Wise Wealth Advisors

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

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Nuggets for 20th January

Posted by Muthu on January 20, 2018

Some of my recent tweets:

1) When we buy quality, time creates wealth. When we buy junk, time destroys wealth. Time is useful in investing only when it is backed by quality.

2) Right behaviour ensures investor returns is equal to investment returns. Though this sounds very simple, it is rare and only few investors make it.

3) Don’t expect immediate gratification. Only when you accept delayed gratification, you become eligible for long term investing.

4) If we time the market, need to be correct at every entry and exit, repeatedly. We have no such ability. Believe that fortunes are made by buying right and holding on.

5) In investing, genius is one who has developed enormous patience and discipline.

6) Patience does not come easily. It needs tremendous discipline and practice. That’s why making money and retaining it is never easy.

7) My results have improved from the time I started focusing on buying right, sitting tight and be a reluctant seller.

8) Rewards for patience happen only over years not weeks or months. How much ever this is emphasised, only few would follow. Delayed gratification is not easy.

9) In hindsight, staying the course looks easy. As every tomorrow has always been uncertain, staying the course is most difficult but extremely rewarding.

10) Being rich is having only money. Being financially independent is having both time and money.

11) Investing is simple. It gets complicated only because of our behaviour. Behave well, all will be well.

12) There is nothing new in worrying about global factors, politics, interest rates and macros. People have always been worried about it and would continue to do so. Equities have done well despite real and imaginary problems and would continue to do so.

13) In long term investing, it is not effort that counts, it is patience.

14) In a country like India, we can make good wealth if we can start thinking in terms of decades as holding period. It doesn’t require a great brain but an excellent temperament.

15) No doubt that there are many roads to reach destination. But better to choose a good and less accident prone road.

16) You’re ready for long term investing only when you’re able to accept underperformance or even negative performance for few years at a stretch.

17) The biggest challenge for many is the initial capital. Living well below one’s means is generally a good habit, but must for beginners who want to get wealthy through investing.

18) If I’m not able to earn the returns I aspire for, I would not increase the risk. Instead I would reduce my expectations.

19) Without some amount of failure, difficult to get a grip on investing. It is better to fail early as you would still have time to catch up and it would also cost less.

20) Many of us would live long. If we can even do slightly better than average, it would be huge over a long period of time. No need to chase quick returns and end blowing up.

21) In every bull market, there are investors who chase fads and quick money. To paraphrase Buffett; each bull market teaches new investors some very old lessons.

22) Even a horrible investment strategy may work in bull markets. It is difficult to keep the money we make in the absence of a good investment strategy.

23) Patience, simplicity and prudence: old fashioned but much needed virtues for every long term investor.

24) Even mediocre returns would create good wealth over long term if we can avoid permanent loss of capital. We underestimate the importance of not blowing up.

25) Not that you should focus on beating others. However a right temperament would ensure that you outperform most of the investors.

Posted in Tweets | 2 Comments »

This is your edge

Posted by Muthu on January 17, 2018

You’ve been our clients for many years and by now know what your edge is. Still, as always, let us keep revisiting and reinforcing our investment philosophy.

Let us take last 2 years, 2016 and 2017. Markets corrected by more than 20% in the beginning of 2016. In June, Brexit happened. Markets corrected. November 8th, two events; demonetisation was announced and Donald Trump got elected as President. Markets corrected.

Coming to 2017, in February UP elections happened. Market was worried whether BJP will win. GST, another structural shift and hence disruption happened in July. Market stumbled. Every other week in 2017, there was a worry about nuclear standoff between US and North Korea. In December, Gujarat elections became a point of worry.

I don’t know what will happen in 2018. But markets always keep finding a new reason to worry. Despite all the imaginary and real fears in 2016 and 2017, your portfolio is doing very well. This is because you are staying invested through ups and downs over last very many years.

I wrote a piece in 2015. During the previous 20 years, many equity funds have multiplied between over 40 to 100 times. Based on a HDFC mutual fund presentation, I wrote how scary those 20 years were. I would like to revisit the same again.

In 1996, Congress lost the general elections. This resulted in communist supported and participating third front government coming to power. A hardcore communist, Indrajit Gupta, was India’s home minister from 1996 to 1998.

You would also remember that BJP first came to power in 1996 and could survive only for 13 days. So between 1996 and 1998, there was huge political uncertainty and we had three governments in 3 years.

In 1997, Asian financial crisis happened. Much of East Asia went through severe currency crisis raising fears of serious economic meltdown.

In 1998, BJP again formed government, which only lasted for 13 months and was in constant turmoil due to tantrums of coalition partners.

In 1998, India conducted nuclear tests. Western sanctions were imposed crippling the country’s financial situation.

In 1999, we had a fight with our neighbour Pakistan. Kargil war brought both the nations to brink of a major confrontation.

In 2000, tech bubble burst. Technology stocks world over crashed eroding investors’ wealth.

In 2001, 9/11 attacks happened, creating a huge geo-political crisis. Markets tanked.

In 2001, Ketan Parekh scam happened. UTI crisis happened. IT stocks in India lost value as much as 90%.

In 2001, Indian parliament was attacked by terrorists.

In 2004 general elections BJP lost. Congress government dependant on left support for survival came to power. There was common minimum program and weekly breakfast meetings. Government has to keep on yielding to the left tantrums to stay in power.

After 2004, the global commodities prices started rising. Oil prices also started rising sharply.

In 2008, global financial crisis, considered as worst financial crisis after great depression happened. World markets collapsed, Sensex dropping more than 50%.

In 2008, Mumbai terrorist attack happened.

From 2010-13, corruptions, scams and scandals started hitting the government. 2G, Common Wealth Games and Coal gate are some of the major scams. UPA-2 was most part immobilised and was fighting one corruption scandal after another.

In 2013, markets panicked due to QE tapering worry. GDP growth slowed down. Current Account Deficit (CAD) and Fiscal Deficit (FD) worsened threatening ratings downgrade. Inflation was very high and the currency weakened.

In 2014, rise of ISIS.

Despite all the above, investors wealth multiplied multi-fold.

As Morgan Housel says, “Progress happens too slowly to notice. Setbacks happen too quickly to ignore.”

As a nation, we would continue to progress. Media will keep amplifying fears and anxieties. What you need to do is continue to stay invested. What can be simpler than this?

You’re able to follow the conviction of staying the course by doing nothing. There are very few long term investors in the market as many find it difficult to adhere to this. Markets would create wealth for you as long as you don’t keep tinkering.

Being a long term buy and hold investor and staying the course through ups and downs is your greatest edge.

Keep up the edge.

Posted in Stock Market, Wealth | 4 Comments »

Bad News and Good News

Posted by Muthu on January 2, 2018

Bad News: Inflation destroys wealth

Good News: Compounding builds wealth

Bad News: Discipline is painful

Good News: Outcome is enjoyable

Bad News: Equities are extremely volatile

Good News: Equities create immense wealth

Bad News: Media amplifies greed and fear

Good News: Good books and blogs impart wisdom

Bad News: Short term is unpredictable

Good News: Long term is reasonably predictable

Bad News: Bad things can happen any time

Good News: Proper planning & risk covers can reduce negative impact

Bad News: Life is ephemeral

Good News: Most of us would live to reach old age

Bad News: Cannot control returns

Good News: Can control savings

Bad News: Markets are not under our control

Good News: Behaviour is under our control

Bad News: Disruptions can happen anytime anywhere

Good News: Continuous learning is the available antidote

Posted in General, Muthu's Musings, Wealth | 5 Comments »

12th Year

Posted by Muthu on January 1, 2018

Wishing you and your family a wonderful 2018.

We never believe in forecasts, especially of short term. In the beginning of 2017, there were many predictions that markets would do badly due to demonetisation. GST implementation strengthened these voices further. However Sensex has delivered around 28% return in 2017. As a policy, we don’t make any index forecasts and would stick to the same for 2018 as well.

If past is anything to go by there are more good years than bad years. Roughly markets are up 70% of the time.  Need to stay invested during the 30% bad years as well, to reap the benefit of good years.

As our clients, you all have created significant wealth. This would accelerate in the years to come. We hold views based on broader picture. India’s GDP per capita would continue to grow over next decade and this would result in many companies doing well. When companies do well, earnings would grow. Growing earnings would get reflected in stock prices and hence in mutual fund NAVs.

We believe that there is huge potential for wealth creation over next decade though the ride, as always, would be bumpy. You’ve been sticking to your investments despite bull and bear markets, positive and negative news flows and your own emotions of greed and fear. Once we buy right, all we need to do is to sit tight.

We are entering into 12th year of our profession today and are grateful to you for being our client.

Though we started the profession in January 2007, it took around 3 years for us to get our focus right. We then realised investor management is more important than investment management. Choosing investments or making portfolio changes is only 10% of the work. 90% is focusing on investor management, which is managing behaviour, emotions and psychology.

By helping you focus on what is important, we’re able to make you achieve excellent results. Through all our communications and interactions, we would continue to focus on investor psychology and behaviour.

Good investing is very simple. It is like daily exercise or consuming good diet. Though these are simple to understand, very difficult to implement on a consistent basis. Our focus would continue to be making you do these simple things consistently. Simple and right discipline, when repeated regularly, would lead to exponential results.

Be it health, wealth, career or relationships what we do everyday matters. To quote Darren Hardey

“You will never change your life until you change something you do daily. The secret of your success is found in your daily routine.”

Stick to simple and effective discipline. Keep reinforcing it regularly. You’ll then be successful in whatever you focus.

Once again, wishing you a great 2018.

Posted in General, Muthu's Musings | 2 Comments »

Hard and Harder

Posted by Muthu on December 23, 2017

Hard: Making money

Harder: Keeping money

Hard: Start investing

Harder: Stay invested

Hard: Saving

Harder: Properly investing the savings

Hard: Avoiding fads

Harder: Sticking to a portfolio for 10 years

Hard: Controlling greed in bull markets

Harder: Controlling fear in bear markets

Hard: Saying no to easy money

Harder: Sitting tight for long term compounding

Hard: Not looking at daily prices

Harder: Not reacting to price fluctuations

Hard: Looking at opportunities in bear market

Harder: Looking at risk in bull market

Hard: Analytical skills

Harder: Discipline and Patience

Hard: Not chasing multi-baggers

Harder: Contentment with modest returns

Posted in General, Wealth | 1 Comment »