Wise Wealth Advisors

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

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Archive for the ‘General’ Category

Focus on progress not on crisis

Posted by Muthu on August 15, 2018

Happy Independence Day.

There has been no year without any domestic or global crisis. We focus only on crisis and not on progress. This is because, as Morgan Housel says, progress happens too slowly to notice and setbacks happen too quickly to ignore.

In the last 7 decades, how many problems we’ve faced as a nation? Innumerable. At the same time, see how we’ve also progressed on various fronts.

Investors who focus on progress create abundant wealth. Those who focus only on crisis, gets jittery and lose the precious wealth creation opportunity.

You need to always keep only bigger picture in mind. If day to day headlines, amplified by media, scare you, you won’t go very far in investing.

Consumption, entertainment, travel, leisure, buying home, borrowing, saving, investing, insuring, healthcare, industrial activities, agriculture, working in office, improvements in technology, infrastructure development…. the list can fill pages; all continue to happen irrespective of any crisis.

If there is a problem in Turkey, you don’t stop brushing with Colgate, stop taking bath with Hamam or not paint your house with Asian Paints. Commerce is the back bone of civilisation and never stops.

By investing in stocks or equity funds, you’re participating in commerce and its progress.

India over next two decades is capable of becoming a middle income country.

By investing in equity, you also become part of this growth and create wealth.

If you focus only on crisis, you’ll miss the underlying progress.

One crisis or another would always be there but so is progress.

Keep the focus right and just stay the course.

Posted in General, Stock Market, Wealth | 4 Comments »

Failure is the norm

Posted by Muthu on July 15, 2018

Many businesses die within first three years of starting. Even among those who survive, very few thrive. Most simply survive. I read that only around 25% of listed companies create wealth. Only a single digit percentage of companies create huge or mega wealth.

It looks like failure is the norm and success is an exception. But we always think otherwise.

Be it sports or movies or politics, the same thing holds good.

Only 1% of us can be in the top 1%. Not all of us can create wealth in stock markets. Most of us would end up average in investing.

Traits are labelled based on outcomes. If successful, we call it perseverance. If failure, we call it stubbornness.

When we realise failure is the norm in many aspects of life, we would be compassionate towards both ourselves and others.

Setting aside for the moment role of luck, we either need to do things differently or do ordinary things extra ordinarily for success.

Impulsiveness and impatience are very common among investors. That why most of them never make any money in markets. Not only that many lose as well.

Discipline and patience would help you do ordinary things extra ordinarily. Though success is never assured, this increases the probability.

All our effort is towards making you do ordinary things well and be different from most of the investors.

If you realise failure is the norm and success is rare, you would understand why we ask you to do what we ask you to do.

Many think stock markets or trading is easy. This is the only field where we take outcome for granted without adequate outer and inner preparation. As Buffett says, in every market cycle, a new set of investors learn some very old lessons.

It is better to have some self doubt, appreciate uncertainty, prepare adequately, do things differently from an average investor and most important do ordinary things extraordinarily. This increases our chance of success and hopefully we won’t fail.

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

Our India is not big

Posted by Muthu on June 17, 2018

I was reading this piece recently.

India has been classified into three as India 1, India 2 and India 3 based on per capita income.

There are 280 million households in India with a population of 1340 million, averaging 4.8 persons per household.

We all belong to India 1 for which details are given below.

India 1 has 23 million households containing 110 million people. The working members of these households are 31 million. So an average a household has 1.3 working people.

The annual per capita income of India 1 is US$8,800 (Rs.0.6 million).

Only 8% of India, 110 million people are upwardly mobile.

10 million iPhone users, 32 million car owners, 37 million credit card holders, 50 million post paid mobile users, 59 million tax payers, 65 million domestic flyers, 24 million international flyers and 20 million ecommerce shoppers; all belong to this top 8% of population categorised as India 1.

India 2 with 104 million people spread among 22 million households has per capita income of US$3000 (Rs.0.2 million). This is another 8% of India which is aspiring to move up to India 1.

India 3 with 1126 million people spread among 235 million households has per capita income of US$1200 (Rs.80 thousand). This 84% is poor of India struggling to survive.

India moving from low income to middle income over next 2 decades would increase upwardly mobile and aspirers.

Only 8% of India can even dream of achieving financial independence. Like many countries, only 1% of population may actually achieve it. We need to keep this in mind.

Also giving needs to be part of everyone’s financial planning. Focus on giving should be on par with consuming and saving. We definitely owe that to the less fortunate.

Posted in Economy, General | 4 Comments »

Annual review

Posted by Muthu on March 30, 2018

As always, April is the month of annual review.

We would be sending your portfolio reports along with our notes and inputs.

We plan to complete the task by end of April.

This review is in addition to our meetings and interactions during the year.

Though we’ve given you online access, it would be good if you see your portfolio once a year. Lesser the frequency better would be the results.

Sensex has delivered 11.3% for the financial year 2017-18.

As far as debt is concerned, yields have hardened resulting in subpar performance.

Those of you who have invested during the recent past would see average to poor results.

For those who have been investing for long, the results continue to be good.

Short term is like weather. Not predictable. Long term is like seasons. Reasonably predictable.

Based on our experience and expectation, we are confident of good long term results. Those of you who have been with us for many years have been experiencing it through portfolio performance.

Emotions and liquidity influences short term performance. Fundamentals influence long term performance. Always focus only on long term. For equities, the long term is not less than 10 years. For hybrid like MIPs and balanced funds, long term ranges between 3 to 6 years.  Only for liquid funds, we can expect all time performance.

You’ll start seeing changes in the name of the funds you hold. This is being done by fund houses in line with latest SEBI guidelines. For the funds we’ve recommended, there has been no major changes in fundamental attributes and it is only change in nomenclature. So you need not worry about this.

Expense ratio for funds are being brought down by 15 bps by SEBI. In our view, this is only beginning and we may see more in coming years. Also as we wrote last year, due to TRI benchmarking and reclassification, we expect alpha to come down in the next few years. We would see more passive funds and ETFs coming into the being. We are keenly watching the developments and would suggest suitable changes at the appropriate time.

It is markets which give you results and not us. We are there to ensure you stay the course to receive the long term benefits offered by markets.

I’ve no new message to offer except asking you to stay the course.

Posted in General | 4 Comments »

Points to remember

Posted by Muthu on February 8, 2018

1) Equity beats inflation and provides superior return over other asset classes in the long run.

2) Good years are more than bad years. Based on the past we can say 70% of the time it is good years.

3) Not possible to time the market. Need to stay invested through both good and bad years to reap the long term return.

4) 10% correction once a year is a normal. Should not be surprised whenever it occurs. Only non occurrence should be a surprise.

5) 20% correction once in few years and 30% fall once in a decade is also very normal. Need to live through this roller coaster ride to enjoy high returns which equities offer.

6) Better to avoid checking portfolio during the periods of market turbulence. Once a year review is good enough, more so during bear markets.

7) Need to withstand emotional pain during the corrections and falls. Any adverse reaction to emotional pain would convert temporary notional loss into permanent real loss.

8) Invest when you’ve money. Redeem when you need money. Ensure there is not less than 10 year time gap between both.

9) Have strong filters when you consume market news. If it is not possible, you would be better off ignoring such news and updates.

10) Patience, discipline and staying the course would ensure you reach your goals and become wealthy. Always work on developing these traits.

Posted in General, Muthu's Musings, Stock Market | 4 Comments »