Wise Wealth Advisors

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

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Good and bad

Posted by Muthu on September 1, 2019

Bad news, which started trickling in April, has reached its height on Friday, when GDP growth rate of Q1 was published as 5%

Will it get worse than this?

Yes, the current quarter (Q2) may be equal to or worse and than Q1.

There are two kind of voices always dominating the narrative; those who blindly believe and of those who blindly hate Modi.

Most of us are in the middle path, judging each action by its merit. Though we are many, our voice is not heard to the extent it should.

The government has failed big time in anticipating the economic trouble and also not using the budget opportunity to revive the economy. In fact, budget added some more woes.

The good part is that since second half of August, government has realised it’s mistakes and implicitly accepted that the economy is in a trouble.

They have been taking measures for the revival of the economy since then.

These are incremental measures and not any big bang reforms.

Assuming they would continue only with incremental measures; still this would result in better liquidity situation and lower the cost of capital.

Ample liquidity and low cost of capital would trigger economic revival.

Without any major reforms, I wouldn’t expect the growth rate to go beyond 7%.

We need 9%+ growth rate even to aim for $5 trillion economy by 2024.

Reasonable growth is possible but dream of $5 trillion may only remain as dream.

We can safely say that the economy has reached the bottom as the government has accepted the problem and have been actually working on it.

We may see the earliest sign of recovery only in Q3.

As I’ve explained many times, market reflects the future and not the present. Though I’ve no capability of market predictions, I’m aware that markets do not wait to till actual growth to manifest and start reflecting the same sometime before. This is true for both good and bad situations.

The bad news is that we have slowed down.

The good news is that this is the beginning of the recovery.

Posted in Economy, General, Muthu's Musings | 3 Comments »

Positive development

Posted by Muthu on August 24, 2019

By this time, you would have heard about the various announcements made by finance minister last evening.

The budget she presented last month lacked focus to address the problems faced by various sectors in the economy. Not only there was nothing progressive but also there were regressive steps as well.

There has been lot of voices against the apathy showed by the government on economic front.

Finally government has taken series of positive measures. These measures include some progressive steps and withdrawal of some earlier regressive steps.

What this would do immediately is to build positive mind set in the business and investing community.

The beginning of all good things is positivity.

It may take probably six months or so to start seeing the impact of these measures on economy.

I’ve no clue about how markets work in the near term. Still it may start reflecting the development even before it happens. Markets rarely reflect the present but it’s opinion about the future. So I wouldn’t be surprised if markets start recovering from the last 20 months of bear run.

So it is only a matter of time for things to start looking better.

The finance minister has also promised more positive measures to be announced in the coming weeks. This also augurs well for the future.

Bull and bear markets keep following each other. There is no permanent bull or bear market.

In bull markets, the NAV goes up. In bear markets, the units you acquire goes up. In the long run, combination of both only creates good wealth.

Though some of you became very anxious recently, all of you stayed the course.

Ultimately staying the course is what matters and that alone creates wealth.

Be ready for positive things in the months to come.

A good beginning has been made yesterday.

Posted in Economy, General, Insurance, Muthu's Musings | 1 Comment »

Thoughts on current situation

Posted by Muthu on August 11, 2019

Usually I write to you not less than once a month. This time there has been a gap due to some unavoidable reasons. Kindly accept my apologies.

In the beginning of 2018, all of you were very happy looking at your portfolio.

Last 20 months has changed the situation upside down.

The government in the last term was focused on providing basic but essential things like bank accounts, LPG, electricity, toilets etc. They did a decent job on this front. Balakot attacks saw a significant political will in defending the country’s security.  There were no terrorist bomb blasts across the country; which once used to be routine news.

Initially when demonetisation was done, many of us thought that as essential to fight corruption and black money.  In hindsight, the realisation is that it has caused more damage to the economy than the benefits it brought. In the name of clean up, also started was more instances of harassment by tax authorities. The government’s key focus became wealth distribution rather creation.

The expectation from the government second time was that they would focus on major economic reforms and wealth creation. This was based on Modi’s development record as Gujarat CM. Having focused on helping the poor in the first term, the natural expectation was creating prosperous economy in the second term.

Budget gave an opinion that this government is focused only on distributing wealth with no clue as to who would create it. It was anti wealth creators. Since this government never had a great economic track record to begin with, markets got afraid as to what is in store for the future.  Having realised the damage Budget has caused, the finance minister has started consultation with all stakeholders in the economy.

This is where we stand today. I don’t know how things would phase out from now on. The government with its brute majority may see no need for listening and course correction. Or Modi being identified as one of the pro development chief ministers in the past, there may be real course correction too.

George Bush senior won the Iraq war. He was very popular because of the same. Still he lost the elections as the economy was not doing well. Bill Clinton’s tenure was marked with controversies; still he won the election because economy was doing well.

Economy is less dependent on the government of the day. It’s a complex mechanism having its own life. Like markets or businesses, it also goes through cycles. At best a government can reduce the pain or incentivise the growth. It has no ability to prevent economic cycles.

If the government becomes responsive, the pain would get over sooner than later and we can explore if 8% growth is possible.

If the government continues with its dismal economic performance, recovery would still happen as a part of the economic cycle. Probably we may have to wait for a year or so for the same and accept 6% as our growth rate.

So it is clear, government can advance or postpone growth but cannot stop it. It can be a deciding factor between 6% or 8% growth; still we would continue to grow.

Assume the best and get ready for the worst. You would be fine in both the scenario.

Don’t try to time the market based on this. Market would never wait for actual growth to happen. It moves based on anticipation. This holds good for both upside and downside.

Since I’ve no reason to be a long term pessimist, I continue to be optimistic.

Stay the course.

Posted in Economy, General | 6 Comments »

Don’t talk about wealth

Posted by Muthu on June 23, 2019

Other than your family, close friends, auditor and financial advisor; stop talking about wealth.

More and more we talk about our wealth, relationships become superficial and we end up a terrible bore.

World being what it is, talking about wealth would attract wrong people.

Also don’t tie up your ego to the size of the house or car. What is good for ego is bad for you and your wealth.

Only encourage people who come to you for what you are and not for what you own.

In the same way, relate to others for what they are and not on what they have or don’t have.

Don’t discuss about wealth while looking for marriage alliance for your children. You may then end up with wrong choice.

Also learn to enjoy wealth. Once you’re financially independent, have a good life style. Enjoy things and experiences. There is no use of wealth if it ends up a mere bank, demat or mutual fund balance.

Provide to children for their education, marriage, when they buy their first house etc.

At the same time, don’t promise your entire wealth to them. Even if you want to provide everything to children, better not to promise it. Let them not take your wealth for granted.

Don’t provide everything to children during your life time. That would be a sure shot way for a miserable old age. It should happen only after you and your spouse is no more.

When I was achieving certain financial milestones, I shared that with more than required people. I stopped it subsequently.

Now I value discretion a lot.

You should value it too.

Posted in Wealth | 9 Comments »

Give time to get results

Posted by Muthu on June 20, 2019

For the last couple of years, we’ve stopped adding new clients unless referred strongly by any existing client. I don’t want to get into a situation where I’m unable to personally handle a client. Also I value my free time a lot. To be contented or grow further is an individual choice and I’ve opted for the former.

I’ve been interacting and sharing my thoughts for now close to one and half decades and some time get impatient if the core philosophy is still not understood.

Whether you invest in an equity or hybrid fund, it takes time to deliver. The expected returns of 15% or 12% happen only over a period. The returns would be uneven as well. There are years of positive returns, negative returns and no returns. If the funds you’ve invested are capable of producing 15% year or on year, the entire population would only opt for equity investing. You want the results of equity without paying the price for it. The price to be paid is accepting and undergoing volatility.

There is no way you’re going to enjoy the fruits without allowing the tree to grow. If it is going to take 10 years for a plant to become tree and yield fruits, no amount of frustration or anxiety is going to advance the yield. In fact, these negative emotions are capable of destroying the tree itself.

All our long term investors are seeing excellent results. Those who invested during the last few years are either seeing average or below average results. No amount of mental anguish is going to change the results. All that is required is patience. Every investment is prescribed with a minimum time frame for holding. Unless you give that time, you’re not going get the results.

If you cannot accept volatility and develop patience, equity investing is not for you. Those who want quick money end up making no money. Either you give time to get results or opt for assured return product like bank deposits. If you aspire for 15% kind of returns, you need to pay the price of accepting stomach churning volatility. Else you need to accept and live with 7% kind of assured returns.

Also came across few retired clients of ours taking up trading. Trading requires enormous knowledge, discipline and skills. It cannot be a hobby or time pass activity. If you want to trade, equip yourself first for the same. You cannot become a trader overnight. Be it investing or trading, it needs years of hard work and discipline. Also avoid intraday trading. It is not for you. There are very few winners there and it is extremely risky as well. Intraday trading is the easy way to lose hard earned money.

As you’ve become seasoned investors, when you refer a client next time, please see if they have basic emotional maturity to learn and follow long term investing. If not, request you not to send them to me. Without patience and discipline, it is impossible to create wealth from markets.

Posted in Muthu's Musings, Stock Market | 3 Comments »