUR ADVISOR BEFORE TAKING ANY DECISION ON INVESTMENT
THE DETAILS SHARED ARE OUR OPINION ONLY AND SHOULD IN NO WAY BE TAKEN AS A RECOMMENDATION 



All the best,
Regards,
Srikanth Matrubai
MUTUAL FUND DISTRIBUTOR

Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH



You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

 
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on Amazon. https://amzn.to/3cHUM6M/ 

You can purchase the book on Amazon and Flipkart 

For the best of ideas on where to invest to create Mountains of Wealth 
join my TELEGRAM channel
WEALTH ARCHITECT
    https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/

Sunday, 21 November 2021

ALL YOU WANTED TO KNOW ABOUT REITs

Namaste,

Real estate is something every Indian understands well and like Gold, that Attachment for AT LEAST 1 OWN HOUSE (EK GHAR TOH CHAHIYE)  is at the zenith of every Indian's heart.
And REITs seem to be a good alternative for those who cannot afford to invest big time in Real Estate.

Buying a REIT is the most transparent way to own Real Estate for a Lay Man.

 

 


 

 

 

WHAT IS REIT?


Real Estate Investment Trust, is more popularly known as REITs.
It is similar to Mutual Funds wherein the money is pooled and invested in Commercial Real Estate Assets with the intention to generate FIXED INCOME through monthly rent to be received from Tenants.

REITs earn rental income from their properties, which is distributed to the Unitholders.  So, while MF invests in Stocks, gold, bonds, etc, the underlying asset in REITs gets invested in actual physical Real Estate.

 

Exactly similar to a Mutual Fund, REIT too will have a Sponsor which establishes a Trust.

Since the earning is from RENT, which can be monthly, quarterly, Half Yearly, or even Yearly, REITS pay, typically, dividends on a Half-Yearly basis.



SO, HOW EXACTLY DOES A REIT WORK : 


1. A REIT (like a Mutual fund) collects money from Investors.
2. These monies are invested across Rent Generating Properties.
3. The REIT collects the Rent
4. The REIT distributes the Rent to Investors via periodical Dividends.
5. The Capital Appreciation (of the Property owned by REIT) is reflected in the NAV

 

 

Regulations in India mandate that these REITs have to pay out 90% of the distributable Cash Flows to the unitholders. 

 






And REITs are supposed to have a minimum 80% in COMPLETED AND INCOME GENERATING real estate properties. 


So, REITs allow lay investors to have exposure to High-Quality Rent Yielding properties that would otherwise be unaffordable.

Yes, REITs are also listed in Stock Markets and traded like any other Equity Shares and hence have no liquidity issues which a typical Real Estate will face.

SEBI came out with a list of DOs and DONTs for REITs way back in 2014 and in the US, REITs are in vogue for quite a long time and more than 300 are registered and about 40,000 Commerical Properties in the US are owned by REITs !!


In July 2020, Mindspace Business Parks came to the public to collect money for their REITs.
This was the 2nd REIT issue to hit the Indian Markets after Embassy Office Parks.
Later, Brookfield came out making it 3 REITs in India which are listed and can be traded. 

 

 

 

 

BENEFITS OF INVESTING IN REITs

 

 

 

 

1.
Owning Real Estate is a challenge both financially and in legal hassles, REITS is an easy simplified asset class to own the same without owning it Physically.

2. No Lock-In

You as an Investor can enter or exit the REIT as per your wish and convenience, unlike an actual Real Estate which has its own problems. You can even sell the REITs in the Stock Markets making it very very liquid. The REITs will be listed on both the NSE AND BSE



3. the Best way to have exposure to Real Estate. Affordable as you can buy a fraction of the property by buying just a few units


4. In addition to the Dividend returns, there is scope for Capital Appreciation which will be captured in the price of the listed unit of the REIT.


5 . Since REITs are mandated to distribute 90% of the surplus distributable Cash Flow, in form of dividends there is a good scope for Regular Income. 

6. Real Estate is one of the Most non-transparent asset classes and REIT aims to reduce that as it is regulated by SEBI and will be managed by Professional Managers (just like Mutual Funds)


7. DEBT ALTERNATIVE
A good alternative to Fixed Deposits and Bonds as the returns in REITS are more or less assured due to regular rents.

7. GEOGRAPHICAL DIVERSIFICATION TOO:

Since REITs will be investing in Different Geographical locations and mostly in Rental generating assets, it offers Investors a Good Diversification Option.




 

 

WHAT’S NOT GOOD : 
 
1. Typical Real Estate Industry Issues like a Bear Market could affect Capital gains

3. The Average Rental Yield is not very attractive in India at present (at about 5% to 8%).


4. Since REITs are listed in the stock markets, the demand/supply mechanism could affect the price of the listed entity and it could be quite volatile. They are not steady and flat. NO Sir!
And Short-term performance could be awful.
In fact, in the US, Dow Jones REIT Index fell 17% in 2007 and 39%  in 2008 though recovered subsequently!

 

 TAX ANGLE :


1. Dividends were supposed to be TAXED IN THE HANDS OF THE INVESTORS but later a change in the Finance Bill 2020 was announced post covid outbreak wherein DIVIDENDS EARNED FROM REITs WILL BE EXEMPT IN THE HANDS OF THE UNITHOLDERS.

Thus, The dividends received from REIT are tax-free. 


2. Short Term Tax (sold within 3 years) is 15% of Gains


3. Long-term tax (sold AFTER 3 years) will be at 10% of Gains.


4. Dividends received will be ADDED TO THE INCOME OF INVESTOR AND SHALL BE CHARGED TO TAXED AS INTEREST INCOME

Point No. 1 The amendment, however, clarifies that the DDT exemption will be given only for the companies which have not migrated to the new corporate tax regime.

 

 

The dividend portion of the income from REIT being non-taxable lends a significant advantage to a retail investor.

 

 


 

SHOULD YOU INVEST?

 

Please note that REIT is NOT Real Estate.
It is also not to be considered as an alternative to Real Estate.

Investing in REIT is like investing in a combo of Equity and Fixed income.

 

Though it has more or less a stable return in form of regular dividends, it also has price volatility in stock markets too.

 

In fact, in the US, the REITs have been MORE CONSISTENT in delivering top performance than even the S&P 500.

 

The records show that in the US and other developed markets, investors invest in REITs not to beat the Stock Market but for regular income as by Law, REITs have to mandatorily payout at least 90% of their net earnings as Dividends.

 

REITs, although listed, do not always move in the same direction as the stock market as the underlying asset is Commercial Real Estate and thus provides Good Diversification.

 

 

 

Investors should consider looking at REITS only if they have a time frame of 5-7 year plus and more as a Diversification tool.



 

Regards & All the best,

Srikanth Matrubai,

Wealth Architect, SRIKAVI WEALTH

 

  

 

 

 

 

Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on

 


You are strongly encouraged to consult your financial planner before taking any decision regarding this investment.

The views expressed here is the authors personal views and should not be interpreted as a recommendation to invest/avoid.

 

 







All the best,
Regards,
Srikanth Matrubai
MUTUAL FUND DISTRIBUTOR
REBALANCE VOLATILITY CERTIFIED COACH
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH


You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

 
Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on Amazon. https://amzn.to/3cHUM6M/ 

You can purchase the book on Amazon and Flipkart 

For the best of ideas on where to invest to create Mountains of Wealth 
join my TELEGRAM channel
WEALTH ARCHITECT
    https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/



Many gettting confused about Dividends
LETS LOOK DEEPER INTO THIS



In India, REITs often own property assets indirectly through Special Purpose Vehicles (SPVs). These SPVs contribute to the REIT’s income by paying out their own income (from rent and other sources) to the REIT as dividends. If any part of the distribution you receive from your REIT is in the form of a dividend, then it may be taxed in two ways:

  • If the SPVs from which the REIT receives dividends have not opted for the new concessional regime (under section 115BAA) on corporate tax, then your dividend from the REIT will be tax-free.
  • If the SPVs from which the REIT receives dividends are paying a lower rate of corporate tax at 22% instead of the standard rate, then you will pay tax on dividend from the REIT at your income tax slab rate.

To decide whether the dividend part of your REIT’s distribution is taxable therefore, you will need to find out if the SPVs of the REIT have opted for the concessional tax regime. Most REITs, thankfully, provide this disclosure in their investor relations section. Both Embassy and Mindspace REIT have clarified that their SPVs have NOT opted for the concessional corporate tax regime. Therefore, the dividend part of their distributions is tax-free in your hands. The above tax changes were brought in, in the 2020 budget when the Dividend Distribution Tax regime for companies and business trusts was done away with, and replaced by a system that taxed dividends in the shareholders’ hands






.Taken from the PRIME INVESTOR website which has clearly clarified about the dividends on REITs


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