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

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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 | 6 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 | 2 Comments »


Posted by Muthu on May 12, 2019

Many of our long term clients are building wealth which would last even beyond their life time. So I thought let me cover today about giving.

There are two kinds of giving. The first one is what we give to our own blood, the next generation and even grand children. The second one is what we give back to society, helping the needy. We cannot forget that society helped us in creating wealth.

If your wealth is limited to this life time of you and your spouse, you may not be able to leave your children anything other than primary residence. That is fine. As far as giving back to society, please see what best you can do, given your limited resources.

For those who have wealth that would last well beyond their life time, don’t wait to leave everything after your death. If you live well into your eighties, your children would then be in their fifties, way past their prime. They would not be in a position to meaningfully enjoy your wealth.

Don’t be tight fisted. Help your kids during occasions like setting up their family and buying primary residence. Take care of their education till post graduation so that they don’t start with student debt.

Also learn to help less privileged. While you may be doing something on and off during working years, this should start full-fledged latest by the age of 60. Giving while living and seeing how the money is useful to others is bliss. So don’t ear mark wealth for charity only after your life time. Give and enjoy giving at least during last two decades of your life.

In my view, not less than 10% of one’s wealth should be given back to society. If you find this less, do more. If you find this more, at least start with 5%. Charity should be significant. Having a wealth of Rs.100 crores and giving few lakhs a year to charity is sub optimal. Though philosophical, need to remember that you’re not going to take any money with you once you die.

Enjoy money in your life time. Give a part of it to your next generation while you live. Let them also enjoy your wealth. And don’t forget to give it to needy. This is a well balanced life and living this way is meaningful.

Kanchi Maha Periyava and Ramana Maharishi are the two Jnanis I respect most.

I end this note with what Sri Ramana said on giving:

“Giving to others is really giving to oneself. If one knows this truth, would one ever remain without giving?”

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

The reward is wealth

Posted by Muthu on April 29, 2019

Good things in life never come easy. Take any country, only a small percentage of population is wealthy. Only 1% of us can be in top 1%. Wealth helps to avoid money worries, which is the main worry for most of the population.

Markets over the long run have been providing around 15% annualised returns. We believe India becoming $10 trillion economy over next 12 to 15 years is very much possible. This means growth in many sectors resulting in good wealth creation for investors.

Equity investing is almost the only way for most of us to create wealth. Many private businesses do not have the return on capital of good listed companies. Be it salaried or SME owner, equity is inevitable to create wealth. The path is clear. It is the journey which is difficult.

Markets do not provide returns in the way we like. A stock may not deliver any returns for many years and provide many years return in a single year. Markets can test your patience greatly. Some give up precisely at the wrong time, only to see that stock soaring subsequently.

Markets go through years of positive returns, negative returns and no returns. Our initial experience varies based on when we entered the markets. If in first few years of investment we see negative or no returns, we tend to give up. That’s why we suggest equity for a period of not less than 10 years. Good and bad years get evened out over this period.

Over 10 years investing, 80% of returns come in 20% of time. This means you need enormous patience during the 80% period to reap the reward in the remaining 20%.

Patience is the most difficult trait to develop. Patience involves pain and none of us like pain. But without patience and developing the understanding that returns are never linear but always lumpy; it is impossible to create wealth.

All those who have been investing through for us for last 10 years or more have created good wealth. They would vouch from their experience; the journey has never been smooth. But the rewards are worth the pain.

Only few create wealth from markets because the journey is not emotionally easy. Unless you learn not to react to your emotions, develop right understanding and enormous patience; it is impossible to create wealth.

Nothing meaningful in life can be achieved without pain. So is wealth. Wealth or lack of it makes enormous difference to our life on earth. So embrace pain and patience.

The reward is wealth.

Posted in General, Wealth | 1 Comment »

It’s review time

Posted by Muthu on March 30, 2019

Other than our regular meetings and interactions, at the end of every financial year, we make it a point to send you portfolio reports along with our review.

Yesterday was the last working day of the market for the financial year 2018-19.

We would start sending your reports from next week and we hope to finish the task for every single client by end of April.

2017 was a great year and you all saw phenomenal returns. 2018 turned out to be a horrible year. But for the sharp recovery in the month of March, this financial year had a very bad time.

For long term investors, the portfolio returns look good. For those of you who started in the recent years, it is average to below average performance.

It’s election time and this is in the top of the mind for every investor. In the long run, markets are not influenced by politics. In the short run, sentiment and liquidity rules the roost. In the immediate future, election results would have impact on the markets. In the long run, what matters is return on equity and growth in earnings.

In the last 40 years of Sensex journey, it has seen all kind of governments; NDA, UPA and third front. The long term results you see are after going through multiple governments. I’ve no permanent affiliation to any one party or leader. Each election, be it parliament or assembly or local body; I’ve voted based on what I felt appropriate at that point of time.

Any government would have pluses and minuses. All I see is which one is more. This time I would prefer NDA government. I believe it is good for both the country and corporate India. None of us can be sure of who would form the next government till the last vote is counted. If NDA loses, it may impact market negatively for short term. In the long run, markets are politically agnostic.

Don’t worry about electoral outcomes. Your only focus should be on developing right behaviour and temperament. In your investing journey, you’re going to see multiple governments and prime ministers. They are not going to determine your investment results. The only deciding factor is going to be your behaviour.

Those of you who have invested during the recent years may be concerned by the lacklustre results. This too shall pass. Long term results would always be good. For time being, trust my words. In the long run, portfolio return itself would automatically convince you.

It’s all finally boils down to staying the course through ups and downs. The long term results are always rewarding.

All the very best for sticking to the course.

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