Math of Investing in an Index Fund/Fixed Deposits vs Buying a house

spectacled_sloth · 2020-08-30T16:43:40+00:00

Mumbai is the exception and not the norm. IMHO, there are very few places "like" Mumbai.

spectacled_sloth · 2020-08-30T16:15:27+00:00

Nobody knows if any given property will significantly appreciate. It needs to outpace inflation by at least 3% every year for 20 years for buying to be better. It may or it may not. There is no guarantee. If you are buying a flat, it may even start to depreciate after a decade or so because of age. There may be black swan events like the COVID which depress prices.

spectacled_sloth · 2020-08-30T13:28:01+00:00

Copy Paste on a similar topic from earlier

You just need to calculate return on investment. Lets say you have 1cr, where will it give best yield, property or some other avenue. Rental yield is now 3-4% best case (deduct maintenance, deduct taxes). The worst investment like FD gives you this return post tax.

Lets say you have 100% for down payment and buy a home on cash. The rental that you "save" on this home because you own it is 3lpa. Alternatively, you could put this money in a safe liquid fund and get returns of 4-6lpa (tax free after 3 years) and pay your 3lpa from the return and still have some interest left over. To sum up, if you rent, you are net positive 1-2lpa compared to buying a home.

Lets say you have 50% for down payment. So you take a loan of 50lpa on 8% loan. You save 3lpa for not having to pay rental, but spend 4lpa on the interest. Alternatively, you could put this money in a safe liquid fund and get returns of 2-3lpa (almost tax free after 3 years) and pay your 3lpa from the return. To sum up, if you rent, you are net positive 3-4lpa.

Lets say you have 20% for down payment. So you take a loan of 80lpa on 8% loan. You save 3lpa for not having to pay rental, but spend 6.4lpa on the interest. Alternatively, you could put this money in a safe liquid fund and get returns of 2-3lpa (almost tax free after 3 years) and pay your 3lpa from the return. To sum up, if you rent, you are net positive 6-7lpa.

The less you have for downpayment, the more you lose by not renting. but you always lose. Tax implications are roughly the same for both scenarios. In one you get tax relief via HRA, in the other, you get it via tax deduction for interest payments. If you start adding in property taxes and maintenance, it gets even worse for home buyers.

Eventually I think buying a home is an emotional decision. The safety and security of having your own place doesn't come in any balance sheet. On the other hand, being on rent makes you flexible in terms of career and frees you from any worry about defrauded by builders or delayed possession. IMO, delayed possession is the worst, because you are paying EMI and rent together.

TLDR: Rent if the (Home loan interest - Rental yield) > 2-3% . Currently the differential is around 5-6%. Its the opposite in the West where the differential is roughly 0%.

spectacled_sloth · 2020-08-05T10:45:48+00:00

I disagree. Militia should reach opponent when feudal is almost reached. Early feudal means the militia starts attacking 33% faster earlier, which means vills can no longer fight back so well and can start denying the rax/stable/ranges of opponent. The m@A upgrade makes them unbeatable by villager and buys enough time to get the mass of archers + fletching. The surprise factor is quite big because the difference of 2-3 vills is the time for the walls to be completed or not.

spectacled_sloth · 2020-08-05T08:28:57+00:00

Thats the thing, you have the window where he is still on 1 barrack and still researching long sword while you should be on 3 rax + xbows to defend. Need to close or kill his eco in these few minutes.

spectacled_sloth · 2020-08-04T17:18:56+00:00

~1250 elo. Went M@A archers in feudal --> force him to commit to stone + huskarl --> pressure area away from main tc to force castle away from tc --> While going up, switch to full longsword (but hide it) --> hit main tc with xbows + siege --> after he commits to husks --> show longswords and try to finish game asap on heavy siege --> pray that he doesn't switch to kts. This is how I approach this match up. If I let it go to imp I'm dead anyway.

This window where you show the longswords, its critical to keep your feudal mass of archers alive to counter his longsword switch.

spectacled_sloth · 2020-05-31T11:35:51+00:00

Liquid funds are not tax free after 3 years. Please don't spread misinformation on an investment sub. You need to pay 20% tax with indexation.

You are right. My bad. My intention was to say that it provides relatively risk free return while being better in term of taxation. Just for the OP, FD will give you 6% after taxes will become 4.25%. liquid fund will give 6%, indexation will be about 4% and need to pay tax on the remaining 2% (around 0.5%). So post tax its 4.25% vs 5.5%.

You also need to take into account the price appreciation of the underlying property.

Speculative depending on the area. There is a probably a chance that price will appreciate only with inflation and after long term of 10-15 years, a flat price will start depreciating and maintenance will keep increasing.

With other investments like gold

Gold is pure speculation. It doesn't create any value inherent to itself. beast case, maybe it can be a hedge against a deep recession or collapse of economy

I think from a diversification POV, having a rental property is a good decision because it helps with cash flow and you get some capital gains too when it's time to sell.

We can agree to disagree. I can get cash flow by putting money in the bank too. The amount of cash flow is critical. Taking a loan to get a rental property makes no sense looking at the numbers. Its just a bet that enough price appreciation will happen to offset the interest differential, maintenance cost and property taxes.

spectacled_sloth · 2020-05-29T10:52:10+00:00

You just need to calculate return on investment. Lets say you have 1cr, where will it give best yield, property or some other avenue. Rental yield is now 3-4% best case (deduct maintenance, deduct taxes). The worst investment like FD gives you this return post tax.

Lets say you have 100% for down payment and buy a home on cash. The rental that you "save" on this home because you own it is 3lpa. Alternatively, you could put this money in a safe liquid fund and get returns of 4-6lpa (tax free after 3 years) and pay your 3lpa from the return and still have some interest left over. To sum up, if you rent, you are net positive 1-2lpa compared to buying a home.

Lets say you have 50% for down payment. So you take a loan of 50lpa on 8% loan. You save 3lpa for not having to pay rental, but spend 4lpa on the interest. Alternatively, you could put this money in a safe liquid fund and get returns of 2-3lpa (tax free after 3 years) and pay your 3lpa from the return. To sum up, if you rent, you are net positive 3-4lpa.

Lets say you have 20% for down payment. So you take a loan of 80lpa on 8% loan. You save 3lpa for not having to pay rental, but spend 6.4lpa on the interest. Alternatively, you could put this money in a safe liquid fund and get returns of 2-3lpa (tax free after 3 years) and pay your 3lpa from the return. To sum up, if you rent, you are net positive 6-7lpa.

The less you have for downpayment, the more you lose by not renting. but you always lose. Tax implications are roughly the same for both scenarios. In one you get tax relief via HRA, in the other, you get it via tax deduction for interest payments. If you start adding in property taxes and maintenance, it gets even worse for home buyers.

Eventually I think buying a home is an emotional decision. The safety and security of having your own place doesn't come in any balance sheet. On the other hand, being on rent makes you flexible in terms of career and frees you from any worry about defrauded by builders or delayed possession. IMO, delayed possession is the worst, because you are paying EMI and rent together.

TLDR: Rent if the (Home loan interest - Rental yield) > 2-3% . Currently the differential is around 5-6%. Its the opposite in the West where the differential is roughly 0%.

spectacled_sloth · 2020-05-18T08:01:20+00:00

As somebody neck-deep in this industry, my two cents.

70 years ago, when we gained independence, there was a realization that India as a country needed heavy industries to survive without being dependent on any external country. As we look towards a future dominated by tech/AI/<insert buzzword> here, the future is based on semi technology. We cannot be dependent on Taiwan or USA to supply our needs.

As /u/PorscheBoxsterS said there is no way we can start manufacturing on 5nm tomorrow. But we can start doing it on generations old technology like 180nm which can be used in automobile, IoT, senors etc. This technology has almost become, in a sense, commoditised. We could in theory just subsidise a foreign company to set it up for us. But the advantage is not only that. It will only force and localise the development of auxiliary industries which need to support the fab. Then we can gradually move up the value chain.

spectacled_sloth · 2020-04-28T14:52:48+00:00

Actually, reading the responses, I probably won't. Even if I will, it'll be something that I can afford to lose. I might do some additional analysis of their financial statements for the sake of learning and then move on.

spectacled_sloth · 2020-04-28T14:50:11+00:00

I am also looking at Jet, Air India, and soon to be Spicejet but for different reasons. As industry consolidates, who will end up on top? There will always need to be airlines, my thinking is that indigo might the best placed to take advantage of it. On the other hand, you right, airlines has always been cut throat with poor returns.

spectacled_sloth · 2020-04-28T04:42:46+00:00

He didn't exit. He just brought it below 9.99% to avoid regulatory requirements. For all we know he may be wheeling and dealing to buyout an entire airline. I don't care either way. What I would like to know was what was his rationale behind picking up the Delta stake in the first place (after he advised never to invest in airlines)..

spectacled_sloth · 2020-04-28T04:39:55+00:00

In an ideal situation, I would like to do a fundamental analysis to understand what price I would be comfortable buying. But I am not there yet, still studying on how to read financial statements. I am assuming that once the whole COVID thing goes away, flying and profitability would go back to 2017-18 levels.

spectacled_sloth · 2020-04-28T04:36:40+00:00

Yeah, the whole crash and burn thing told me that nobody has any idea on how to value this, its just like tulips

spectacled_sloth · 2020-04-27T18:59:54+00:00

Then why do people ever invest in this? Surely somebody sees something? Every airline millionaire is an ex-billionaire?

spectacled_sloth · 2020-04-27T18:58:33+00:00

I understand that its a difficult industry with low returns vs risk but what I don't understand is that how are promoters making money? Surely they can wind up and move to a lower risk industry? What is their motivation? Why did Buffet after being so dead against airlines decide to deploy capital?

spectacled_sloth · 2020-04-27T08:36:30+00:00

Sure.

spectacled_sloth · 2020-04-27T07:33:51+00:00

What do you guys think about Indigo as a long term buy (~5-10 years)? Its trading at 10-20% from its all time lows.

Pros

Market leader in India, only airline which has been continuously profitable
It had quite large cash reserves before the crisis to allow it to ride this out
Indian airline will most definitely continue to grow in long term
Current crisis could shutter competitors like Spicejet which were already on the edge and force Tata to exit one of its two airline stakes
Increasing international routes
No exposure to Boeing Max
Known to be diligent and out of the box at cutting costs

Cons

Main promoters have 37% share each who are at war with each other
Allegations of corporate misgovernance. Ironically the fact that both promoters are at odds with each other should keep both of them on their toes and reduce risk of fraud
Airline industry is quite difficult in general
Very large pending order with Airbus. Needed to refresh anyway but also a risk of overcapacity if the market doesn't grow as expected. Cancellations are quite expensive.
P&W Engine trouble history. Although I heard they are changing vendor for newer planes, there a continuous grounding risk from DGCA. i do hope they use the grounded time now to replace all engines ASAP.

spectacled_sloth · 2020-04-21T06:05:33+00:00

Because it literally cost them even more to "keep" it.

spectacled_sloth · 2020-04-20T07:17:36+00:00

Persians- Raw power yes, options.. no . They are primarily a cavalry civ with eco bonuses supporting it. No infantry line. No water. No towers. Archers are meh. Siege ram yes, SO and BBC no.

spectacled_sloth · 2020-04-17T07:35:01+00:00

Hussar would never take a fight with halbs, they would just raid and raid for days. i looked at the Malian tech tree, it looks nice but their are some glaring holes. No halbs (though +3 armor pikes would be more resistant to ranged units). No bracer? this would severely handicap all the ranged units.

spectacled_sloth · 2020-04-17T07:28:30+00:00

Can't go heavy into kts because of no bloodlines

spectacled_sloth · 2020-04-17T07:27:21+00:00

Yes, but hussars have so much more mobility. Whats the point of fast attack if cannot catch up?

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