Market Trends: FIIs Continue to Pour In, Driving Nifty and Sensex to New Peaks

Foreign Institutional Inflows and Asset Performance Snapshot

• Foreign institutional inflows (FIIs) into Indian equities remained strong, reaching approximately 26,644 crores by June 23.
• This influx of investment has propelled the Nifty index above 19,000 and the Sensex above 64,000, reaching all-time highs.
• Despite indications from the US Federal Reserve about potential interest rate hikes to control inflation, it is unlikely that flows to India will decrease in the short term.

This data provides an overview of recent market trends and highlights the robust inflow of foreign institutional investment into Indian equities, driving the market to new highs.

The Health and Economic Impact of Rising Healthcare Costs in India

• Sedentary lifestyle and unhealthy dietary habits are prevalent in today's world, increasing the risk of diseases.
• India has the highest number of diabetics worldwide (50.8 million) and a significant burden of cardiovascular illnesses (25 million).
• The cost of treating these diseases has substantially increased over time.
• High medical treatment costs often push people into poverty.
• In 2018-19, the average Indian household spent around 48.21% of their income on healthcare, compared to the global average of 18.1%.
• High healthcare costs in India annually impoverish around 55 million people, with over 17% of households facing catastrophic health expenditures.

Needless to say, one solution to this challenge is adequate Health Insurance.

Do connect with us for the best solutions on health/medical insurance @ jrswealth.org/ +919881142430

Harnessing the Power of Good Debt

• Debt is a reality for many of us, as cash payment for major life purchases is often unattainable.
• Not all debt is created equal, and understanding the distinction between good debt and bad debt is crucial.
• Good debt has the potential to increase your net worth or income over time, serving as a valuable investment.
• While it requires regular payments, good debt is an investment that appreciates in value and contributes to a brighter financial future.
• Good debt can also be strategic consumption that enhances your status or positively impacts your business or practice.
• However, it's important to manage good debt responsibly and avoid borrowing beyond your means.
• Popular examples of good debt include:
  1. Business Loans: Fuelling entrepreneurial ventures and future cash flow.
  2. Home Loans: Investing in homeownership with potential for price appreciation.
  3. Student Loans: Enabling education and enhancing long-term earning potential.

By embracing good debt wisely, you can leverage it as a tool for wealth creation and financial prosperity. Remember to exercise caution and prudence to ensure your debt remains manageable and aligned with your financial goals.

A. Business Loan: Fuelling Your Entrepreneurial Journey

• Starting your own business is an investment in your future, and borrowing money to fund it can be considered good debt.
• A business loan provides the necessary financial support to launch or expand a profitable company, with the expectation of generating future cash flow.
• To ensure the viability of the business loan, it's crucial to have a well-thought-out and realistic business plan that demonstrates the potential for sustainable revenue.
• If your business thrives, its value can surpass the loan amount, leading to significant returns on your investment.
• However, it's important to maintain a clear distinction between your personal wealth and the business, as excessive reliance on business loans can pose risks.
• Business failures or unfavorable economic cycles can jeopardize both the business and personal finances, underscoring the need for prudent risk management.

Embrace the opportunities of entrepreneurship, but approach business loans with careful consideration and a solid plan for long-term success.

B. Home Loans: A Path to Homeownership and Potential Profit

• Home loans are considered a form of good debt, especially for individuals seeking to settle down with their families and own a home.
• Paying towards a home loan can be seen as an investment, as it allows you to acquire a property that can provide long-term benefits.
• Owning a home enables you to reside in it for many years and potentially benefit from price appreciation, allowing you to sell it at a profit in the future.
• However, it's important to note that the rental yield on residential homes can be relatively low, typically around 2% to 4% of the property value.
• Additionally, newer apartments may have higher maintenance costs, which can impact the overall yield on the investment.
• Consider both the potential for price appreciation and the rental yield when assessing the financial viability of purchasing a residential property.

Investment Comparison: Residential Apartment as an investment vs. Equities as an investment

Residential Apartment as an Investment:

• Today: Rs.2 crs
• After 20 years: Rs.5.5 crs (overestimation – Avg growth about 90% from 2000-20)
• Loan EMI @ 8%: Rs. 167,000/-
• Rental Yield @ 4%: Rs. 100,000 per month (overestimation)
• Total Value of Property: Rs. 7.9 crs.

Equities as an Investment:

• Monthly SIP : Rs. 167,000/-
• Total investment after 20 years: Rs. 40,080,000
• Value of investment in Equity at growing at 10% over 20 years: Rs. 12.68 crs (conservative estimation)

Gain on investing in Equities over residential apartment: Rs. 4.78 crs

C. Student Loans: Maximizing Long-Term Potential

• Student loans enhance earning potential and open doors to better career opportunities.
• Well-educated individuals are more likely to secure high-paying jobs and adapt to changing employment needs.
• Choosing the right field of study is crucial for long-term career prospects and financial success.
• Parents can proactively invest in equities to financially prepare for their children's education.
• Investing around Rs. 100,000 per month over 20 years can adequately cover the cost of quality education.

The Risks of Good Debt: Balancing Expectations and Potential Setbacks

• Good debt comes with assumptions about the future, based on personal goals and past outcomes.
• Excessive debt can hinder saving for the future and increase the burden of loan repayment.
• Prioritize careful consideration of expected returns and potential risks before taking on any debt.
• No guarantees exist, and unforeseen circumstances can impact the expected benefits of good debt.
• Striking a balance between debt and financial security is essential for long-term financial well-being.

The Risks of Bad Loans/Debt

• Bad debt is incurred when borrowing money for rapidly depreciating assets or unjustified consumption.
• High interest rates associated with bad debt can result in increased out-of-pocket costs.
• Some bad debts can lead to financial difficulties and create obstacles in the long run.
• Affordability is crucial in determining whether a loan is bad debt.
• Excessive spending, going overboard, or relying on potential future earnings can contribute to bad debt.
• Examples of bad debt include luxury purchases without a clear repayment plan and borrowing beyond one's means.

A. Auto Loans:

• Cars depreciate quickly, making auto loans for expensive upgrades a risky choice.
• High-interest payments add to the overall cost of the loan.
• Upgraded versions of the car may become available shortly after purchase, leading to dissatisfaction and potential regrets.

B. Personal Loan for Consumption:

• Easy access to credit encourages impulsive buying and unnecessary spending.
• High-interest costs associated with personal loans for consumption can strain finances.
• Accumulated bad debt from such loans hampers savings potential and wealth creation.
• Credit card debt, with its high-interest rates, poses a particularly significant risk.