Rent vs Buy a house

12 factors that go in the decision Rent vs Buy a house – you can also download the Excel with a real example, change the numbers per your situation.

36 million people move every year, assuming these 36 million people represent 20 million households, 20 million households face the following question every year: Rent or Buy?

In most cases, people say ‘Let us start by renting and then see if we like the place enough to buy’. Although that is a very valid way to think about things, read on to find a holistic scientific method of determining what makes more sense financially?

12 Facts to consider

Continue reading

Importance of Asset Allocation

What is an Asset Class? What is Asset Allocation? How should you determine your Target Asset Allocation?

If you read my blog often enough, and have started to think I qualify everything I write about as ‘most important’ – then you are mistaken (and partly it is my fault). I might be saying those things in a different context.

For example, when I say compounding is your biggest friend, I mean it, but keep in mind that compounding happens over a period of time. When I say Asset Allocation is the most important factor in determining long term returns, I do not mean to say asset allocation is more important than compounding.

Things apart from Asset Allocation are important too, specially how much you save and how soon you start to save, how much expenses do you have etc; but once you have started to save/ invest, Asset Allocation is what will be a primary driver of your long-term returns.

What is Asset Allocation?

Asset Allocation is simply how your portfolio (money) is divided into various Asset Classes.

If you do not understand big jargon like Asset Allocation and Asset Class (and some others) we are talking about today, please do not be discouraged, read till the end. I am introducing these terms so that you can interpret and understand host of information that is available on the internet on this topic.

I could have explained the basics even without using any jargon but I want you to be able to read that Wall Street Journal article with confidence the next time you see it, so getting familiar with the jargon is essential.

What is an Asset Class?

An asset class is a group of ‘investments’ that share riskiness and return. Three main asset classes in stock market are stocks, bonds, and cash. Let us focus on stocks and bonds for now. Stocks are more risky but provide higher returns long term.

By risky, I mean the returns on stocks are more volatile – they might return 25% in a single year but might lose 25% of the value also in a given year. But over a long period of time, their annualized returns are most likely going to be higher than bonds.
Continue reading

Bobby’s theory of Relativity

Time can be converted to Dime and Dime can be converted to Time. Read on to how what should you do (Time-> $ OR $ -> Time) and how should you go about doing it?

Albert Einstein proposed theory of relativity in the year 1905, whereby he established that matter can be converted to energy and energy can be converted to matter.

Today, I am proposing Bobby’s theory of relativity – it states “Time can be converted to money AND money can be converted to time”.

Time can be converted to money

Continue reading

Shark Tank Audition

Read on to find out how my Shark Tank audition went and how I was sitting there documenting my thoughts so that I can share them with you.

This was the most beautiful face at the audition, so beautiful that I had to remove my face:

Winner of the ‘Most Beautiful Face at Shark Tank Audition, Miami, 3/3/2016’ (Awarded by One More Dime)

I had my Shark Tank audition on 3/3/2016 but I will still write the post as if this was today.

Here is how the day went:

I planned to leave at 6.30am – I was in my car at 6.35am. Continue reading

IRA accounts (Ultra-rich vs Rich vs Poor)

Ever wondered how the Ultra-rich use IRA accounts? And how people with moderate means can also use the IRA accounts? Read on…

In recent past, my Roth IRA account’s worth reached $100,000 so I am personally very excited. I can be considered rich by many standards. Today, we will talk about Roth IRA accounts and how the ultra-rich and rich use it. We will then continue to talk about the middle class and the poor – and explore what can they do to be able to save a little more.

(You can also skip directly to rich or middle class/ poor section if the ultra-rich jugglery does not interest you).


Ultra-rich use several different techniques to make the most of Roth IRA possibilities. The most widely used and easiest to understand is “Buying pre-IPO stock that records a 2,000% gain as soon as IPO’.

IPO stands for Initial Public Offering. Any company usually starts because a few like minded people come together and start to create a new product or service. They put some of their money and start the company.

If the idea starts to do well, they will find investors to invest some serious money. Once the company becomes successful, then they go to the ‘stock market’ and sell part of their (owners + investors) ownership to common public through an IPO.

The company has a lot of flexibility in deciding how much to ‘charge’ for the initial distribution of shares.

The name of Max R. Levchin (Yelp) comes up often in these discussions, let us examine what he did:

He acquired Yelp stock mostly for free. At one point, he held about 29 million shares of Yelp.

Yelp went public in 2012 at stock price of $15. This means Max’s 29 Million shares would have been worth $435 Million.
Continue reading

Compare 30 year vs 15 year mortgage

More than 5 million homes get sold in the country each year. Assuming 80% of them are financed through a mortgage – 4 million households face the question ’30 year vs 15 year mortgage’ every year (and in my opinion 90% – 3.6 Million – do not understand all the differences):

How to compare 30 year vs 15 year mortgage?

 First off – there is no straight forward answer to the decision between 30 year mortgage vs 15 year mortgage, here is a screenshot of an Excel spreadsheet that I developed to make my decision:

30 year vs 15 year mortgage

30 year vs 15 year mortgage

What are the factors that go into that decision?

Continue reading

Making money by moving money – 1

Make money by moving money

Make money by moving money

Today we will see how to make $592 in 22 minutes.

I received a letter today by mail that told me about a promotion offer being run by a bank: Earn a $500 bonus by depositing $50,000 for 90 days.

Essentially – you open a savings account with this bank, transfer $50,000 to the new account, leave the money there for 90 days, and the bank gives you $500.

Although I will explain the $50,000 example today, the bank has offers for deposits starting $5,000. 

What is the ROI (Return on Investment)?

Continue reading

Buying vs leasing a car

Leasing is for rich people and buying is for people who want to stay rich. Let us examine the differences between buying vs leasing so that you can decide for yourself if buying is better for you or leasing is.

In my opinion, the primary (and perhaps) only advantage leasing offers over buying is the convenience of having a new car every 2-3 years. Still go through the complete post and decide for yourself.

Definitions – Buying vs Leasing

Let us start by defining buying vs leasing:

Everyone knows what buying a car means – it means you own the car, it is yours, you can use it for as long as you like, and sell it whenever you like.

On the other hand, leasing is renting. You do not own the car. The dealer owns the car, he rents it to you for a fixed period of time (usually anywhere from 2 to 4 years). You pay rent every month. At the end of the lease term, you return the car to the dealer.

Arguments people make

Continue reading

IRA versus Roth IRA

Deciding factors: if the contribution is deductible, tax bracket in retirement versus tax bracket today, income levels today, current age, and availability of  retirement plan at work.

If the question is whether you should invest in an IRA account (including traditional and Roth), then the answer is YES (capital bold yes)*. If the question is whether you should contribute to a traditional IRA or a Roth IRA, then the answer is ‘it depends’.

It primarily depends on several factors. Two of these factors are the most important: whether the contributions are taxable in the current taxable year, and whether you expect your tax rate to be higher or lower (as compared to the current rate) in retirement.

The basic idea of an IRA account (traditional and Roth) is 'Money is taxed by the IRS only once' - either you get taxed now OR you get taxed when you withdraw the money in retirement.

Continue reading