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Thursday, January 16, 2025

Reconstructing the portfolio

 I have received few messages from the old members of the group, specially.

They're asking for rationale regarding my shift to index fund and back to face on next Nifty and all market index funds.

I fully understand their concern because I have changed my advice and strategy over the years. But this is not unnatural and infact one must keep reviewing once owns stance and portfolio with the changing Times. 

10 to 15 years ago there was no total market fund and index funds were just being introduced with no clear direction from the AMCs.

The large and midcap funds were giving decent returns and the small caps were having a good run. 

On my personal front I was always preferring what are now called Flexicap  funds because the multicap fund had also not had a separate Avatar.

In fact 2018 when various funds were re-classified with not just the change of name but also the mandate.

This naturally disrupted lot of things and before we could say Jack Robinson COVID struck.

After covid there was a massive Bull run which gave astronomical returns across all funds and very soon the valuations became unrealistic.

The small cap and mid Cap fund managers started becoming scared because there were no stocks to buy.

In this entire turmoil which people saw as opportunity I observed that just sticking to 1 particular market cap was becoming very difficult ; as in a short time the scrips were moving from small to mid and mid to large caps. This was making selection of fund very difficult.

Therefore in an attempt to further automate the decision making of investment I decided on two strategies: 

1. Firstly to have one active and one passive fund in the market cap that we were investing. e.g. if you had a large cap fund then add a next Nifty index fund to it.

2.  Secondly instead of trying to catch the Nifty 50 or sensex 30 index fund aim to maximize the profits by investing in more active companies which were less volatile than the midcap and more active than the larger index which is Nifty 50, you can say taking the middle path. 


3. Thirdly I observed that over limited period Nifty 500 give an average return of all the large mid and small cap. And just about 2 years before Nifty total market index was formed which included over 766 top funds of the country. 

In my view this was the best fund which could impart stability to any portfolio without compromising on the returns or any AMC falling out. 


This is a calculated strategy which will work as long as your expectations are not unrealistic and you should not hesitate in making adjustments to the strategy as you move ahead.

You should not limit yourself to this group and take professional advise also whenever you feel unsatisfied with your portfolio. Always select the best advisor and pay the top dollar to get his advice.

But you should always remember to ask the rationale if the advisor suggest some radical changes.

Wednesday, January 15, 2025

What to do in this down market?

 What to do in this down market?


Quite a few of you on this group, maybe seeing a market falling like this for the first time and it may be unnerving you and some of you may have started thinking if you have done the right thing .

Today I must say that this has happened so many times before not only for a day or week, but even for months together . 

So naturally to a new investor the most automatic question which comes to mind is what to do in this type of market situation. 

Usually, there are three types of actions which a person wants to do, and depending upon what kind of a person we are, which means that the action is actually in the mind much before we even take it.

To a very new investor who gets unnerved- the most natural reaction is to sell and run because he thinks that he has come to the wrong place and this is not his fault and the FD or maybe even the saving the account is much better.

To the second analogy, more experienced investor the thought comes that let me sell and wait to buy again at a lower level .

A third type of investor who still has money will like to put all at once to take the advantage of the situation.

But an even more seasoned investor will start making bulk purchases, but in steps and in addition to the SIPon STP that are undergoing . This is of course, the most equanimous  situation.



It’s A no-brainer that the last situation, obviously the best . 


In addition to this, then maybe other people like me who have been invested fully and have nothing more to invest. Such people would be like yogis who just sit  still and either watch things happening or don’t watch them at all but definitely don’t do anything at all. THIS IS CERTAINLY THE MOST DIFFICULT THING TO DO, BUT IT IS WHAT SHOULD BE DONE. 


But there are other things that a person can do as a investor apart from simply investing more or not investing at all..


1. They should review each and every Fund of their portfolio by opening out the list of all funds from Value research and checking how much their fund has lost in the last three months. They should go to a longer history and see how the fun has performed at different times like during the last election or the two lockdowns or in 2022 .

comparison with other funds and checking out the weather performance who have kept themselves in the top 25% will give them a fair idea of what is the nature and capacity of their fund and the fund managers.

2. They can also compare their funds with the index funds and the ETF funds of the same category and the benchmark. This will provide them with a self-made Plan for future.

3. We should check the performance of all the star funds and their managers which they had been listening to in the last two or three years like those of Quant , canara robecco, Motilal, and the others.

4. Lastly, the above observations will provide them with food for thought whether it should exit their star fund to move with the more seasoned and vanilla type performances or should they give more proportionality for their existing funds.

I GET LOT OF MESSAGES EVERY DAY ASKING ABOUT EVALUATING THE PORTFOLIO OR ASKING ME TO APPROVE THEIR FUND FOR INVESTMENT OR ANY OTHER ADVICE REGARDING FINANCE. but I am happy to say that this time even with the market falling somewhat no one has actually come with the question if they should sell most of them in fact, I’ve asked if they can go for bulk purchase purchases..

This is a sign of great maturity of the members of this group and I must commend group for that.

As you may have read so many books on finance, (which, fortunately I have not), you may have come across the famous words  That-  be  greedy when others are fearful.

So this is the time to apply that saying, however there is something weird that is happening this time and that is the people are not fearful at all.

Almost every day the mutual funds are making buys in 3 to 4000 crores.

This is again the immense faith of the people in the markets.


So Godspeed, all of you and a very happy Makar Sakranti Pongal and happy kite flying.

Saturday, November 16, 2024

Tenth anniversary musings

 Tenth anniversary musings


… And so today I complete 10 years of exiting my career and sole means of livelihood and maybe to others what may seem as the only identity that a person bears.


I have tried to write something about my life into self-imposed retirement, almost on every anniversary, but nothing ever made any sense; and that may have been it is a point in life, which maybe , has no bearing to anyone else.


…And why should it be?


A person is born as a piece of statistics every second and is only important to his mother or his immediate family. Slowly as he keeps growing he keeps finding out that he’s actually of no importance to others and his life actually makes no difference to this vast World.


Like every other human being, capable of doing something… he keeps doing something for himself to grow his small feathers which can make him capable of flying in this world. The process keeps on till he further gives birth to another human being and imposes his will on that entity by giving his selected name, religion, nationality, and further subdivisions that Society can recognize him with.


Very soon with the passage of time he finds that his agile body does not remains so anymore and his spine, which could at one time help him stand in the face of this world … now starts getting a little bent, but not flexible.


This inflexibility does not remain restricted to his body, but becomes a part of his beliefs and psyche, and it refuses to change but expects that everyone should adjust to his ways of thinking… how comical is that?


As a male and probably some female too, all that remains of its identity and entity is the profession that he has been known with. Even in the modern world, he is no different than the other menial task carriers of century old underprivileged people who were known by the profession that they carried out . Just like people were known with the surname of leather workers or pottery workers or jewelers, etc. even in the higher economic group their only identity was that of engineer, Dr , chartered, accountant, politician, etc..


He never tried to show to this world, his other facet of his personality, which actually make up one’s character.


It is this conventional image that I wished to shake up and shake off. Having taken up the profession of an engineer, rather very reluctantly I did feel very proud of it as long as I practiced it because it helped me keep my brain working and the fire in the hearth burning.


However , all through my career and life I was very sure that I had to only work as much as it could provide the means to sustain my future life and no more.


Even in my childhood, I could see thousands and thousands of people getting up in the morning and rush into the jobs coming back in the evening and at the end or beginning of the month getting some paltry money which just about kept them alive. Of course, this was not applicable to those who did the conventional jobs which could sustain the society, but even to those of the creative and artistic Creed, like writers, poets, musicians, singers, actors, etc. Almost everyone had very sporadic bursts of financial means which somehow could not sustain him or his family for life and do some good manage to keep their head above water. Most of them died in abject penury and tuberculosis.


I knew I had to change this. I also knew that I had to change it not only for myself, but those who worked with me and those worked like me and around me. 


What I did and I am doing in that direction is known many and there is absolutely no need of going into that but I did realize one thing that be it artistic independence or search of spirituality it did not come to a hungry stomach and it was absolutely no romance in being poor.


Certainly , having too much of financial muscle and too much affluence did make one arrogant insensitive, and disconnected from the society but it also goes without saying that the absence of financial means made one weaker.


Now 10 years into that unknown world of getting up on the morning of 17th November, and not being answerable to anyone was quite a heady feeling and certainly not scary.


My career at see certainly did allow me to feel arrogant and humble (at the same time ) Apna about two things.


Firstly, that once we were outside the port limits of any country, we were beyond the laws and rules of any entity and any political power of this world . Your survival at sea was not dependent upon the political laws laid down by any constitution, but by your own good behavior amongst your comrades and colleagues. There were many who flouted this cardinal rule and ended up at the bottom of the sea.


Second aspect that I realized almost in the first week at sea was that we are almost like paper boats in the hands of the five elements that we saw around us. When I used to read the news about countries and individuals fighting against each other I used to and still do feel pity and compassion at them and their small thinking. Nobody even realizes that they are nothing but small specs , lesser than the dust, in the hands of nature and it takes less time to extinguish them than the flame of burning candle.


However, the morning of 16th November, when I disembarked last time from my last vessel at Amsterdam I was certainly emotional, but very determined and upbeat about my future life and was telling almost everyone from the boat driver to the immigration that it was the last time that they saw me as a sailor.The past decade has mercifully seen me putting on so many caps and masks and trying out every activity that could satisfy various urges of my physical and mental existence on this planet. I succeeded with all of them to varying degrees because when you have set your own goals, you can never fail. 


A Sailor’s career prepares himself for one thing and that is immense faith  in himself. When at sea he knows one thing that except the five elements and his interaction with them , there is nothing and nobody who can come to his Assistance and Rescue. A similar parallel could not be extended to his personal and family life. it was this that I wanted to work on.


At the end of these 10 years of retired life, I have moderately succeeded up  in bringing independence to the financial life of a sailor and make him strong enough to stand on his own without the support of any government or his employer or society.


I have absorbed in a few cases that where a mariner has financial independence, he could still be troubled with various mental phobia and agony because of low self esteem. I am working on this by creating various interactive groups, specially for people who are in the age group where they have to prepare to quit sea .


Members of my brethren did not see me as a person teaching the tenants of financial independence to them, but give me the rare privilege of looking into their most intimate and private life, and help them with various traumas that they were facing .


All this did make me more tender and receptive, but it certainly did not slow down the process of my aging . The physical activity through regular regimen could not still keep the same level of agility as it was on board. Within a short time, I developed various issues because of long driving that I enjoyed and extended period of sitting in meditation..


Now, when I look at the decaying body in the mirror it does not sadden me because I feel that I have gone beyond the body by utilizing every day and every moment to live; and living or enjoying not in the conventional or hedonistic way, but beyond that by utilizing every unit of time and every cell of the body for others. 


My practice of the Vipassana oriented meditation taught me objectivity and not torturous methods of organized faiths.


And know when I looked towards the seventh decade of my physical existence, I wish to do it without any significant change or variation without any grandiose plans .


I do not wish to change the world. I do not wish to make it a better place to Live. Because I know, and I realize that it will change as itwishes to do.


I want no remembrances of it, and I do not wish the world to remember me either .


I do not wish to be known as a person who made any mark in this world or leave any indelible signs. 


I know better than that than to expect all this.


A person on this planet is only capable of just being there How important he may seem to himself he will be forgotten, almost as soon as he exits.


So all that one should aspire for is discovering peaceful way of going into the deep slumber from which no one rises again. If it can be done painlessly, he has succeeded if not, then he should Try better in the next world.

Monday, November 11, 2024

Children and their Foundations

 Today’s ET Wealth had an article about teaching equity investment to teenagers, and there was a case study shown of a 16-year-old who had been using the trading account of his father.
For the first time I felt cheated that such a great publication can actually misguide the youngsters
Instead of actually teaching children about the basic concepts of economics and how it helps to build up national and personal wealth, the publishing articles which will actually detrack and distract the youngsters.
As it is a large number of youngsters have lost phenomenal wealth by doing trading after the lockdown because they got into the habit of it during the Covid lockdown.
Now by doing this, they are targeting the younger age group, which should actually be learning about fundamental subjects to build a great edifice of their life on it.
Or simply teach the children how an individual or a company or any organized entity helps in building the nation that should be good enough .
Simply teaching those children the basics of Bank and banking should also be good enough .
What we need to teach children is that our WANTS are unlimited, but MEANS are always limited .
What we need to teach children is that they have choices to make, and what other factors which can help them in making those choices .
Please do not get swayed by such articles and misguide your children. There are so many things that your children need to learn along with their sciences and other aspects of life.
Please do not be shortsighted by teaching them about simply trying to make money by the stock market instead of concentrating on their profession .
Even I am of the opinion that finance as a subject should be taught in schools, but that does not mean that we start teaching children how to play with fire when it is hardly required .
Please be careful.

Monday, October 28, 2024

The glorious past and us

Ref: a YouTube video was posted as a conspiracy theory questioning why Mount Everest was not named after an Indian.

You can’t take away the fact that Sir George Everest surveyed not only India or the Indian subcontinent but even as far as New Zealand.
Event today in India, the milestones are the ones that were laid down by the British with the help of the Gurkha Regiment. I am surprised that they are not demarcated in miles but rather kilometers and meters. How many of you have seen the subclass stones which are laid out every 200 m.
The office where Radhanath Sikdar calculate the height of Mount Everest and rushed to the surveyor generals office is 3 km from my home.
We must give the credit to the British that they did not name the peak in the name of any Emperor or Empress of the time, but in the name of the employee .
I don’t know why do we get excited every time you see a video indicating the glorious past of India? 
We must not forget that it was some enlightened people of the British and the French colonies, who made us realize our own great scriptures, and are great past .
Our forefathers and ancestors may have made discoveries but they were all lost to us and we were making precious little use of it if you make the exception of  Sawai Jaisingh who made 5 Jantar Mantars.
We keep harping upon Charak , Sushrut , Patanjali and the like.
But why in 3000 years, we could not set up a strong healthcare system with organized clinics and hospitals .
Surely the diseases were not that new that they did not find mention in the scriptures.
It is also a fallacy that our ancient discovery and inventions were not recorded they are very much documented and are found, but only in English publications discovered and translated by the British.
The great Indus valley ,various buildings, Buddha viharas all were discovered by the British French or Portuguese.
We keep saying that Turks and mongols attacked us.
But why did they attack us and how did they manage to get a strong hold? 
How is it possible for someone to come and fight effectively with the resident army? 
All over the world there is a clear proof that the aggressor has never won a war In the land of the defender, then how was it that in India after the other foreigners had a foothOld but we never learnt any lessons.
We kept ourselves divided like the European countries before the first world war and for amongst ourselves exactly like the two world wars were fought.
Hell even the Kamasutra had to be discovered by someone and translated to us to

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Check the above Google coordinate 

Do you see that road called NainSingh Road?
All the blue part is actually within the campus of survey of India and the 150 m part connecting up to Canal Road is the one that is open to the public .
I have yet to meet a single person in Dehradun who either knows the name of this road or the importance of  Nain Singh.
The above video shows the importance of one man called Ramanath Sikdar.
Why no one knows about Nainsingh who was a spy of the survey of India and is the single person who has mapped the entire forbidden city of Lhasa. https://en.m.wikipedia.org/wiki/Nain_Singh
No one in the entire history of mankind before him was ever allowed to walk the streets of Lhasa .
He discovered and recorded the topography of entire Lasa with the help of a single compass and a thermometer which he used to Calc ululate the altitude of Lhasa because he did not have an altimeter.
Our glorious past has everything to do with the annihilation of Buddha and his teachings and his followers whom we threw out and decimated within 500 years of his existence.
Had his teachings not been retained by a small country called Burma- he was lost till the world
We all know that the martial arts were developed by the Buddhist monks, but nobody ever tried to find out why they did it.
After all what things of material importance would this monk have that could be looted by the thieves as they were flying to Japan, China, and other countries why would their life be at risk? 
We ourselves don’t like to ask questions .
After reading the above wiki article on Nain Singh Rawat would you even for a second not call him a Risshi or a researcher.
His knowledge was simple and pure- nothing about British or ancient , it was just knowledge.
The British never disapproved of our astronomical knowledge ( pun intended) or our discovery of zero. 
They probably built modern edifices on our ancient knowledge.
I am not an Anglophile but I do like to mention quite often that when we were fighting was with each other, Shakespeare was penning masterpieces that we torture our children with now.
So we don’t know if the war was more dangerous or Shakespeare 😊

Wednesday, September 4, 2024

Compounding of Businesses - A practical case study

 Compounding of Businesses 


There are plethora of articles on the net and quotes regarding compounding and how it works magically or like wonder of the world. 
Just like compounding works organically for an individual. It works for a business also, and the process gets magnified and expedited if the processes and business practices are ethical and dependable.
I will relate once such business and the owner to you.
On 6 of June 2002 a youngster came for an appointment with me as a mutual fund advisor or distributor as an employee of a not a very well known brokerage firm. He arrived half an hour late by when I had decided to leave for some other place .
We met the next day and I told him that the first step of credibility is being punctual. He never gave me another chance to repeat myself.
I had already been investing in mutual funds for some years after my extended interaction with Mr. Shanbhag. But having found a new person closer home, I started challenging his intellect and observing his business practices.
It’s not that we would agree upon every fund that I invested in, but he always had a reason of suggesting a particular fund to me.
In a span of five years, he won my heart and mind so much so that I persuaded him to resign from his company and set up his own advisory plus distribution business.
In 2007 shortly after he went solo, the entry load on mutual fund was scrapped, which was a direct loss of about 2.25% for any distributor and soon after the brokerages for distributors were also reduced greatly to them below 0.3%. 
The very next year, there was a global meltdown because of American banking system, causing almost 0 inflows in equity.
In 2013 the Direct mode of MF purchase also affected business for distributors 
At times I felt guilty at suggesting him to go independent and offered to share his business and personal expenses, but he was not to be affected and he marched on.
It took roughly 11years to accumulate AUM of One hundred crores. The next hundred crores came in just 3 1/2 years. … and last week going on the reverse he was giving party to the mutual fund industry for reaching 300 crores in just two years.
At this point, it is important to note that a very small amount may have come by way of new and fresh investments from his clients and roughly 30% must have come by the incremental wealth of his clients. And that precisely is his tagline . He does not believe in churning funds for his clients but says that ,“The only way I can benefit is by increasing your own wealth”
His reliability is such that people would trust their WILLS with him rather than their own family members. While working on board, I would leave the entire checkbooks and transaction slips signed with him for regular bulk purchases in case the market went down.
Against my strong advice during the Covid lockdown, he would regularly take his aging clients to AIIMS and other hospitals. 
Not only my friends, colleagues and relatives he has helped me generate meaningful wealth, for my domestic helps and many other people from the economically challenged background.
One thing that he started very late for himself was investing for his and his own family, and I am very proud to say that I cajole , monitor and reprimand him for various of his choices.
He must be the only distributor and financial advisor who listens to his client for his own investments.
Now putting a name to this compounding, wonder- ladies and gentlemen, let me present Pankaj Jaiswal , a profile in moral courage , patience and credibility .



Friday, June 14, 2024

 





 
THE STORY OF COMMISSIONS AND OMISSIONS

One of my hobbies is to collect, collate and interpret data to get some sort of a story or trend into which humanity is moving on short and long term basis.
Today after reading a news item in which the employers of banks, insurance companies and wealth management companies (but not mutual fund companies) are incentivizing the exclusive foreign travels of their distribution network and employees promoted me to extract the data of aum under each industry.

The article that I want to write was in fact about the commissions but I am also going to give you some eye openers about crores of people like you who are called retail investors in common parlance.

Size of Indian Budget that finances the entire country--- ₹47,65,768 cr

AUM of MF industry-                 ₹58,91,160 crore. (Of which 58.1% is in equity mutual funds).

AUM of ENTIRE Insurance sector. -         ₹54,63,414 cr

Total deposits in Indian Bank s- 201,00,000. Cr
( AS FRONT RUNNERS OF FUTURE INDIA YOU MUST GET INTO THE HABIT OF USING THE TERM TRILLION FOR ONE LAKH CRORE)

(Source: PRSIndia.org ; business- standard.com, RBI.org.in)

Did you know that 88% of the equity investments in mutual funds is done by retail investor which includes small individual investors like me and the HNIs like you.
This is as opposed to only 16% of institutional investment ( domestic and Foreign )in the equity mutual funds.
Now furthering the discussion... 58% of the mutual fund outlay means 34.16 lakh crores OR ₹Tr are in equity MFs.
Taking a median expense ratio of 1.0% between regular and direct investments 0.34Tr₹ is the size of expense ratio that the AMCs collectively charge and distribute about 0.15- 0.30% to its distributors (depending upon the Tier cities) .
Now consider 35% of first premium and  5-10% of successive( of 54.163₹Tr) that insurance companies charge you , what do they do with that?
You guessed it right!!! That is the reason your insurance broker has a bigger car than you while insuring your life!!!
The lure is so strong that there are Insurance companies which have doctors, teachers, bankers ,tailors and even petrol pump attendants on private basis on their payroll.
A Seafarer from another WhatsApp group  is so convinced with Ulips that he takes one policy every time he comes back from ship.
His insurance company has placed so much of trust in him that they have made him an insurance advisor. Now of course he is compensated handsomely for the premium that he pays for himself.
Now that you have understood about the insurance let us move over to banking which has almost double the amount of deposits then either insurance or MF sector.
We have been need to understand that our bank deposits and money from saving account goes to nation building And in return we get taxable and below inflation returns. The gratitude that the government shows to the depositors is so great that it even deducts the tax at source above the gigantic limit of rupees 2500.
What the bank does with this deposit of yours... I have already discussed this in my book And you can go over it again to refresh your information.
The whole idea of this small exercise of mine this morning is to make you understand how each and every person out there( and that may include mutual fund companies as well) Is out to lighten your weight of your hard earned money.
I don't think the article will have any convincing effect on most hardliners but at least I have done my job.
Before I leave I would like to mention that I have intentionally left out the topic of real estate and other government aided schemes which punish you equally for the money that you give to them for safe keeping.