Will probably take it off in the morning. These are just notes, i guess.

Ok. Assume that we start with some capital - say - 1,00,000

1% of 1,00,000 = Rs.1,000

Post taxes, a fixed deposit pays you 0.5% per month (6% p.a) risk free = Rs.500 a month on 1,00,000

In order to maintain a minimum standard lifestyle i probably need Rs.50,000 (not right now. Now i need much lesser - but id ideally like 50,000 a month in change apart from what my day job will give me* - so this 50k will go to family for lifestyle, domestic expenses (dogfood, diapers) and so on)

So to make 50,000 a month from FD interest (risk free) i need about a crore in fixed deposits.

This is not just me - this is what anyone will need. This is / or atleast should be anyone's first financial milestone.

(*What the day job gives, will mostly go back to the day job because it is a physical business and it needs to grow, see ?)

I have pretty rigid ideas, developed over a long period , on this particular theme - more stuff maybe later.

Question: Why this wonkery today, all of a sudden ?


The thing is - say i have some money in stocks, part of a portfolio i set up in February 2009. By now - 'X' is slightly more than '2X' and this 2X today is like partly stocks and partly in cash (Most big positions sold off / older positions toned out etc) - Probably like 1X (stocks) + 1X (cash) -

The Index today is at 16,700 odd - here are some scenarios to consider and relative likelihoods of happening (my own estimates):

a) Index at 21,000 - 25% gain from current levels. Amount made = 25% of 1X = 0.25X
Likelihood: HIGHLY unlikely

b) Index at 15 - 18k - 5% +/- from current levels. Not significant change in nett worth.
Likelihood: Highly probable for another month or two.

c) Index falling back to 13,000 levels - 20% loss from current levels. Amount lost = 0.2X
Likelihood: Pretty good chances.

d) Index getting below 13,000 - >25% loss from current levels. Highly unlikely.

In such a scenario - the best case upward scenario looks a pretty small gain - while the most likely scenario (mildly bearish) will probably wipe out between 10 and 20% of my original capital.

One thing i am strongly tempted to do is the liquidate ALL my stock holding and just play with options and futures for the next month or so - purely participating on a momentum / technical call basis - with the option to cut exposure off with just one phone call.

*yawn* we'll see - the impulse to trade / act on half baked information is probably the serious investor's biggest folly - so we sleep on this tonight and take a call tomorrow - noting that in the background the assumption is that capital preservation and establishment of the trust fund are the medium term milestones we are going for.