Wise Wealth Advisors

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

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Archive for the ‘Wealth’ Category

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 »

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 »

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 »

Simple that’s why

Posted by Muthu on August 5, 2018

Last month I wrote how failure is the norm, be it investing or business. The success rate is very less.

In an article, New York Times mentions that out of 3481 listed companies in US, 200 companies accounted for all profits. The rest 3281 companies lost money. The success rate is just 6%.

We’ve also seen many times in past, how investors earn less than fund returns, as they chase performance. The average holding period of mutual fund investors is around 18 to 24 months. Once Prashant Jain mentioned, hardly 2% of investors stay invested for more than 10 years in a fund. Only small percentage of investors create wealth through equity, be it mutual funds or direct stocks.

Many of you are now among this tiny group of successful investors. How majority of our clients ended up in this successful tiny minority?

We’ve no special expertise but strongly believe in certain process and discipline. We accept investments only for a minimum tenure of 10 years. We don’t frequently churn portfolio. We rarely make changes that too only when we are convinced it is required. We use all opportunities to educate how ups and downs are very nature of markets and why staying invested for long run matters. By not tinkering, we interfere less in your wealth creation journey. More importantly, we don’t let you become your own enemy, through your behaviour.

When I started as an advisor 12 years ago, I decided to implement these principles in my own investment journey and that of our clients. It was easier to implement for clients from day one. It took few years for me to implement for my own investments.

To make money, one needs to be in right place at the right time. India is in such a sweet spot. Unless we mess things up by our own behaviour, discipline and patience would continue to create good wealth. All I ensure is you do few right things, avoid many wrong things and don’t mess it up by negative behaviour.

Teaching is easy. Following the teaching is very difficult. We did the easy part and you the difficult one. Glad that we are able to attract clients matching our philosophy.

We did not do anything extra ordinary. We’ve very limited expertise. You’re successful because you did ordinary things extra ordinary well. Nothing new in the wisdom we shared. It’s all learning from legends, freely available in the internet.

Charlie Munger once said “More investors don’t copy our model because our model is too simple. Most people believe you can’t be an expert if it’s too simple.”

You did simple things very well ending up in tiny successful minority.

The thing is anyone can copy this and be successful, but most won’t do.

That’s why it is being repeatedly said that investing is simple but not easy.

Posted in Stock Market, Wealth | 2 Comments »

Nothing is the best thing

Posted by Muthu on June 16, 2018

In personal finance and investing, we’ve to do few right things and avoid many wrong things. Once we do few right things, doing nothing is rest of the course. We never get tired of repeating this. The key value we bring into the relationship is ensuring that you do nothing after the course is set.

There are many approaches to investing and personal finance. We follow what we’ve internalised through our learning, experience and inspiration. We can only advice what we follow. That’s why we always focus on buy and hold.

Our strategy has evolved based on our faith in the future of our country. Over next two decades, there is a strong possibility of India moving into middle income from low income. Many sectors and companies would benefit from this growth. For stock pickers, they need to find few quality companies where they can sit on their ass for one to two decades.

For you all, mutual fund investors, need to stick to chosen equity funds and keep investing regularly in a systematic way. Need to tolerate periodic under performance of funds. Even legends underperform close to one third of time. So there is no way the fund managers can avoid this. Though choosing good funds are important; it is still a hygiene factor. What really matters is your discipline in staying the course.

We neither believe in short term wealth nor have knowledge of creating it. You’ve self selected to be our clients since you see merit in the philosophy and the strategy we follow. In our view, it takes not less than 2 decades of high saving and prudent investing to gain financial independence and create sizeable wealth.

Doing nothing was easy last year as markets gave excellent returns. It is a year like current one which shakes the faith. Markets have always behaved like this and future would be no different from the past. Need to accept this bumpy ride with a conviction that we are moving towards a good destination.

Though you heard from me many times, it is difficult to do nothing. Our mind always sees action as a sign of progress. This is indeed true for various aspects of life but not to investing, especially for the strategy we’ve chosen to follow.

So continue to do nothing and stay the course.

Posted in Wealth | 2 Comments »