Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Peter Lynch on market timing

Posted by Muthu on November 19, 2017

Peter Lynch was one of the best fund managers. He managed a fund called Fidelity Magellan Fund for 13 years, between 1977 and 1990. $1000 invested in 1977 in his fund has become $28,000 in 1990. Money multiplied by 28 times in 13 years, annualised return of 29.21%

I was reading one of his interviews today. Thanks to @stocknladdr  for sharing the link. As you know, we are always against market timing. In our opinion, you should invest when you have money and redeem when you need money, ensuring at least there is a 10 year time period in between.

Peter Lynch has provided a study on market timing. Let us listen to him in his own words.

“People spend all this time trying to figure out “What time of the year should I make an investment? When should I invest?” And it’s such a waste of time. It’s so futile. I did a great study, it’s an amazing exercise.

In the 30 years, 1965 to 1995, if you had invested a thousand dollars, you had incredible good luck, you invested at the low of the year, you picked the low day of the year, you put your thousand dollars in, your return would have been 11.7% compounded.

Now some poor unlucky soul, the Jackie Gleason of the world, put in the high of the year. He or she picked the high of the year; put their thousand dollars in at the peak every single time, miserable record, 30 years in a row, picked the high of the year. Their return was 10.6%. That’s the only difference between the high of the year and the low of the year.

Some other person put in the first day of the year, their return was 11%. I mean the odds of that are very little, but people spend an unbelievable amount of mental energy trying to pick what the market’s going to do, what time of the year to buy it. It’s just not worth it.

Excellent timing returned 11.7%. Lousy timing gave 10.6% and disciplined investing provided 11%. Always keep this in mind and stay the course.

Wishing you a wonderful week ahead.

Posted in Mutual Funds, Stock Market, Wealth | 5 Comments »

How many people in India are rich in 2017?

Posted by Muthu on November 15, 2017

Credit Suisse publishes global wealth report every year.

This year report can be accessed here.

We’re sharing some interesting data from this report every year.

They have taken only adult population into consideration for the purpose of this report.

For dollar to rupee conversion, the rate assumed is 1 USD = Rs.65.

A country is considered rich, if the average wealth per person is over $100,000 (Rs.65 lakhs).

You would be surprised to know that Cyprus joined the list of rich nations this year.

The richest country in the world is Switzerland with average wealth per person of $537,000 (Rs.3.50 crores).Switzerland is the only country in the world where the average wealth per person has crossed half a million dollars.

The top ten richest countries in the world are Switzerland, Australia, USA, New Zealand, Norway, Denmark, Belgium, UK, Singapore and France.

If you are a dollar millionaire (Rs.6.5 crores), you are among the top 0.7% of the world population.

If you’ve wealth of $770,368 (Rs.5 crores), you’re among the wealthiest 1%

The average net worth of an individual in the world is $56,540 (Rs.37 lakhs).

70.1% of the world population has wealth less than $10,000 (Rs.6.5 lakhs).

21.3% of the world population has wealth between $10,000 (Rs.6.5 lakhs) to $100,000 (Rs.65 lakhs).

7.8% of the world population has wealth between $100,000 (Rs.65 lakhs) to $1 million (Rs.6.5 crores).

The top 1% of the population owns 50.1% of the total assets.

The top 10% of the population owns 87.8% of the total assets.

Coming to India, we’ve 245,000 people who are dollar millionaires and above.

0.5% or 42 lakh people have wealth above Rs.65 lakhs but less than Rs.6.5 crores.

7.2% or 6 crore people have above Rs.6.5 lakhs but less than Rs.65 lakhs.

The balance 92.3% of population, roughly 77 crore adults, have less than Rs.6.5 lakhs. This is the most poorer section of our population.

There are 1820 people who have above $50 million (Rs.325 crores).

There are 760 people who have above $100 million (Rs.650 crores).

A dollar billionaire is the one who owns more than Rs.6500 crores.

Out of the 2043 billionaires in the world, 101 live in India.

Total wealth of the country is $5 trillion predominantly in real estate and gold.

The average wealth per individual is $5976 (Rs.3.88 lakhs) and the median wealth is $1295 (Rs.84,175).

Median wealth means that half of our population has less than Rs.85,000 as wealth.

Going through this report reaffirms that other than spending and saving; giving too needs to be part of our financial plan.

Posted in General, Wealth | 7 Comments »

Nuggets for 7th November

Posted by Muthu on November 7, 2017

Some of my recent tweets:

1)We’ve no ability to avoid down markets. We stay invested through both ups and downs with conviction that equity does wonders in long term.

2) It is better to be optimistic always. But many get optimistic at peaks and pessimistic at troughs. Sure way to lose money.

3) Time arbitrage is your greatest edge. When most investors focus on short term, ability to focus on long term is a huge competitive advantage.

4) Even if tempted with super normal returns, don’t abandon the approach which works for you and able to stick during both good and bad times.

5) Luck plays a major role in outcome. But better your process and discipline, greater is the chance of luck leading to good outcome.

6) Look for long term track records. Returns from short term, especially during bull markets, conveys very little about the quality of process.

7) Bad is to live from paycheck to paycheck. Worse is spending in anticipation of future paychecks.

8) Market does not determine your fate. Your behaviour does.

9) Avoiding debt is the cornerstone of wise money management.

10) Traits like delayed gratification, patience and discipline need not be inborn. They can be learnt, put into practice and made as a habit.

11) Other than regular needs, better to postpone our wants by a month and see if we are still interested. This would prevent impulsive buying.

12) Save money during your working years so that money can save you during retirement.

13) Plan in such a way that you work for money for two decades and the money works for you for rest of the life.

14) You need not make money every month or every year. This expectation leads to disaster. Buy and hold knowing that gains are always lumpy.

15) Trying to make money in short term would prevent building good wealth over long term.

16) Knowing what to avoid is very important in investing. Avoid many wrong things, do few right things and then just stay the course.

17) Avoid investments with lock-ins. Hold long because of discipline and not due to compulsion. Never give up liquidity and transparency.

18) Discipline and patience scores hands down than intelligence in investment success.

19) For some, the only investment strategy seems to be making money faster from stocks. This is unviable and would lead to ruin.

20) Whether it is career, wealth or health, thinking long term and avoiding instant gratification is the key to success.

21) Businesses which take long term decisions even if it means short term pain deliver greater wealth to shareholders.

22) How much ever you develop knowledge, there would be many better than you. If you develop emotional balance, there is very less competition.

23) Overreaching for returns many a time ends in wealth destruction instead of creation. Instead of quick, focus on sustainable wealth creation.

24) Don’t look only at returns, especially short term. Look at the quality of process. Long term outcomes are primarily determined by process quality.

25) Mutual funds are best option for those who want to harness the power of equity but may lack time or expertise in stock picking.

Posted in Tweets | Leave a Comment »

How an ordinary businessman made $1.75 billion?

Posted by Muthu on November 5, 2017

$1.75 billion is Rs.11,375 crores. This conversion is to show the magnitude of this sum.

Whenever we hear illustration of if someone has held a fund or stock for 20 years how rich he would have become, we just yawn. We believe those are just illustrations and not a reflection of real life. No doubt it is not easy to hold a stock or fund for 20 years. But I keep giving examples to show, though rare this can be done. We may or may not make  hundreds of crores but tens of crores is possible for high income earners with right investment strategy, patience and discipline.

In 1980, Stewart Horejsi was a struggling business man. Warren Buffett was not well known 40 years ago as he is today. Horejsi heard about an upcoming businessman doing well in capital allocation and building wealth for shareholders. So he invested $10,600 of his family wealth in Buffett’s company, Berkshire Hathaway. He also started adding more shares regularly.

After 3 decades he nearly made a billion dollars out of his Berkshire holdings and got into Forbes list of billionaires. He subsequently diversified his wealth but still hold good number of Berkshire shares. As per Forbes, his current net worth is $1.75 billion.

Buying a good company itself is not an easy job. Keep on buying and holding on to the same for 30 years demands extreme conviction, patience and discipline.

Buy and hold may or may not work for a single stock. But for portfolios, mutual funds and index, selling rarely and holding on for most of the time would work wonders. The argument mainly against buy and hold is disruption. Disruption has always been there for businesses. It is not a new phenomenon. Good companies adapt and thrive. Weak companies fail and die. Buying & holding does not prevent us from tracking developments. Also it does not mean giving up our judgement and discrimination. Selling can be done but it has to be the last option. If we buy right, selling will be infrequent.

You’ve been following our guidance for more than a decade and have been rewarded for the same. Good principles would never go out of fashion though it may have periods of underperformance.

Stay the course and build fortune.

Posted in Stock Market, Warren Buffett, Wealth | 1 Comment »

How a retired executive built $70 million?

Posted by Muthu on October 31, 2017

Theodore Johnson was born in last century and died at the ripe age of 91 in 1993.

From 1923 to 1952, for 29 years, he worked in United Parcel Service (UPS).

He joined the company at $25 a week, rose through the ranks and retired in 1952. At the time of retirement he was making $270 a week, which is $14,000 per year. For ease of understanding, in today’s dollar, it is worth around $1,25,000.

He had a habit of saving around 25% of his income every month and he invested it in stock. When I say stock, he invested only in one stock, that of his employer UPS.

When he retired in 1952, he has accumulated UPS stock worth $7,00,000.

He never touched the corpus. He might have been living on his dividend income. Assuming a dividend yield of 2%, he would have lived very comfortably with dividends itself.

Thirty nine years after his retirement, in 1991, the stock has grown to the value of $70 million. Please note that he might have received a dividend of $1.4 million a year for that corpus.

He gave a sizeable portion of this wealth to his son and two grand children.

After the same, he donated $36 million for various charitable organisations supporting education for poor and disabled.

He passed away next year. His wife died few years before him. They had a long married life.

From what I read, he has lived a well balanced and good life.

No doubt he was a high earner of his times. Still building a corpus of $70 million is a huge achievement.

Many of you are high earners. You can also save 25% of your income. Instead of investing in only one stock (we would not advice that), you’re investing in equity funds. Shareholders would receive dividends and mutual fund unit holders can do SWP (Systematic Withdrawal Plan).

Five equity funds or a portfolio of 15 to 20 stocks can do wonders if you save with discipline during working years and withdraw only for your lifestyle needs in retirement years. Higher the corpus, even a small withdrawal would ensure an excellent life style.

You can pass on wealth to your children and grand children and also provide for underprivileged in the society.

Leading a good life style, passing on wealth to next generation and giving it back to society, what more a life well lived needs?

Aim big and work for it.

Posted in General, Giving, Stock Market, Wealth | 1 Comment »