Investment in Property, Chit / Bet Funds or Stock? First analyze your advisor!

Sudhir Panda • 25 April 2015
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He/she maybe an agent in disguise for the real gamblers - builders, owners, politicians, media barons, mafia gurus, MBAs, brokers, Stock/MF traders, bankers, manipulators of Dalal Street or Wall Street, etc. Keep aside the financial jargons; stock, bet or chit fund investments are no more than a "glorified version of traditional gambling".

It seems real estate and financial products are involved in most cheats, frauds, scams & disasters of all colors. In the wake of alleged fraud involving millions looted by Kolkata-based Saradha group (and many other real estate players - both online / offline), I guess more than 90% of such schemes are just fraud bubbles waiting to bust sooner or later! Timing depends on appetite of looters and cronies. Though, we rely on elected governments to act, they are mostly too late, delivering very little, and most of it for their supporters. How many dubious financial companies are still lurking only to be found guilty later? How does the so-called independent national and local media showing rosy pictures & ads involving such frauds for few more bucks? How does the civil IAS / IPS officers, local police and politicians not aware or beneficiaries?

Lately some state bodies are propagating short-time advisories to village-level leaders requesting to spread awareness on the risk involved in dubious chit funds and financial companies in West Bengal, Orissa, etc.. The government is ordering some Serious Fraud Investigation Office or SFIO probe (what jargon & jerks) into suspected misuse of the public money by various chit fund companies. Just to show how serious they are after the event, shedding crocodile tears, assuring the poor, looking for more votes. A fact: Given a choice, most will vote for immediate exile of these corrupt assholes - kleptocracy kings and queens dictating / looting in the name of democracy.

These are precisely the conditions that allow corruption to flourish. To counter this, we need more transparent and accountable financial institutions that are responsive to the needs of consumers, investors and the wider economy. The freedoms that the financial sector has enjoyed under the banner of deregulation have too often served the financial elite - disguised as smart businessman.

The challenge to policy-makers and civil society is to ensure that regulation serves the greater public interest - otherwise the privatization of gains and socialization of losses that were the hallmark of the financial crisis will occur again and again. Remember the moments in the past decades when lapses in accountability caused financial havoc. Why can't this happen again?

Chances are, when you think about investing in booming real estate, outrageous funds, luring chits, great MLM schemes or upcoming stocks the first thing that comes to mind is to ask investment experts or professionals, overriding your OWN common sense. Look at the housing or financial market as a critic and just Calculate Cash Flow Return (Rental Income) and Future ROI - keep aside big hopes.

Also beware & keep watching the hawks at BSE Index and other similar trends, ground realities. Reading the recent global market crashes, huge scams and considering how manipulative the markets are, in general, the long-term success is not so rosy anymore for small investors… Many will surely take it otherwise, but that cannot change the ground realities, can it?

Taking clues from today's proliferated media to make important decisions can be a disaster, be logical. They are notorious for changing opinions as quick as the status of markets. Forget what the Kotaks, Investment Magazines, Experts, MagicBricks, Makaans, HomeWalas, NDTVs, 99Acres, Bankers, CNBCs, 2letservices, Consultants, RealEstateTimes, Yahoos, Googles, Hype Mobile Apps, Fakebook or SMS Virals ..etc are suggesting, look at the local market conditions! Yes, there are no official monarchies in today's digital world, but the basics of what Canakya or Kautilya said in Arthasastra (read finance) cannot be mutated by few opportunists forever. There are NO means to gather quick wealth unless you are a cronie crook or a looter, direct or indirect - be in chit funds, some MLM or Multi-Level Marketing gimmick, financial product.. on anything that promises BIG money! Why will the market grow in your favor? Why will they benefit you instead of profiting their cozy network of friends and family? Will you find an answer before jumping-in or cry after half-dead in a disaster?

Standard Frauds of Indian Builders include bluntly ditching the home buyer in date of handover / possession, twisted returns, freebies, etc. Though few real estate developers do keep their promises. There are also selling cheats over titles and conveyance to innocent buyers who invest their savings by duplicating title deeds of properties under dispute and exit before caught. Builders often refuse to provide the conveyance certificate even after completion. Rental Returns Hypes and marketing gimmickry undertaken by builders in association Internet portals and mobile apps, assuring returns if the property is rented out. This is done to lure purchase of a property as investment. Builders also create fake online rental listings of their property to bait buyers.

Builder delays bluffing scarcity of raw materials or approvals, a simplest benefit is builder wants its properties to be fully booked or probably pooling money from one project to another. Builders also procrastinate seeking approvals and sanctions like electricity connection, water connection etc. leaving buyer with a house without electricity and water connection. Unauthorized layouts, land use violations, etc are more serious approval offenses that some builders indulge.

Historical returns are of little value in formulating return expectations, standard deviations and correlations: When past performance of stocks/bond, funds or housing investments are used as inputs, the outputs of the analysis are portfolios which performed particularly well in the past. When beliefs of investment experts are used as inputs, we get the output as better or worse portfolios. Good and reliable advisory add value by constantly evaluating the investment planning implications of alternative economic scenarios, investment solutions and lifestyle choices, managing costs, and counseling a margin of safety in saving and investing your money. Anything less is bad practice, fire him/her! If you are socially responsible, alert others, spread, viral, write or comment about it.

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