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Yes. Buying Health Insurance protects Your Wealth, not Health.

For the past few weeks, I have been doing quite a lot of research on finding the Perfect Health Insurance Policy. And my research has led me to one simple conclusion.

That there is no such thing as the Perfect health insurance policy. Ofcourse there are good policies. And then, there are few great policies too. But there is no Perfect policy out there.

So should I (or for that matter anyone) avoid buying one, just because I am not able to find the perfect policy?

The answer is a big No!

It is the same as the idea that one should invest, even if you cannot beat the stock markets.

 
Health Insurance Protects Wealth
 
Now what exactly is the ‘Perfect’ in this Perfect Health Insurance Policy?

Atleast for me, a perfect policy would cover all the diseases (including critical ones), should offer unlimited renewals, have hassle-free claims procedure, no co-pay clauses, no hidden clauses which I might easily overlook, no caps on room rent, fees or anything, no disease-level or category-level caps, provide lump-sum amounts in case of critical diseases, etc. And ofcourse, it should not be very costly.

Though I can easily get into my preaching-mode and say that health insurance is not an investment, the fact is that I will still love to buy a policy that is cheap and offers me the world. The money I can save because of the low cost of the so-called perfect policy can be redirected towards investing for the long term.

By the way just to put it on record, I do believe that health insurance should not be treated as an investment or a tax saving instrument. Period. You might still get tax benefits for buying health insurance in India, but that should not be the primary reason to purchase it.

Now you might have already found a policy that meets all the above-mentioned criteria of a perfect policy. But I am yet to find my perfect policy. Or maybe it exists and my definition of ‘not-very-costly’ is different from other people. In any case, I have moved on and purchased a policy which might not be perfect, but is still good enough.

The point that I am trying to make is that even if a policy passes on 7 of the 10 parameters you set, then you should buy it. Don’t wait for too long and try your luck.

This brings me to the topic of the post.

How can health insurance protect your wealth? I mean, isn’t health insurance something which one buys for health?

Yes it is.

Before we move forward with our discussion, please think and answer the following 3 questions:

Q1: Will buying a health insurance help you stay healthy?

Q2: Will not buying a health insurance, result in your poor health?

Q3: If not for health, then why am I even bothered about this whole concept of health insurance?

Got it?

I am sure you have the right answers. But for the sake of making this post look complete, I will tell you the answers to first two questions.

And the answer is NO for both.

Buying a health insurance will not help you stay healthy.

Not buying a health insurance, will not make you unhealthy.

Wasn’t that obvious?

And now when you think of it again, it might seem strange that you never buy health insurance for good health. And to be brutally honest, majority of people buy it for tax benefits!!

But I am telling you…. One visit to a hospital without health insurance and you are sure to realize the importance of health insurance! I have seen it happening and it can be ugly. Really ugly.

So…

What exactly is this Health Insurance?

Simply speaking, it is an insurance coverage that covers the cost of an insured person’s medical and surgical expenses. So when you buy a health insurance policy, you are paying a small premium now, so that you don’t have to pay large hospital bills (if any) in future.

That’s it.

Health Insurance is neither a tax-saving product nor an investment. It is just a contractual promise by the health insurer, to pay a part or all of your hospital bills in case there is a need. Though there are many clauses and terms and conditions that govern this contract, we can ignore them for the sake of keeping this discussion simple.

So the whole point is that you don’t want to pay the large hospital bills. And rightly so. Who wants to pay them? No one.

But let us suppose that for some reasons, you don’t buy health insurance. And unfortunately, you get hospitalized and the bill to be paid is Rs 10 lacs. Now your health is not insured. So there is no one to pay the bill, except you. So you end up paying the bill by liquidating fixed deposits, selling shares, gold, etc.

The result is that you lose a major part of your wealth that you had accumulated.

Had you had a health insurance policy, you could have easily saved your wealth from being used up in paying medical bills!

Now think…

 

Doesn’t buying Health Insurance help protect your wealth?

It does. No doubt about that.

Let’s take another example to drill down this concept.

Now once again, you get hospitalized and the bill is Rs 10 lacs. But in this scenario, you had a health plan with a coverage of Rs 3 lacs. So you end up paying the remaining Rs 7 lacs.

Better than the first scenario. But it still makes a dent in your wealth.

Now even after getting it right, i.e. having bought a health insurance policy, you end up getting screwed. And that is because you had low health coverage. The reason can be a lack of adequate funds on your part, or intentional decision to save some money by taking low premium plans offering lower coverage.

Whatever the case may be, you end up getting screwed.

I really hope that you understand the importance of having health insurance in protecting your get-rich-plans.

 

In reality, it’s all linked. You. Your Health. Your Wealth. Everything.

You save and invest to get rich. But you try to cut corners by saving a few thousands and don’t buy health insurance. Bad luck strikes. You get hospitalized. You pay the bills by selling your assets. All your savings are gone. Your get rich plan is screwed. You start saving and investing again. You buy health insurance this time. But you have lost out on the benefits of compounding, because you sold all your original assets. You can never be as rich as you could have been in first place. And that is just because you saved a few thousands by not buying a health insurance in first place.

There are quite a lot of points which come to my mind about health insurance and various scenarios linked to it. For example, what should you do if your health is already covered by your employer’s health plan, whether your policy can help you beat inflation in medical costs or not, how to buy health insurance if you don’t have a lot of surplus funds, etc. But I guess its best to dedicate individual posts to atleast a few of these thoughts and scenarios, instead of clubbing all of them in just one post. So I will be doing such posts soon.

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Someone Said I Have Double Standards. My Reply – It Works For Me & I Will Stick To It

A few days back on a flight to my hometown, I was reading a book on Warren Buffett – Tap Dancing To Work. The person sitting next to me got interested and asked me whether the old man on cover was the well known investor Buffett. This question was the start of our small but interesting conversation about stock markets in general and my investment philosophy in particular.

Now this person was far more talkative than a few which I know of. And hence for 90% of the 2 hour flight, I ended up listening to him. 🙂
It became quite clear that he had burned his fingers (& money) in 2000 and again in 2008 Crisis. He also seemed to be having a tough time believing in market’s potential to make people rich. Anyways…he told me about a lot of stocks which I had not heard of. And unsurprisingly enough, these stocks had brought down his portfolio substantially in past.

But the interesting part came when he asked me about what I was buying in current markets, which are regularly making new life-time highs. I told him that apart from few stocks which I purchase regularly (almost irrespective of prices & for really long term), I am not buying anything.

He was surprised as he thought that since everybody else is buying…and if I considered myself to be an expert investor (since I was reading a book on Warren Buffett – ;p ), I should also be buying stocks and finding potential multibaggers. 
I told him that I am not looking at finding the next multibagger and am pretty satisfied with my mutual fund SIPs and few stocks which I am accumulating in my core portfolio. He unsurprisingly was not impressed with my reply.

Then he asked me what I did in 2008-2009 when markets crashed. And whether I was able to get out of markets in time? I told him that since I had just started earning during those years and still did not have significant sums in markets, I never cared about getting out of markets at that time. I was rather more concerned about getting in when share prices were falling like anything and there were plenty of no-brainer deals available if one looked carefully.

This ticked him off somewhere deep. He said that:

“This is not how an investor operates. You should be able to get out before a market starts to fall. And start buying when markets are ‘supposed’ to rise for next few years. You seem to have double standards in stock markets….you try to buy when no one is buying and try not to buy when everyone else is buying.”

Double Standards Markets

I told him clearly that I don’t know what a typical investor, or for that matter an expert investor should do or shouldn’t do. 

But I do what is in accordance with my personality and risk appetite. I also said that his comment of ‘markets are supposed to rise’ was not sensible as markets are not controlled by anyone and cannot be predicted. And that for a real long term investor, it doesn’t make much sense to time the markets.


If others are comfortable buying in rising markets then so be it. I am not and I will not go with the trend.

There was nothing noteworthy in rest of our conversation as this person realized that I could not be convinced and I realized that its not easy to convince someone about the benefits of long term investing when that ‘someone’ has lost a lot of money in markets.

Thankfully for me, pilot’s announcement of approaching destination came as a way out of the discussion, where for the first time I was accused of having double standards and I happily accepted it. 🙂

If You Want To Multiply Your Investments 2x, 3x or even 5x in a Year, then Please Don’t Buy This

In 1980s, a famous Chinese leader Deng Xiapong said – “To be Rich is Glorious

This slogan is believed to have unleashed a wave of personal entrepreneurship in China that is still driving its economy today. And there is no doubt that it is indeed glorious to make money. Even more so if you can double or triple your money in one year.

But I am quite sure that there is no-one who can be 100% sure of a method of doubling or tripling one’s money in a year. And if you know someone, please do introduce him to me. 🙂

About 2 weeks ago, I launched Ultra Long Term Stocks – A subscription based service where I discuss stocks for the long run. And by long, I mean really long in classical sense of the word. The intent with Ultra Long Term Stocks is to invest for decades and not just years.
I received a few queries from readers who thought it was a get-rich-quick kind of a service where I will offer hot stock tips for quick gains. One reader was honest enough to ask whether this service will change his life or not!! 🙂

But this is not what Ultra Long Term Stocks is all about. And I politely replied to each and every such mail telling the same. I also advised these people not to subscribe to this service as their expectations of quick gains will never be met in this service.

So,

What is Ultra Long Term Stocks?

Ultra Long Term Stock is not about making money in the short term. Rather its about how to grow your stock portfolio slowly but steadily over a period of time by constant accumulation of stocks which are good to buy and stick with for years to come.

Subscription entitles you to a report every 45 days, where you get the following:


If you think that Ultra Long Term Stocks is in line with what you believe long term investing is, then go ahead and..

______________________________________________________________________

Click Here To Subscribe Right Now!!
(Subscription Closes at 11:59pm on 30-June-2014)
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Please remember that subscriptions will not remain open forever and will close within next 3 days, i.e. 30-June-2014. If you have some queries, then please check Frequently Asked Questions (FAQs) section and probability is that your question would already have been answered there. Or else feel free to drop a mail at stableinvestor@gmail.com


What Do Current Subscribers have to say?

Many subscribers who have already received the first report have good words to say about Ultra Long Term Stocks. 


Can I Subscribe the Report Right Now?

Yes you can. And I assure you that you would be surprised to see the pricing of the report. You would be astonished to see the value you are getting by paying a small subscription fee. 

For less than Rs 10 a day (which is less than what you spend on your tea cups every day), you will be getting high quality, non-nonsense and more importantly, actionable reports about how and why to invest in stocks which can be held for decades.

You can read all the details about the service here or can read the launch post here.

Please remember that subscription for Ultra Long Term Stock closes sharp at 11:59pm on 30-June-2014. So much time isn’t left!!

If you think you are convinced about the benefits of long term investing, then its time to be decisive and take control of your portfolio:

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Click Here To Subscribe Right Now!!
(Subscription Closes at 11:59pm on 30-June-2014)
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One more thing. Investing for security of your loved one’s future is important. Rather its very important. But always remember that money is not everything. So in case you are confused about this being an opportunity which may be like once-in-a-lifetime kind of an opportunity, I would suggest you not to worry. 

Life is too long for just one once-in-a-lifetime-opportunity. 🙂 

Happy Investing

Dev

The Wait Is Over – Launching the (Special) Ultra Long Term Stocks!!

Rahul – Sold good stocks he inherited from his father and made huge losses by trading in bad ones. He now wants to leave a rich legacy of good stocks for his children.

Jignesh – Dependent on his stock portfolio for his post retirement life. Suffered big losses due to unnecessary risk taking. He is now waiting for markets to rally to sell his bad stocks. He then plans to invest in just few good stocks and hold them till retirement.

Venkat – His son does not respect him because of his bad luck & stock market losses due to poor stock selection. He wants to regain that respect.

If you can relate to any of the above men whose stories I shared sometime back, then chances are that you are also looking towards heaven or stock market rallies to save your money and stock portfolios.

But if you are true to yourself, you would realize that when you wait for stock market rallies, it indicates that you are trying to control the uncontrollable. Your prayers or wants won’t give you stock market rallies.

It is when you realize that you cannot control the uncontrollable, that you can think about what you can control. And as highlighted by stories of 3 men above, it’s about sticking only to good, stable businesses when investing your heard earned money and be disciplined about it.

It is as simple as that

But having said that….we must remember…

Successful investing is simple but not easy.

And in a small way, I am trying to help you take care of what you can control.

After months of planning and weeks of tireless research, analysis and brainstorming, I am happy to announce that Ultra Long Term Stocks is available especially for you now.

Ultra Long Term Stocks


Ultra Long Term Stocks is a subscription based service which would send out a report every 45 days.

The special reports would cover the following:

Details Ultra Long Term Stocks

A Promise
I know we all hate reading long reports. Rest assured, this 10-15 page report you receive every 45 days, will be Solid, Practical and No-Nonsense. And most importantly, it will help you in Taking Decisions.

How to Subscribe?

You can start your subscription right away! Ultra Long Term Stocks is available in two subscription options:

Subscription Pricing - Ultra Long Term Stocks

  
Those who have pre-registered get to subscribe the service at discounted rates. You all have already been mailed your discount codes which you can use while making payments (payment details below). 
Please note that this service is available only till 23:59 Hrs of 30-June-2014.
Now if you do some quick calculations, you would realize the magnitude of benefits you are getting for the small subscription fee being charged.

At a price which is less than that of one cup of tea a day, you are getting heavily researched and comprehensive analysis of stocks in form of reports that are easier to understand and more importantly, helpful in decision making.

It is unlike any other report that is available from established research houses which are good to increase knowledge and are less about aiding Your Decision to Invest. As the saying goes, “Amateurs are right and wrong. It’s the professionals that make money.”

It is time to do the latter now 🙂

So now, if you are interested in making yourself proud of your stock portfolio and believe that long term investing can lead to big riches, then click below to subscribe to Ultra Long Term Stocks
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Click Here To Subscribe Right Now!!
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I have created a comprehensive list of Frequently Asked Questions (FAQs)to help you with your queries. In case of any other query / doubt, please drop me a mail at stableinvestor@gmail.com

Note –

1 – You can make payment using safe & secure third party payment gateway (details here) or can wire me the same directly (bank details here).

2 – Once you make the payment, I will send you the report within 2 days of confirmation of receipt of payment.


The Wealth Grid – A New Way To Track Your Money

Wealth Grid, as the name suggests is a matrix of your wealth. But before I get into the details, I would first like to tell you about the origin of this concept.

Why Wealth Grid?

In past, I have been fortunate enough to have worked in a highly process oriented industry. (Read more about me and my past in an interview here). And I have a strong belief that no matter who you are OR where you are OR what you do, nothing worthwhile can be achieved without following a structured approach which has proper well defined systems in place.

In financial terms, for some people, something worthwhile might mean becoming rich and being counted in some club of Crorepatis. For me it might mean something far less materialistic. In past too, I have been a proponent of following a structured approach like the Core-Satellite approach to build one’s long term stock portfolio. Now when you think of a grid, the very first image which comes to mind is something like the one given below –
Plain Blank Grid
A grid is a collection of cells, where each and every cell has a proper well-defined place according to some pre-defined logic. And each and every cell has some or the other relation with cells adjacent to it.
How Does Wealth Grid Help?

Now the question comes that how can we use this wealth grid? Now, to be honest here, I am still developing this concept, which may eventually spread out and encompass use of multiple grids for different purposes. But this current grid structure, which I will explain in just a little while from now, simply helps in identification of asset classes. Once identified, it aims to map these asset classes to their respective (correct) time horizons, depending on the end use.
What Exactly is Wealth Grid?

Now on the very first glance, it might not be easy to think of your wealth in a grid like structure as detailed below. But once you clearly understand the concept being tracked on x-axis and y-axis, you will realize that this is quite a helpful structure which allows one to view their wealth on a simple timeline in accordance with the end use of the money.

Wealth Grid Manage Money
A Basic Wealth Grid
As you can see in this very basic Wealth Grid, the columns are used to track the purpose of that asset class, i.e. short term, medium term or long term. The rows are used to track liquidity of these asset classes. This is important because a mismatch here can be disastrous. Suppose you intend to pay for your child’s college fee in next few months, and for that you have bought stocks of some good Indian companies. But unfortunately at time of fee payment, stock markets crash and shares of companies you have bought also go down with them. Now how will you pay the fees? You are in a fix. You might have to borrow some money from your close relatives or take personal / education loan from the bank. I hope you are realizing the gravity of such a situation…

But if the same money was parked in Cash / Fixed Deposits / Recurring Deposits to be used later, then the possibility of any such crisis happening would have been eliminated. Why? Because the correct asset class (non-risky one) was being used to fund a short term expense.

Eventually, it is all about understanding when to save and when to invest (and mind you, there is a difference between the two).

And if you observe closely, I have marked Wealth Grid as [Beta], as I am still working on this concept. It is still not complete. This grid only gives a snapshot of the asset side of your finances. But another important component of our financial lives is debt or loans. Going forward, I would be incorporating the loan and other aspects as well in this Wealth Grid. Rest assured, I will keep you guys updated about the developments.

I will leave you all with a sample (real life) Wealth Grid, which can be used to track one’s wealth. As you can see below, one can get a very comprehensive picture if the Wealth Grid is properly maintained:
Comprehensive Wealth Grid
Sample of Real Life Wealth Grid || Click to enlarge
In the meantime, if you all have any suggestions to improve this grid, please share it with me by means of comments or you can email me directly at stableinve….@gmail.com

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Believe Us, You are not Warren Buffett!

Oracle of Omaha, Warren Buffett has been in news lately for tipping his son Howard Buffett to be the new chairman of Berkshire Hathaway (source). By profession, Howard is a farmer. Company’s investment strategy would still be governed by the CEO and Board of Directors. But Warren Buffett’s son would serve as a Custodian of Company values rather than take part in regular day to day affairs.

So what makes Warren Buffett so special? On very first page of his famous and revered Annual Letters to Shareholders (2011, 2012), it is mentioned that from 1965-2010 (a period of 45 years), Berkshire has had a CAGR of 20.2% i.e. your money doubles every 4 years!

Can average investors like you and me, who don’t know so many things beat that performance?

Can we earn 20% year on year for decades? I doubt that.

you are not warren buffett
You are not Warren Buffett. Period.
 

Such superlative performance can have have the effect that average investors try to become the next Warren Buffett. But in doing so, they would be making a grave mistake. That’s because-

  • Most profits made by Berkshire come from owning entire companies, which an average investor is incapable of doing.
  • Though Buffett gives independence to individual companies’ management, he always keeps a tab on them to see that they don’t deviate from Berkshire’s simple but sacred principles. As far as an average investor is concerned, he doesn’t even meet any member of the company’s management.
  • Buffett owns the perfect business of insurance. This is equivalent of having a constant source of interest-free loans given to buy shares of other companies. Now who among us can boast of ownership of such a business?
  • Inspite of being famous for having a holding period of forever, Buffett occasionally sells stocks. Unlike us, he doesn’t require money for his basic needs. He sells when he does not see value in his investments or wants to fund more lucrative investments.
  • Unlike average investors, he has access to loads of insider information and has an army of people who can do comprehensive number crunching for him. This augments his investment decision making process.
  • Buffett is a fast and voracious reader. We can’t imagine an average investor to read Forbes, Wall Street Journal, Financial Times, New York Times, USA Today and Omaha World-Herald every single day of the year, decade after decade. (For Indian Investors, replace above names with Indian financial newspapers and publications). Even if a person does read a few good publications, the question arises whether he will he be able to utilize and interpret this information to his advantage?
  • An average investor does not get deals which are skewed heavily in his favor. Buffett got one hell of a deal from Goldman Sachs, where he was earning $500 million every year for doing simply nothing!!! And when Goldman Sachs decided to redeem the preferred stocks, Warren was the unhappiest person in the world as any normal person would hate to lose a free cash flow of $500 Million an year. Very recently, he entered solar energy via Topaz. An interesting article shows once again that why and how he lands up such delicious deals.

Warren Buffett had once said – My wealth has come from a combination of living in America, some lucky genes, and compound interest”. Out of these three, only compound interest, is under our control.

Though compounding has a peculiar problem, it still works for those who are patient enough.

So an average investor should focus more on buying good stocks and allowing compounding to show its magic. But instead, what he does is that he is constatnly on a lookout for stock tips and is looking to find the next multibagger. As a sensible investor, one should be prepared for opportunities which markets throws up every now and then. And when that opportunity comes, be prepared to take advantage of them.