#Throwback2017 General observations. Bulls, SIPs and gyani investment babas

2017 - year of the Bull

Wishing you all a very happy new year, filled with good health, success in your endeavours and a step forward to complete financial freedom.

2017 has been fantastic for equity investments and do see the chart prepared by Rajesh below.

Just wish to make a few observations:

All those who have remained in the markets since 2008 have truly gained. They have seen lows and have understood the necessity of asset allocation. They remain grounded and have taken advantage of this bull run. While, this year has been good and in fact the last 3 years have been great, investors will do well to remember years when things did not go well.

Thousands of new investors have entered the equity through mutual funds – mainly using SIP as an instrument. The industry monthly SIP book is almost 6000 crores now. SIP has been a wonderful way to enter for those who earn a salary and for those whose cash flow allows a specific sum to be invested every month. 

Source: AMFI

The one thing I can say is that simplicity scores over any complicated investment method. Salaried professionals simply have no time to look regularly at their portfolio and keep a tactical portfolio running.

There has been no dearth of social media gyani investment babas waiting for the market to crash. Some of them seem to be waiting to tell the new entrants into Mutual Funds that mutual funds sahi nahi hai!! Waiting to tell the SIPers that that SIPing does not take out risk from equity. Today also one worthy on twitter said that he was waiting for years of single digit returns so that his point was proved right! Phew!

No investor says that SIPing takes out risk from equity investing. And we know that the market will crash sometime. We SIP not because it is a risk free method of investing, but because our cash flow allows for monthly investments. It is a tool to maintain discipline and automate the saving/investment process. Using SIP does not mean not allocating to debt! IMHO the best advice is one that makes you STAY THE COURSE and stick to your investing principles. Stay the course, shut out the noise and you will do well on your path to complete financial freedom.

Equally, many gyani investment babas like only 1 or 2 particular fund houses because of their “perceived honesty” and criticize others. They have have missed out! Be open to ideas. Always be open to new ideas. Approaching investments with a closed mind is having a frog in the well approach There are some great fund houses with some great schemes and fund managers. You miss out if you do not use these to your benefit. The light blue line in the chart below is the fund with a low TER and the orange line is a NIFTY ETF. These are one year returns. These are all large cap based funds that I track. So, be open and do not miss out on good opportunities. Yes, times may change and one day we may move into an era of passive investing. Till that time comes, make the best out of active funds. Be open to changing over to passive investing too :)😁

One important point: Many will not agree with me, but I would certainly NOT neglect mid cap based funds just because they have run up a lot. More on this in a future post.
If you've remained in SIP in a mid cap fund for the last 5 years, you've surely got an XIRR of > 25% in that fund. However, keep expectations grounded.

A note on debt: Just because the last one year has not been good for debt funds, do not neglect these. The GOI 10 year bond is at 7.33% now and FD rates are at about 6.75% only for a one year FD. Rates look to be inching higher and definitely bond funds look attractive. Some of the shorter duration and accrual funds we track have all given a CAGR of > 8.5% over 3 years.

Finally a few words for 2018

• Imbibe principles of personal finance and investing well
• Be disciplined when it comes to working for complete financial freedom and automate the process
• Stay the course
• Do not procrastinate ( in cleaning up portfolio, in rebalancing to original allocation etc) 
• Cut out the noise from financial media – learn to filter out the information you need
• Last – take help if you need it.

Once again, wishing you all a happy, healthy and successful 2018

Mutual Funds are subject to market risk. Read all scheme related documents carefully before investing

Cafemutual interviewed me...

Cafemutual intervewed me recently when they were looking for the most (top 3) followed mutual fund advisors on twitter. The below is what they published

Getting a loyal following on twitter is every advisor’s dream. While most advisors are yet to reach their first 1000 followers, these two IFAs have taken social media presence to a whole new level. They have not just established themselves as thought leaders but managed to get more than 10,000 followers. In this interview with Cafemutual, they reveal their unique style of tweeting.

Mahesh Mirpuri of Invest Mutual, Chennai

@invest_mutual

Followers: 11368

Joined on: July 2011

I started using Twitter before I became an IFA. I believe since Twitter is a social media, one should focus on personal interests and passions. Hence, apart from mutual funds, I post tweets on personal finance, Sanskrit and Vedanta.

In fact, in my profile description too, I have specifically mentioned this to let my followers know what type of posts to expect from me.

By sharing infographics and giving commentary on news or articles, I am able to reach out to a wide audience. In fact, many people in my Vedanta and Sanskrit lists have approached me for financial advice.

In addition, I make it a point not to give advice on Twitter. I keep it strictly for socializing. If someone asks me a mutual fund query, I encourage him or her to become my client first.

My advice to advisors is to increase interaction with people on social media. If someone has posted a tweet, reply immediately. I am never shy of replying to industry leaders, CEOs, CIOs and fund managers. By interacting with various people, I have increased my visibility. Recently, a fund manager approached me telling he recognised me from Twitter. 

Personal Finance: From darkness to light

Diwali is here and we have some really great words of wisdom from many investors and advisors on investment strategy and on behaviour patterns required to be successful in investing and reaching financial goals.

The avalanche of news articles, advertisements along with lower returns from traditional investment avenues that guarantee returns have prompted many to seek out newer products. Many of you are new, first time investors, shifting tentatively from FDs to investments that give market related (not guaranteed) returns.

The most common places for information we go to are news articles, opinion in the finance pages, TV channels. We do get some really great information from here but truly useful information is hidden among a lot of rubbish. Unfortunately much of what is bandied about is exaggerated, inappropriate and I find many getting utterly confused on what to do. More importantly, they make you feel you are missing out and lead you to hara-kiri.

Another person who freely dishes out information is that Bank “Relationship Manager”. I’ve personally never seen so many untruths being spoken as when I hear a Relationship Manager speak about an investment. His/her only relationship is with the money in your account which may have come from a matured FD.

So, what should investors do?

First – take some effort to move from darkness of ignorance of financial instruments towards the light of knowledge

Spend some time learning about various financial instruments, how they work and what you can expect. Such information does not come from the questions on in newspapers or on CNBC asking “Which is the best Fund?”. Neither will it come from WA forwards on investment tips. It requires some time to read relevant books on investments and simple financial primers explaining various instruments.

An investment in knowledge pays the best interest. This learning does not take too much time and only requires some interest and commitment on your part.

Second – seek advice and learn

While I was addressing a large group on personal finance – a group of about 80, only two persons could answer a question of mine on how a mutual fund worked. If you don’t know, it makes sense to seek advice, have someone to guide you and teach you. Your advisor, guide, financial mentor can keep you focused, impart his wisdom. Wisdom is more than just knowledge about financial instruments. As I hinted above – right at the start, your behaviour, your reaction to various events, attitude towards finances can be changed which is the most important factor in attaining financial goals.

While many of you have entered the markets for the first time in this bull run and have had a great experience  in the last four years, it is imperative that you are aware of what you are getting into and enjoy the ride, with the light of knowledge guiding you in your path to financial freedom.

I wish you all a Happy Diwali, healthy and prosperous new year and success in your journey to financial freedom.

असतो मा सद्गमय । तमसो मा ज्योतिर्गमय । मृत्योर्मा अमृतं गमय । 

Integrated personality and success in your financial life

I met a young investor several months back wanting to make a start and he decided to invest in an ELSS scheme. He took the KYC forms and promised to get back in 2 days. Months passed and even after reminders, there was no information, till last week he called and lamented that a huge amount of TDS had been cut from his annual bonus received in the end of Jan!! (He has delayed in making the investing and did not submit proof to his HR)

Now, another investor: A young lady, at her first job discussed a plan for savings and investment last year and started with an SIP of Rs 2000.00, promising to increase SIP by Rs 10000.00 after a year. She has just come and actually made the NEW investment even though her increment was not as expected. Was truly impressed when she said that she would not let anything get in the way of the plan and would cut unnecessary expenses.

You can already guess who has a greater chance of achieving total financial freedom!! The difference in the two investors is the heading of this post – Integration of one's personality!! - Integration of the various layers of personality is a very very important factor in achieving success in ANY field let’s see how this works. First, what are the layers of personality referred to here?

Layers of personality

Intellectual layer: All of us individuals have an intellect (brain!!) which receives information, processes it, learns new facts, discriminates between right and not right and makes a decision. Planning, analysis, deciding processes etc are the functions of the intellect which makes decisions. So deciding on how you invest, how much to invest, planning our budgets etc. etc. are a process of the intellectual layer of our personality. (Alas, many do not fully use their intellectual abilities and just amber along, which is the subject of another post)

Now, this decision made by the intellect needs to be implemented!! In between the decision and the implementation come two more layers of our personality – our MIND (mental layer) and our BODY (physical layer of our personality). The mind is a fickle thing, has strong likes and dislikes, needs, desires, wants the easy way out (jugaad), is pulled by the various things of beauty and novelty in the world around! It is very strong and PULLS the body along with it. It is often working at a tangent different from the intellect.

To give an example, you have decided to take an early morning walk and set the alarm for 5.30 AM. The alarm goes off. Invariably the fickle, pleasure loving mind will want another 10 minutes more of sleep!! This snooze thing is a real killer and you never get up. But note what has happened. Your mind and body are opposing the decision of your intellectual layer!! Let this happen a few times and you will NEVER get up early. The same is the story with all new year resolutions!

Integration of our personality – when the intellect, mind and body are aligned

It’s easy now to see what we need to do but most difficult to implement. Integration of our personality is the complete alignment of our decisive intellects, our minds and the body. If the intellect works out a plan or even decides something small, the MIND SHOULD agree to implement without excuses and the body should be in alignment working towards our objectives, goals.  If not done, it will weaken your personality as you consistently negate yourself.

When investing, we often decide an asset allocation. If the market is shooting up wildly, see how our minds go crazy with dizzy excitement and does not implement the decision, justifying it instead - giving or making excuses!!! Looking objectively, you know this can be harmful. Many such examples can be given.

Exercises to practise: Simple methods have been given to practise integration of personality. Just make a start by being on time – ALWAYS. Being punctual is a proof of integration. Another good exercise to follow, is to positively give up some favorite food for a month and ensure that the craving mind and body follow!!

Successful living: The bottom line is to ensure that the discriminating, thinking intellect, the mind and body are in perfect alignment and harmony. Look around and see all instances of success. They did not happen purely by luck. The individuals have been decisive and with the different layers of their personality completely aligned towards their objectives. The adage – united we stand, divided we fall applies to layers of our personality. Ultimately it is we ourselves who are our own friends and our own enemies.

If you wish to invest in mutual funds through me, write to me . You can also message me on twitter @Invest_mutual

Mutual Fund investments are subject to market risk. Please read all scheme related documents carefully before investing.

Empower Yourself - SM, a great tool you can use

The IFA Galaxy 2017 Annual Summit concluded yesterday and the theme was LEAP - Learn, Evolve, Adapt and Prosper.  The below is my piece published in the Annual Souvenir.

Empower yourself

(Social Media - a great tool you can use)

Many years ago, (maybe 20 years) as I was driving down Mount Road in Chennai, I saw a huge hoarding with an advertisement for the Economic Times that has I remember and recollect often. It had a picture of a ferocious canine looking down menacingly at a little cat that was sitting surprisingly calm, unafraid, staring right back! The caption of the advertisement read – THE POWER OF KNOWLEDGE. The picture made me stop driving and look again. The dog was chained to a post and could not move and the little cat was aware of it. This knowledge gave her the power to sit calmly and stare back!! Made me laugh then, but this has stayed with me.

The simple message from this – Knowledge IS power! Empower yourself through knowledge. In whatever field we are and whatever profession we follow, we can grow, evolve and adapt only if we have a continuous learning process in place.

Social media – a means to empower ourselves

As professionals, it is imperative to read, stay in touch, get information and in depth knowledge about every aspect of our business. I need not mention the various sources of getting information and means of knowledge, but wish to emphasize here on using social media as a wonderful means to empower oneself. I was surprised that someone suggested to advisors not to spend time on social media! We have five sense organs to gather knowledge from the world outside. I consider social media as a sixth sense organ we can use to get access to information. Those who do not use this great tool to learn and get ideas are simply shutting out one means of knowledge.

Bloggers today write on a range of topics - from personal finance basics to in depth analysis of securities, from detailing products and methods of investing to behavioral finance. These will give you far more knowledge than anything you read in the financial papers. Twenty odd years ago, the above advertisement pulled me to the paper, but in general, mainstream media often does not measure up these days with shallow and biased analysis. These are shared on various media.

Many on social media often mine data and give in depth commentary of major events like the budget which is often lifted by print and TV media. Media now-a-days lifts tweets of leaders etc. and presents this as news! In fact, the world gets to know future US Policy from the US President’s tweets only!    Unbelievable is the fact that information is available absolutely FREE to us when one pink paper is charging to read its stuff online.

In additions to the blogs we follow, twitter and facebook are simply a must to get a pulse of what is happening in your profession. Conversations of investors, commentators and analysts give a great insight on events and on regulatory developments. Unlike mails, you will almost certainly get a response on social media to a query you put to an expert. And, it is instant. I mean, imagine getting almost instant responses from a Professor of Finance at a Management Institute or from a fund manager! I have learnt more seeing the approach of fellow professionals on social media than from any relationship manager.

Are we clued on to the thoughts, needs of investors and clients? If you aren’t using SM well, you are simply missing out. Responses to a simple post on FB will give you more information that you think.

We are in a situation where the mutual fund industry is growing much faster than we thought it would. Investors are maturing in their outlook and there are big changes coming in the way the advice is given. Products are manifold. My simple message – among the various sources of knowledge, learn to use SM well. It will serve you well in the years ahead!

Budget speech - some highlights

Some highlights from the Budget Speech

1. Total expenditure 21.47 Lakhs crores 

2. Increase in Direct Tax collection by 34% after demonetisation.

3. Holding period for LTCG for Land & Building reduced to 2 years.

4. Carried forward of MAT Credit for 15 years instead of 10 years.

5. 5% tax exemption for companies having turnover below Rs 50 crores.

6. No cash transaction above Rs. 3 Lakhs will be permitted.

7. Maximum Donation receivable from unknown source by pol party will be Rs 2000.00

8. Change in period of limitation for scrutiny assessment.

9. The tax rate for the slae between Rs 2.5 lakhs and Rs. 5 Lakhs has been reduced to              5% 

10. 10% surcharge for assesse income between Rs 50 Lakhs toRs 1 crores.

11. Simple One page Income Tax return proposed.

12.  IRCTC to be listed

13.  Corporate tax for small corporates - MSME with turnover upto Rs 50 crores will be 25%

14.  People not filing taxes for the first time will not be subject to scrutiny

15.  Huge focus on infrastructure spending and poverty alleviation

16   Base Year for indexation now 2001 instead of 1981 for long term capital gains

17.  Capital gains period for real estate reduced to 2 years

18.  Fiscal deficit contained - at 3.2% of GDP