Learn Investment with Ganpati Bappa

Learn Investment with Ganpati Bappa

Under the rule of Chattrapati Shivaji Maharaj in the 17th century, it was first decided to celebrate Ganesh Chaturthi festivities in a grandiose fashion in the state of Maharashtra. Since then, the state, in general, and the financial capital of Mumbai, in particular, celebrates the 10 day festivities of Ganesh Chaturthi with great pomp and gaiety. As is well-known, Lord Ganesha is the Lord of Prosperity. It is believed that when he arrives, he brings with him prosperity to the people.

In the spirit of the festival, we discuss 10 investment lessons we can glean from Lord Ganesha for a prosperous future.

1. Learning is at the core of wealth creation

Among other things, Lord Ganesha was known for his incomparable intellect and his ability to grasp and analyze situations. His ability to write down the entire Mahabharata epic in one sitting is a classic example of that intellectual depth and thirst for knowledge, this practice makes the core of investing. With the investment scenario becoming complex, the best insurance you have against any uncertainties is constant and continuous investment in knowledge. If you can do that, good returns will follow.

2. Discipline and commitment is important for investing

If you recollect the story of Lord Ganesha, he was created by Mother Parvati to guard the house while she was away. It was a statement of Lord Ganesha’s commitment to his word that he did not even permit the omnipotent Lord Shiva to enter the house. Like in the case of Lord Ganesha, your commitment to your goals and your discipline in investing must be maintained at all times.

3. Humility is the key to success in investments

Have you ever wondered what the posture of Lord Ganesha indicates? It is a classic example of humility. With one leg firmly planted on the ground and the trunk coiled, it represents the image of a powerful person humble in his own strength. Did you know that humility is integral to investing? You need to acknowledge that the market knows best and design your strategy accordingly. Never be presumptuous enough to imagine that you can perpetually beat the market.

4. Like Vakratunda, be patient and adaptable

The coiled trunk of Lord Ganesh is also called the Vakratunda. Apart from humility, it also represents adaptability since the trunk is flexible enough to be used for various purposes. The message to investors is to always be adaptable. Even the great Warren Buffett, who once refused to believe in tech stocks, now has Apple as his biggest exposure. Markets change and you need to change your strategy accordingly.

5. Listen attentively to what the market has to say

If you visit a Ganesh temple anywhere in India, you will find the statue of a mouse (Mushika) outside the sanctum, to whom devotees go and whisper their life goals. The large ears of Lord Ganesha represent the quality of listening to others attentively. As an investor, you should never get trapped in the pomp of your own thinking and your ideas. Listen to what others have to say and more importantly listen to what the market is saying. Keep your ears wide open as that can go a long way in making you a successful investor.

6. Make the best of the resources available to you

The fable goes like this: Lord Shiva promises the fruit of knowledge to the one who circum-ambulates the universe first. While Kartikeya sets off on his peacock, Lord Ganesha goes round his parents (after all, they represent Brahmaand) and wins the fruit of knowledge. When you invest, you are never going to have everything going your way. The key is to make the best of the resources available to you. The moral of the story is not to give up on investing just because you have to start small. You have to create the circumstances to invest.

7. Like Gajanana; get the big picture ahead of you

The elephant head of Lord Ganesha (Gajanana) has a much larger significance. It represents the bigger picture in the world. This applies to your investment as well. When we get into stocks, mutual funds and returns, we normally tend to lose the bigger picture. Our bigger picture is our financial goals towards which all these investments are intended. That is why, we have regular portfolio checks and portfolio rebalancing so that at no point you lose the bigger picture.

8. Tusk out the chaff from the wheat

The tusk of Ganesha represents the ability to separate the good from the bad. In more poetic parlance, we can also call it separating the wheat from the chaff. That is exactly the purpose of the tusk. This is all so relevant to our investment portfolios as well. There are times when mid caps get too expensive, there are times when valuations cannot be justified and there are times growth is faltering, but the P/E ratio is not. That is the time to use your proverbial tusk to review the portfolio and get rid of any potential non-performers.

9. Balance the material and the moral

Lord Ganesha is popular across India because he combines the best attributes of materialism and morality. This is evident from Lord Ganesha’s one foot which is firmly planted in the ground at all times. As an investor, you need to realize that the best way to create wealth in the markets is by marrying money and ethics. Unethical practices rarely work in the long run. The best companies in the Indian market are the ones who strike this balance.

10. This too shall pass

That is the crux of the Ganesha Chaturthi. The 10 days of festivities are here to remind you that good times will not stay forever. All good things come to an end, however, even bad times eventually pass. This presents important lessons on managing your portfolio, how you take profits off the table, etc. Hence, make the most of the good times and consolidate in tough times.
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10 Investment tips from Lord Ganesha!

10 Investment tips from Lord Ganesha!

The festivities of Ganesh Chaturthi begin with the installation of the idol and conclude on the 10th day with its immersion in a water body. These 10 days signify a joyous phase in your life, while the immersion reminds you that good times in life can be ephemeral.

Lord Ganesha is said to have 108 different names. Let us look at 10 such names of the ‘Lord of Prosperity’ to commemorate the festivities and find some interesting takeaways for investors.

Gajanana (The wisdom of an elephant)

The elephant and the whale are the only two mammals that have brains larger than humans. Wisdom, here, is the ability to distinguish between the good and the bad, which the elephant has in plenty. As an investor, your biggest challenge is to distinguish between the good news and the bad news, the good stocks and the bad stocks, and the good decisions versus the bad ones. For this, you need to imbibe the basic qualities of the Gajanana.

Mangala Murthy (The eliminator of negativity)

Negativity implies a different meaning here. As an investor, it is essential to surround yourself with positive people and positive ideas. Like a Mangala Murthy, you need to eliminate the negative people from your vicinity and also eliminate the negativity in your mind. Most of your investment decisions are conditioned by your past experiences or by your observations in real life. Don’t let that negativity come in the way of making intelligent and rational investment decisions.

Ekadanta (The one with the broken tooth)

The broken tusk of Lord Ganesha has a larger significance. It represents out-of-the-box thinking. Ganesha had committed to Veda Vyasa to write down the Mahabharata non-stop; Ganesha promised the latter that when his pen would stop, he would break a part of his tusk and use that as a pen. Remember, investing is also all about flexibility and out-of-the-box thinking. You could start with certain assumptions but will, without a doubt, have to adapt and improvise along the way. Don’t get too caught up in your ideas, i.e. don’t be rigid. Make changes, adapt, and just move on.

Lambodara (The one with an appetite)

Ganesha’s stomach signifies an appetite that can be easily digested and one can refer to this if they wish to understand about risk appetite. Many investors often tend to confuse between risk appetite and risk-taking capacity. While your risk is driven by your risk appetite, the actual risk you take should be circumscribed by your risk-taking capacity. When it comes to investing, you must always cut your coat according to your cloth. Indiscriminate risk-taking is at the root of most investing problems.

Dhumravarna (Significance of smoke)

Ganesha’s vision straddles the apparent, the latent, and the ambiguous. The smoke or the haze represents the grey areas when we invest. You always make investment decisions, even when the future is uncertain. That is because of the grey areas in investing, where a clear vision, an ability to see through the clutter, as well as the ability to use data and analysis in the best manner possible come in handy.

Vidyapati (Knowledge at the core of action)

Lord Ganesha is known as the Vidyapati as he is the only one to have mastered the 18 different forms of knowledge. In terms of intellectual breadth and depth, he is unmatched. For every investor, the hunger to learn new ideas and experiment with new strategies is very important. A copycat approach can only take you so far as an investor. For real success, you need to expand your horizons and apply your own skills and in-depth knowledge.

Ganapati (Master of subtleties)

The Ganapati form is an extension of the Vidyapati. Ganapati is not just about knowledge, but also about subtleties. Remember, these subtleties are at the core of your investing. As the market gets more complex, the factors that you will need to consider before investing will also become manifold. When it comes to this, it is not just information that will help you, but insights; and these insights only come from understanding the subtleties of the financial markets.

Chintamani (Overcoming mental blocks)

Chintamani is all about the power of the mind. The mind can be a positive weapon as well as a self-destructive one. The Chintamani is all about using your mind in a positive way. This involves two stages; removing mental blocks and bringing in positive ideas. As an investor, you would have realized that not addressing your mental blocks stops you from being a successful investor. You have to first remove the blocks pertaining to mid-caps, small calls, higher growth stocks, etc., before you can apply the right ideas and strategies.

Kshipra (Not being too rigid)

Kshipra is not about flexibility in the strict sense of the term; it is more about moving on. It is about a person who does not get caught in the past and just gets on with his/her life. This is an important quality for an investor. Many investors, even the best of them, tend to hold on to past experiences too closely. Mistakes are to be learnt from, not to be brooded over. As an investor, you will make good decisions, bad decisions, and even atrocious decisions. Your job is to just learn, move on, and focus on the core task.

Lambakarna (One with an ear for listening)

Keep an ear to the ground and keep the other on the whispers in the market. If you meet a really successful investor, you will find that they listen as well as ask a lot of questions. That is their way of learning. This is why Lord Ganesha has a small mouth and large ears. As an investor, you need to always keep your eyes and ears open for new ideas. The day you put yourself in a closet, you stop being a serious investor.

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Invest in these stocks before Union Budget 2018-19

Invest in these stocks before Union Budget 2018-19
by Nikita Bhoota and Gautam Upadhyaya 01/12/2018

Union Budget 2018-19 is the most widely discussed topic these days. Everyone has high expectations from this budget particularly, as it is the first budget post GST era and the last full budget of the NDA Government for its term from 2014-19. It is expected that this budget will continue to focus on infrastructure development, job creation to stimulate the economy and improving rural income. The major topics likely to be discussed in the upcoming budget are, change in long-term capital gain tax norms and increase in the tax exemption limit from Rs2.5 lakh to Rs.3 lakh p.a.  It may also introduce new policies and reforms to uplift the rural economy, thus resulting in improving the rural consumption.

Union Budget 2018-19 is expected to be the next big trigger for the Stock market. Almost all the stocks are likely to benefit from the announcements to be made in the forthcoming budget. Based on the fundamentals, management outlook, growth prospects and technical charts we have cherry picked the below mentioned stocks for investing before the Union Budget 2019.

DB Corp

Fundamental View

DB Corp is the largest print media company with an added presence in radio and digital media. Its revenue consisted of printing & publishing (91%), Radio (6%) and Others (3%) in FY17. The company enjoys leadership position in radio listenership in cities of Rajasthan, MP and Chhattisgarh.  We expect revenue CAGR of 7.5% over FY17-19E on account of traction in local print media and increase in circulation revenue backed by increasing copies in existing markets and launch of new edition in Surat in Q1FY18E. Additionally, company's foray into radio business is seeing good traction.  Its acquisition of 13 stations to further augment the radio revenue albeit on a small base. Due to better realizations, we expect EBITDA CAGR of 8.3% over FY17-19E. Consequently, PAT would register CAGR of 11.6% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 2,258 28.4 374 20.4 18.6 87.0 4.4
FY18E 2,425 28.3 403 22.0 17.3 104.3 3.6
FY19E 2,608 28.8 466 25.5 14.9 124.9 3.0

Source: 5 Paisa Research

Technical View


The stock has managed to give a breakout above the declining trend line on the daily chart backed by a surge in volumes. The stock has also managed to give a close above its 200 day EMA. We expect the positive momentum to continue in the stock. 

Buy/Sell Range Target Stop Loss
Buy (cash) 372-376 414 348
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
DBCORP 6,899 395/338 367

Texmaco Rail

Fundamental View

Texmaco’s acquisitions, Kalindee Rail Nirman (track work and signaling) and Bright Power Projects (railway electrification) have positioned it as a ‘Total Rail Solutions’ company. The company now operates in three segments - Heavy Engineering (wagons/freight cars), Steel Foundry and Rail EPC, contributing ~ 49%, 15.9% and 35.4% respectively to FY17 sales. We expect finalization of tender for 9,500 wagons by Indian Railway may help strengthen its wagon division order book. The RAIL EPC division’s sales and profitability is improving on back of completion of legacy contracts. Further, speedy electrification and completion of Dedicated Freight Corridor (DFC) projects will be positive for the company. The company’s foray into international markets - South East Asia, West Asia, Middle East Asia and Africa are likely to aid future growth in all the segments. Thus, we project revenue CAGR of 20% over FY17-19E. The present order book is ~Rs3,800cr (2.8xFY17 sales) providing strong sales visibility. We expect incremental sales to result in EBITDA margin expansion by 490bps by FY19E. PAT is expected to grow (led by improving operating performance and decline in interest) at 83% over the same period.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) P/BV (x)
FY17 1,154 5.0 34 1.6 2.5
FY18E 1,000 4.0 2 0.1 2.5
FY19E 1,650 9.9 114 5.2 2.3

Source: 5 Paisa Research

Technical View

Stock Texmaco Rail & Engineering Limited

The stock is in a higher top higher bottom chart structure on the daily chart and has managed to take support along the rising trend line. The trend and strength analysis indicates that the current momentum is likely to continue further.

Buy/Sell Range Target Stop Loss
Buy(cash) 117-119 136 108
NSE Code Market Cap (Rs in Cr) 52-week High / low 200 Day M.A
TEXRAIL 2,609 128/84 103

Ingersoll- Rand Ltd

Fundamental View

Ingersoll Rand (IRIL) manufactures and sells air compressors, which include reciprocating compressors, centrifugal compressors and system components. IRIL enjoys strong market positioning in domestic compressors market. We believe that pick up in user industries (automotive, metals, pharmaceuticals and textile) along with introduction of new products and development of Naroda as an export base for large reciprocating compressor packages and parts is likely to drive future sales. Thus, we see revenue CAGR of 12.5% over FY17-19E. Indigenization of most of its products and high realization from new products is likely to help the company maintain EBITDA margin despite pricing pressure. Hence, we project PAT CAGR of 12.5% over FY17-19E. The company’s debt free status and unencumbered promoter holding of 74% adds further stability. 

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 664 19.0% 77 24.4 35.7 2.6
FY18E 730 18.9% 85 26.9 32.4 2.4
FY19E 840 19.0% 97 30.9 28.2 2.2

Source: 5 Paisa Research

Technical View


The stock is on the verge of witnessing a symmetrical triangle breakout on the monthly chart and has also witnessed a smart uptick in volumes. The positive strength shown by the stock on the weekly MACD Histogram affirms our bullish view on the stock. 

Buy/Sell Range Target Stop Loss
Buy(cash) 858-868 998 784
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 Day M.A
INGERRAND 2,841 940/645 795

Cera Sanitaryware

Cera Sanitaryware is a pioneer in the sanitaryware segment in India. It is the third largest player in the organised sanitaryware business with market share of ~23%. It generates revenue from sanitaryware (~62%), faucets (~21%) and tiles (~17%) business. We see revenue CAGR of 23% over FY17-19E as company’s tie-up with Italian luxury brand ISEVA will help company to tap premium sanitaryware market. New innovative launches in faucet segment as well as commissioning of tiles plant in south, where presence of organised players is limited will also boost the revenues. Further, the replacement demand in India forms only 10-15% of total demand, whereas worldwide it contributes around 75-80%. Hence, with rising standard of living, the replacement demand for sanitary ware and faucet is expected to witness northward movement. Consequently, we expect ~23% CAGR in revenue over FY17-19E. The entry into premium segment, GST implementation and improving operating performance would drive PAT at ~27% CAGR over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 1,006 17.0% 99 76.2 49.6 9.4
FY18E 1,172 17.00% 120 92.3 40.9 7.9
FY19E 1,383 17.0% 144 110.8 34.1 6.6

Source: 5 Paisa Research

Technical View

Stock Cera Sanitaryware Limited
Recommendation The stock is in a higher top higher bottom chart structure on the monthly and weekly chart. The stock has also formed an ascending triangle formation on the daily chart; we expect the stock to breach its upper resistance trend line and head higher.
Buy/Sell Range Target Stop Loss
Buy(cash) 3,770-3,790 4,210 3,490
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
CERA 4,912 4,300/2,023 3,150

Reliance Industries Ltd

Fundamental View

Reliance Industries (RIL) is one of the largest private sector enterprises in India. RIL is a vertically integrated company with business interests in energy and materials value chain. Its revenue in FY17 comprised of refining business (64%), petrochemical business (24%) and others (12%). The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. We estimate revenue CAGR of 18.2% over FY17-19E on account of expansion of RJio and strong refining margin outlook.  Jio’s RMS (revenue market share) is expected to be ~30% over next few years. Company’s margins are expected to remain robust due to firm demand and improving utilization in polyester segment. Refinery off-gas cracker (ROGC) has been commissioned and will be ramped up to full utilization by FY18E. In addition, company has commissioned 4 of its 10 petcoke gasifiers, which will ramp up over FY18-19E. Our outlook on refining remains strong with growth in petro-product demand outpacing supply additions. This should keep RIL’s GRM (Gross Refining Margin) in the US$11-11.5/bbl range. Consequently, we expect PAT CAGR of 12.2% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 305,400 15.1% 29,800 50.3 18.6 2.1
FY18E 392,700 15.0% 34100 57.6 16.3 1.9
FY19E 427,100 17.4% 37,600 63.5 14.8 1.7

Source: 5 Paisa Research

Technical View

Stock Reliance Industries Limited
Recommendation The stock is currently trading in a rising channel formation on the weekly chart. It has also witnessed a bullish crossover on the daily MACD Indicator. We expect the stock to trend higher and to move towards the upper end of the channel.
Buy/Sell Range Target Stop Loss
SELL-Jan Futures 935-940 1,010 888
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
RELIANCE 594,779 957/508 801

Research Disclaimer

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5 Stocks for next week 15th Jan-19th Jan 2018

5 Stocks for next week 15th Jan-19th Jan 2018
by Gautam Upadhyaya 01/12/2018


Recommendation The stock has formed a bullish engulfing candlestick pattern on the daily chart and has managed to give a close above its short term EMA. The stock has also formed a bullish hammer formation on the weekly chart.
Buy/Sell Range Target Stop Loss
Buy(cash 373.5-375.5 389 364
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 Day M.A
 INFRATEL  69036 481/283 382


Recommendation The stock has managed to give a close above the declining trend line on the daily chart backed by a surge in volumes. Derivative data is also suggesting a fresh long build up which is indicated by surge in price and O.I.
Buy/Sell Range Target Stop Loss
Buy(cash) 165.5-167.5 177 159
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 Day M.A
KTKBANK 4721 181/112 150



Recommendation The stock has given a breakout from its sideways consolidation on the daily chart backed by a surge in volumes; The stock is also on the verge of witnessing a bullish crossover on the daily MACD indicator.
Buy/Sell Range Target Stop Loss
Buy(cash) 323-326 337 315
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
TATAGLOBAL  20489 327/126 216


Recommendation The stock has formed a large bearish candle on the daily chart which has been accompanied by a rise in volumes. The stock has also breached its support levels and has given a close below its 200 day EMA which affirms our negative view on the stock.
Buy/Sell Range Target Stop Loss
Sell Jan Futures 78-79 73 82
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
DISHTV 8362 110/68 82


Recommendation The stock has formed a bearish candlestick on the weekly chart. It has also shown weakness on the daily MACD Histogram. Derivative data suggests fresh short positions.
Buy/Sell Range Target Stop Loss
SELL-Jan Futures 680-684 654 702
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
REPCOHOME 4233 932/552 675

Research Disclaimer

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IPO Note: Aster DM Healthcare Ltd - Not Rated

IPO Note: Aster DM Healthcare Ltd - Not Rated
by Nikita Bhoota 02/12/2018
Untitled Document

Issue Opens: February 12, 2018
Issue Closes: February 15, 2018
Face Value: Rs10
Price Band: Rs180-190
Issue Size: ~Rs980cr
Public Issue: 5.16-5.37 crore shares
Bid Lot: 78 Equity shares       
Issue Type: 100% Book Building

% Shareholding


Post IPO







Source: RHP

Company Background

Aster DM Healthcare (Aster) is one of the largest private healthcare service providers in multiple GCC countries (Gulf Cooperation Council). Company also has operations in India and Philippines. It has a diversified portfolio of healthcare facilities, consisting of 9 hospitals, 90 clinics and 206 retail pharmacies in the GCC countries, 10 multi-specialty hospitals and 7 clinics in India and 1 clinic in Philippines. Domestic business generated 18% of H1FY18 revenue, while rest came from GCC region and Philippines. Aster is planning to add 1,658 beds over the next 2-4 years through 4 new multi-specialty hospitals in the UAE and 5 new hospitals in India.

Objective of the Offer

The Initial Public Offer consists of an Offer for Sale for 1.34cr equity shares amounting to `255cr (on the upper price band) by promoter group company, Union Investments Private Ltd. The IPO also includes fresh issue of Rs725cr, which comprises of issuance of 3.82cr new shares on the upper price band. Company proposes to use the fresh issue proceeds to repay debt (Rs564.2cr) and to purchase medical equipment (Rs110.3cr).


Consolidated Rs Cr.















Adj. EBITDA Margin %





Adj. PAT





Adj. EPS* (Rs)

























RONW (%)





ROCE (%)





Source: Company, 5 Paisa Research; *EPS & Ratios at higher end of the price band.

Key Points

During the Union Budget 2018-19, Indian government announced National Health Protection Scheme (NHPS) to cover ~10cr poor and vulnerable families (up to Rs5 lakh cover per family/ year) for secondary and tertiary hospitalization. This brings ~50cr people under health insurance coverage, boosting domestic healthcare industry, including hospital sector. Aster operates in India with 10 hospitals (3,887 bed capacity) and plans to expand by adding 5 new hospitals (1,372 beds) over the next 4 years. Aster, with its presence in the tier 2/ 3 cities is likely to emerge as one of the beneficiaries of NHPS in India.

The Emirate of Abu Dhabi introduced mandatory health insurance for locals and expatriates in 2006, which increased number of insured people in Abu Dhabi at a CAGR of 7.4% over FY08-13 and covered 3.43 million people in 2015. The mandatory health insurance was also implemented in Dubai in March 2017, which is likely to have brought 1.5-2 million additional people under health insurance coverage by 2017. Aster is well placed in the GCC countries due to its early mover advantage, deep understanding of the region and strong presence.

Key Risk

Profitability has been inconsistent over the past and is likely to remain weak due to cost associated with new hospital additions and lower occupancy in the existing hospitals.

Research Disclaimer

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Attention Investors - Half of Your Salary Raise Should Go Towards the Future

Attention Investors - Half of Your Salary Raise Should Go Towards the Future

Getting a raise in salary is one of the best things for an employee. Professionals from all walks of life set targets and make wish lists in anticipation of a salary raise. A salary raise is usually an occasion for a celebration. To the more savings-minded, it is an opportunity to top-up on their investments. But before you decide to splurge the money, let’s have a look at why a fifty percent of the raise should be invested for your future.

The prevalent thought – Percentage Savings

Retirement planners bank upon the classic “save a percentage” model. It usually means taking a slice out of the income pie every year. There’s no universal consensus on what’s a reasonable amount. A 10% savings on the pre-tax salary seems reasonable to most. The general idea is that, as your salary increases, so does your savings. But there are pitfalls that we turn a blind eye to.


  • Increasing standard of livingWhen you save 10% of your income, you save only 10% of your raise. This puts you in a position of spending 90% of your salary, no matter what the increase. This significantly increases the standard of living and requires much greater savings for an equivalent retirement corpus.

  • Post-retirement difficulty - With the standard of living peaking just before retirement, it becomes difficult to sustain the lifestyle. Troubles multiply after hanging up your boots and a reduced corpus doesn’t help at all.

The alternative – Save your raise

Alternatively, you spend only 50% of each raise, implicitly saving the raise. Instead of dedicating the same percentage of your income to savings, you save the same percentage of our salary hikes.

  • The controlled standard of living Saving half of your salary raise helps you to control the rise in your living standard. Expenditure is capped and savings grow in parallel to your paychecks.

  • Early retirement opportunity  With your standard of living in check, and your salaries burgeoning, you can easily move for an early retirement.

A Case Study

Figures rarely lie. Logic and reasoning need to be backed up by some solid figures to support claims.

Let’s take two examples to illustrate the point.

Case A: Traditional Savings

Mohan starts off with a Rs 4,00,000 per annum salary in the mid-twenties. He follows a 3% savings growth plan. With a reasonable increment of Rs 20,000 per annum, his savings build up somewhat like this:

Now in a period of 3 years, Mohan will have an annual contribution of Rs 13,800 per annum.

Though Mohan possibly becomes a millionaire, he’s forgotten to take the bigger picture into account. He is raising the lifestyle costs by 90% each year.

Thus, an initial living cost of Rs 3,88,000 per annum (Rs 40K minus the 3% saved) can exponentially increase.

With a 4% withdrawal rate, Mohan is going to need a lot more to make it through.

Case B: Saving half your raise

Mohan’s friend Rohan started off on the same Rs 4,00,000 per annum as Mohan. However, he doesn’t plan to save exactly 3% every year. He plans to save half his salary raise every annum.

He puts aside 3% for the first year and then spends only 50% of each salary raise, saving the rest.

In a period of 3 years, Rohan has saved much more than Mohan. His annual savings contribution is now Rs 42,000. His savings graph now looks something like this.

Since he has significantly reduced his lifestyle growth, he’s more likely to make do with a much smaller corpus than Mohan’s on retirement. He had a lifestyle growth which was slower, but it definitely means that he won’t have to do with less once he hangs up his boots

Saving more and spending less is a double blessing. It grants more flexibility during your working career and significantly increases the chance that you will enjoy a comfortable retirement.

It’s worth your while to save that next pay raise—and you deserve it!