Wise Wealth Advisors

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

  • Blog Stats

    • 1,136,508 hits
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 1,229 other followers

13th Year

Posted by Muthu on January 1, 2019

Wishing you and your family a wonderful 2019.

I’ve made it a practice to write on the first day of every year.

After quitting employment in December 2006, I formally got into this profession on 1’st January 2007.

This is our 13th year into the profession. I’ve been evolving a lot both as an investor and an advisor. You’ve been part of this journey and I am proud to note that there are very few emotionally matured investors like you. Only a small percentage of investors can manage their behaviour and emotions well. Those who do that are the one who create wealth from markets. I’m glad that you’re all part of this tiny minority.

For the last two years, we’ve stopped taking new clients except if it comes as a strong referral from anyone of you. We’re fine with where we are now. We want quality time to be made available to you as and when required and I also enjoy the free time the current bandwidth offers.

I’m financially independent and contented with our present state. I don’t want to increase the quantity, there by affecting quality. Time is finite and there is no point in spending it by chasing more and more growth.

I want to be always of assistance to you in managing your financial affairs. I want all of you to build good wealth and also preserve the same. Getting rich is difficult and remaining rich is most difficult. We’re there to guide you both in creation and preservation of wealth.

2017 was a great year in terms of return and 2018 was bad on the same. There is no way to avoid bad years. I’ve no clue how 2019 would be. All I know is there are more good years than bad and staying invested for a decade or more creates good wealth.

It would have been a great pleasure to see the portfolio in 2017 and painful to see the same in 2018. Pain, even though temporary, is the price we have to pay for long term wealth creation.

Nothing worthwhile in life can be achieved without some amount of pain. It holds good for wealth creation from markets as well.

Focus on your life going through the pleasure and pain it offers. Leave the investment part to us. Avoid looking at portfolio frequently. The emotional roller coaster you would go through by constantly looking at markets is not worth it. There are better things to do in the finite time available on earth. We would continue to do yearly review for you, which is more than enough. Investors for whom market is not the profession, yearly portfolio review is good enough.

I wish that 2019 be good to you and your family. Once again best wishes for a wonderful year ahead.

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

Less pain and some gain

Posted by Muthu on December 16, 2018

I’m writing to you after 50 days. I wrote to you multiple times in September and October when markets had a steep fall.

After I wrote last piece, markets have been in recovery mode.

This is true for both equity and debt markets as well.

Overall this year has been a rough one.

As I repeatedly point out, 10% fall once a year, 20% fall once in couple of years and 30% fall atleast once a decade is unavoidable.

For many portfolios, this is a year of 20%+ correction.

Nobody loves to see the portfolio value going down. But this is the price which has to be paid for long term growth.

In most aspects of life, nothing worthwhile can be achieved without some amount of pain and sacrifice.

The very fact you set aside money today for investing shows that you sacrifice some part of today for a better tomorrow.

In equity investing, seeing your wealth going down, though it is temporary is the pain you’ve to go through for building long term wealth.

The only way to avoid pain is not to invest in equity at all.

By avoiding pain you would not have any gain as well.

You’ve all chosen equity fully understanding the pain and sacrifice that needs to be undergone on the journey towards achieving long term life goals.

Good advice never changes however repetitive and boring it sounds.

Just continue to stay the course remembering the long term results are always good for those willing to undergo short term pain.

Posted in General, Muthu's Musings, Stock Market | 1 Comment »

Pain continues

Posted by Muthu on October 27, 2018

Your portfolios are going through pain due to this bear market. There is no way to avoid this pain. In fact this is the unavoidable price you’ve to pay for getting good long term returns.

My continuous mentoring is to make you emotionally ready and bear with such pains as and when they occur. All good things in life never come without some pain. We’ve often heard that no pain no gain.

Though it is difficult to predict, some generalisations are possible. Bull markets are usually long and bear markets are short. Around 70% of years markets perform positively. This year is one of those 30%.

If returns are linear and predictable, everyone would get rich. But we know only 1% can be in the top 1%. If you want to build wealth through markets, need to accept this roller coaster ride and lumpy returns.

The question naturally comes to mind is how long this bear market would last. If we can predict that successfully, we can time the markets and completely avoid pain. By now, being our client for many years, you know this is not possible. Markets can recover in few months or may even take a year or more. We always advice not to time the market but invest when you’ve money and redeem when you need money ensuring a minimum time period of ten years in between.

Good advice rarely changes and so I’m repeating what I always keep repeating. How you behave in bear markets decides your investing fate. If you sell during bear phase, you’re converting notional loss into permanent one. If you stop SIPs, you lose the opportunity to acquire units at lower price which would actually boost your long term returns.

Only those who have control over their emotions get and stay rich. For others it is a loser’s game. We want you to be amongst successful tiny minority.

What you need to do for being successful? Just bear with the pain and stay the course. That is all you need to do and this one thing differentiates between success and failure.

Remember bear markets are always followed by bull markets. This is the time to accept and live with pain for long term gain.

Avoiding pain is avoiding growth.

Interestingly accepting pain actually reduces it.

This is time for you to experiment and see.

Experience coming out of experiment is wisdom.

And it is the wise who ends up successful.

Posted in General, Stock Market | 4 Comments »

This is bear market

Posted by Muthu on October 5, 2018

I’ve been writing every week for last few weeks. Even if I miss writing in bull markets, it is fine because things are rosy. Bear markets are painful and I need to reinforce few basic tenets of good investing.

I was reading this piece last evening. There is no hard and fast rule for definition of bear markets. Generally it is said that a fall of 20% or more by index is bear market.

Index is yet to fall 20%. But a third of all stocks have fallen by more than 50%. Another one third of stocks have fallen in the range of 25% to 50%. The BSE smallcap index is down by more than 30% and BSE midcap index is down around 20%. If this is not bear market, then what is bear market? This is my understanding.

Your portfolio consists predominantly of multicap funds. Considering the above brutal carnage, the fall for you have been bearable. This is because we create a portfolio keeping in mind bear markets as well. We never suggest smallcaps. We don’t go overboard on midcaps. Our preference is always for multicap. Equity by nature is very volatile. Pure mid and smallcap are extremely volatile. Anyhow multicaps also have decent exposure to midcaps. We should not only focus on returns but what we undergo to earn that returns. Pain is inevitable. But we should not make it more painful than necessary.

Yields have hardened a lot resulting in hybrid like balanced and MIPs also not doing well. This year has been very rough both on equity and debt. It is difficult to predict how much more pain is left in the system. We’ve no ability to predict tops and bottoms. It is good that our memory is short. In your investing journey of more than a decade with us, you’ve faced similar situations but may not remember now because markets have always recovered.

In the long run markets only keep going up. It is never a linear movement. For two steps forward, market again a take a step backward before moving forward again. As we repeatedly mention, markets are up 70% of time (in years). There is no way to avoid the remaining 30%. Bear markets are painful and gut wrenching. Though we cannot avoid pain, we need not react to the same. We make temporary losses into permanent one if we react with panic.

We’ve not faced any redemption or SIP stoppage due to current fall. This shows your maturity. Our aim is to ensure you stay the course despite ups and downs and earn the good long term returns which markets offer. I would like to repeat again that try to avoid looking at your portfolio now because it would be very painful and pain sometimes bring undesirable reaction.

What we are going through is very normal. This is how markets behave. No pain no gain is applicable to investing as well.

In nutshell, avoid looking at portfolio, don’t panic and stay the course remembering this too shall pass.

Posted in General, Mutual Funds, Stock Market | Leave a Comment »

Some more thoughts

Posted by Muthu on September 29, 2018

I got lot of responses to the piece I wrote last week. Thanks for your clarity and understanding.

September has been a very bad month for the markets. The indices do not adequately reflect the pain individual portfolios have gone through. Even good quality stocks have gone through brutal correction. Debt market has been no exception to this pain.

It is not possible to predict how long this fall would last and when markets would recover. But what we do know is that good years are more than bad years. Around 70% of time (in years) markets are positive and the balance 30% it is negative.

Markets, be it debt or equity, never produce linear returns. The returns are always lumpy. 80% of the returns happen in 20% of the time. There is no way to time this 20%. Staying invested all the time is best way to capture the market returns.

To avoid fear and prevent impulsive decisions, please don’t track your portfolio. Not looking at portfolio frequently is always a good habit more so at the times like these.

Going through roller coaster ride of volatility is the price we’ve to compulsorily pay for getting good long term returns. Markets have always been like this. This is very normal.

If we are sick of volatility, then we’ve opt for fixed return products like bank deposits. But the problem there is the returns hardly matches inflation and post tax returns can actually end up eroding our purchasing power.

If we want to have returns above inflation, build wealth, preserve and enhance our purchasing power; there is no way to avoid the pain resulting out of volatility.

Discipline and patience is the key. Patience has its origin in a French word meaning suffering. To be patient is to suffer.  No doubt, we find it very difficult to develop patience.

Patience is painful. But reward for the patience makes the suffering worthwhile.

10% fall once a year, 20% fall once in couple of years and 30% fall atleast once a decade is unavoidable. It is better to be prepared to face it.

Focus only on long term and stay the course.

Temporary fall in values are not losses unless we sell in panic.

Don’t panic.

This too shall definitely pass.

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