@Wolf, Thanks for the suggestion. I have been writing and rewriting replies before coming here to post it. This post is to mainly to show the situation from my perspective. May be it includes fears, pre-concieved notions and such.
Inflation rates in india:
I am bit reluctant to invest in stock market over 15% of my overall portfolio. There are many reasons for it,
- The financials of the companies are vague at best. Its not entirely reliable. Eg., Scams related to Ramalinga Raju + Satyam& Harshad Metha.
- Dividend yield is not very reliable. At most I get 1% return from the dividends. I don’t want to touch the principal during my withdrawal period. Comparatively my tax advantaged accounts yield 7-8% yield.
- Lack of role models who has done it already , as no one in my personal circle invests mainly in stock market. Few do trading or mutual funds but not for long term wealth or dividend investing.
- I don’t want to put too much energy and research into an area where it’s totally not in my control with.
What drives inflation in India?
Increasing necessities.. Eg., Water – 15-20 years ago we didn’t buy water or purify it. We got it from the rivers or corporation or well and just drank it. We did not face any health issues due to this. Now that is no longer the option. We have to purify the water due to pollutants and not having the same sweet ground water as the water tables have gone down.
Competition for the same product population. ( Eg., Rent in the area nearby office four years ago for a 2BHK is 12K , now its 40K. For the same resources, we have to compete with more number of people. )
Taxes.. Taxes.. There is an increase in tax on everything we buy, around 8-20% even though the tax is less than many other countries, it do add up.
Medical Inflation- The medical inflation has gone up. I don’t have any data to back it up. It’s more of a personal experience. Eg., Doctor fee during 10 years ago is along Rs.100 per session now its around Rs.500.
Easy credit. When we were kids, my parents don’t have that much easy credit as now. Home loan is the only loan with most people can get. Right now personal loans , car loans are a norm. So it does drive up certain prices up.
Black Money. This mainly drives the real estate prices unrealistically as this is one of the main asset class to hide money. Even though reforms are coming, yet to see how effective it is.
So thats long, I am mainly looking for opportunities outside the stock market. Right now invested some money in my dad business and getting 12% return for the loan. Any thoughts or suggestions are welcome.