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

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Wisely Speaking- 7

Posted by Muthu on July 16, 2012

I’m getting an invitation every other day for Linkedin. I opened a Linkedin and Facebook account for a short while and closed the same. I do not see any need for me either personally or professionally to be in social network. When it becomes hygiene factor for me have a social network account, I would then consider the same. As of  now, I’m fine with communication through email and phone. Though I’ve not closed my Twitter account, it is dormant. Only Thiruvalluvar can say something meaningful in 130 characters:-)

Thanks for your responses on my recent TOI article. ‘Aval Vikatan’ interviewed me last week as to how home makers can manage the rising prices. The article would be published in this week’s issue.

Though I’ve been a shareholder since 1998, I’ve never attended any AGM (Annual General Meeting) so far. Last week, I attended the AGM of IDFC, in which I’m a shareholder for last 4 years. Prepared 6 questions and made it a point to raise the same in AGM. Mr.Deepak Parekh, chairman of IDFC answered all the questions. Some of the answers found its way in the business newspapers next day.

I met a person in the IDFC AGM who has come all the way from Mumbai for attending the same. He is 40 years old and is an investor. You may ask what is unique in being an investor. We are all one, isn’t it? The difference is that being an investor is his occupation and profession. He comes from a family with out any investing background and has made it up only through investing. He makes it a point to attend all the AGMs of the companies in which he has invested in. Since IDFC’s registered office is in Chennai, the AGM is always conduced here.

Mr.Parekh is the chairman of IDFC, HDFC and HDFC Bank. All the 3 AGMs happened last week and it would have been a hectic week for him to prepare, address, face all the questions and answer them for all the 3 companies. Mr.Parekh is the most respected face in corporate India.

You may be surprised to know that IDFC has contributed for creating half of telecom towers in the country, two third of wireless subscriber base, half of private sector’s thermal and hydro-generation, 50% of container cargo capacity addition in Indian ports, 20% of National highways constructed with private participation and 25% of passenger and cargo air traffic.

I’ve decided to attend AGMs of the companies I’ve invested in, atleast whose registered offices are in Tamilnadu. So I would like to be present in AGMs of IDFC and City Union Bank (CUB).

Disclosure: Though it is very clear above, I would like to explicitly mention that I’m a shareholder in IDFC & CUB.

I’ve been offering a particular suggestion to all our clients working in IT sector for the last 3 years. I would like to state it once again. Please do not tie up both your employment and significant part of your net worth to the same organization. If some thing goes wrong, you would loose both your income and savings.

IT sector is now becoming like any other sector. It may not command the salary and social premium any more. The same hold good for marriage market as well:-) For existing people in IT sector, they may not see huge salary jumps hence forth. For all the graduates whose dream is to get into IT sector, the reality may not match the dream.

Both employees and investors make good money when a company is growing. As it matures, high growth becomes a thing of the past.

I read somewhere long ago that average life span of an organization is 60 years. Out of all the companies listed in New York Stock Exchange 100 years ago, only one, General Electric has survived till now.

East India Company, a typical trading company, which ruled our country for long is no more. I read that an Indian has purchased the same, just to own our past ruler.

People who are of my age would remember using Bril ink for ‘ink pen’ at schools. The uniform we wore was always Binny’s. Both the companies are no longer there.

The place I live now had a huge perfume factory before. Do you remember Kunega perfume? This was the perfume used my middle class till eighties and children used to keep smelling pages of magazines like Kumudam and Vikatan where Kunega’s advertisement used to appear. As a marketing technique, they used to spray the perfume in their advertisement itself.

The televisions middle class used to buy in eighties are EC TV, Solidaire, Dyanora, Crown, Uptron (remember what’s on? It’s uptron!) etc. has now vanished. When we bought EC TV in early eighties, the waiting time for delivery used to be 6 months.

The movies we used to see would have a byline ‘Eastman Colour’. Eastman Kodak company, the undisputed leader in photography for more than a century filed bankruptcy early this year.

When I was working with Elcot New Era Technolgies (later renamed as ELNET), it was the biggest IT park in Chennai. Now it may be the smallest one in the city:-)

So if you own shares, it is your responsibility to understand the nature of companies and the sector. Nothing lasts forever and only few things survive for long term. If you invest in mutual funds, it is the responsibility of the fund manager to change the portfolio according to the changing environment.

Many people think their fund NAVs keeps going up and down based on the Sensex. Nothing can be farther than truth. Sensex consists of 30 largest companies in the market. Funds do not invest in Sensex companies alone. They may invest among hundreds and thousands of companies that are listed in the markets. Let me provide an illustration. Sensex was at 18091 on 29th January 2008. The NAV of HDFC Equity Fund on that day was Rs.192/- Sensex was at 18078 on 24th February 2012. Sensex was at the same level even after 4 years. Whereas NAV of HDFC Equity Fund on the later day was Rs.261/-. Though Senesex was flat even after 4 years, the NAV has grown by 36%. Whenever I talk about a fund performance, do not forget to read the disclaimer.

A childhood play mate who is four years younger to me, passed away in a road accident last week. When his wife conceived 2 years ago, it resulted in an unfortunate abortion at the end of 7th month. She is home maker with dependant parents. She would be having a difficult time both emotionally and financially. Seeing this, one more friend of me is very eager to take all the necessary insurances immediately.

In Buddhist meditations, they keep repeating the phrase ‘Anicca’. Anicca means impermanence. We need to plan for both long life and also for snapping out early.

Though you may have health cover, start creating a separate corpus for medical exigencies. The cover we have may be sufficient for next 5 to 10 years and can become inadequate then. As we grow old and get sick, additional coverage would not be possible. I advice people taking medical cover upto Rs.30 lakhs (Rs.50 lakhs is what maximum given). After 10 years, I do not know whether the cover would be adequate.

Also for some one having dialysis, it may cost around Rs.1 lakh a month. I read about a poor woman having Multiple Scelorosis and struggling spend Rs.40,000/- a month for treatment. Why poor woman? Most of us cannot afford to spend that amount on a regular basis for life. I’m highlighting this because, medical expenses are really expensive and it would become more so in future. Our problem would be aggravated if there is no sufficient fund for managing the same.

Emergency Fund, Term cover, Medical cover, Personal accident cover, Fire insurance cover for home and creation of corpus for medical treatment is a must. The best way for us to enhance our wealth to meet both our aspirations and contingencies is long term investing in equity. Please don’t forget that. If possible paste ‘Invest in equity regularly for long term’ on your bathroom door:-)

4 Responses to “Wisely Speaking- 7”

  1. Chetan said

    What an article. Hatsoff Sir!

  2. Shinu said

    No story will be as good as “Nokia” as is happening now.

  3. trupti said

    good article

  4. bimal said

    u r great muthu.hats off.

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