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

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Archive for the ‘Weekend Jottings’ Category

Weekend Jottings

Posted by Muthu on January 23, 2011

Saagaavaram (The boon of deathlessness) – Some time last year, I read this beautiful Tamil book written by one of the respected IAS officer in Tamilnadu, Irai Anbu. I liked the book and shared it with few of my friends too.

Incidentally Irai Anbu, a Tamil name means one who loves God.

This book says deathlessness, which people think as a boon, is actually a curse. Creation without destruction is very painful. Spring looses meaning if there is no autumn. There is no such thing as permanency or continuity of an individual. If there is one, then that is what an eternal hell is.   

A reference was made in the book about ‘Papanasam  Swamigal’. Probably Irai Anbu might have known him.

A close friend of mine knew this swamigal well and has asked me many times in the past to accompany him to Papanasam (near Tirunelveli). Somehow it never happened.

This friend of mine is non religious and non ritualistic. He neither worships anyone nor practices any system. We share some common traits. 

Few years ago, when this swamigal visited Chennai, I happened to see him.

If the term ‘swamigal’ gives a picture of someone in an ochre robe, with long beard etc., it is not so. He resembled any ordinary gentleman in his old age, wearing normal attire.

Normally when you visit a guru, there is either expectation from the guru or his coterie that you show extreme reverence. Bending, prostrating and talking with hands covering the mouth are the norms at many places.

He has come alone to a house and everyone was joyfully chatting with him. There was no garlanding, ‘Padhaa Pooja’ (worship of feet) or distribution of any ‘prasadam’ (offerings).

When I saw him, I felt like bowing down. May be my old habit. He immediately stopped me from doing that and mentioned something like there is no need to bow before another human being.

Despite his ripe age, he addressed me only in plural and offered me a seat. There was no such thing as he sitting in a chair and everyone else sitting down.

Though we discussed nothing profound, there was only a casual chat, he somehow made an impact on me.

I thought I should visit Papanasam and spend sometime with him. However he soon passed away in sleep while he was travelling in a train.

Only very few knew him because he never promised anybody anything. A guru is in demand only if he offers protection to people from their fears or promises them what they desire, either in this world or the other. Even the worldly detached ones, wants self realization, considered as pinnacle of one’s spiritual journey.

He was working till his last giving employment to the local community also. He never depended on anyone.

I was told that he gave instructions that after his death there should not be any kind of symbol of worship by people who liked him. He wanted to leave without any trail.

There was a time I used to be deeply scared about death, my death.

Somehow I’ve overcome it. Though like any other species, I’m hardwired to fight for my survival, the psychological fear is less now.

I cannot say the same for people whom I like. Definitely there is fear of loosing people. However I realise that all I can do is to grieve, when such thing happens.

I do not believe in any kind of continuity. If there is one, I’ll know after I die.

I feel that bubbles have no separate identity apart from ocean. Ocean is one.

I sometimes exhibit the trait of wanting the future to be certain.

Time and time again, life has proved that it is not possible.

Any lesson learnt?

I worry lot less these days but am not able to totally avoid it.

I’m fine with the same. I feel that negative emotions too have an unavoidable place in the life.

I find it easier to deal with people who do not project themselves as ‘ever green positive thinkers’. There is some depth in the relationships when you relate to people as they are.

I’ve found many times that hard core positive thinkers are very superficial and it is impossible to connect to them as they do not want their outer veneer to be broken.  They do not want to be vulnerable. Unless I’m ready to be vulnerable, nobody can meaningfully connect to me.

Feelings, both positive and negative, needs to be acknowledged.

Like happiness and pleasure, suffering and pain also exist, both in me and outside me.

There is no point living in a denial mode.

‘Positive thinkers’ project the state of permanent happiness, which in my opinion is non existent. 

I’m unable to watch interviews of film heroines for more than few minutes. They smile for each and everything and it appears very shallow.

Equally horrible is watching serials where they only cry endlessly.

I many a times get positive thinking quotes which ends up saying that sky is the limit.

Whenever I get such quotes I remember Buffett’s quip that ‘Trees don’t grow to sky’.

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Weekend Jottings

Posted by Muthu on January 17, 2011

Had severe migraine during the weekend. Hence the ‘weekend’ jottings are appearing on Monday. 

We’ve purchased the software and are in the process of getting last 4 years data and testing the output.

Once we get it operational by some time next month, we can not only bring in single sheet all the investments details and portfolio performance of a client but also group various family members or entities coming under a client. This single snap shot would be very helpful at the time of review.

Though we strongly advise our clients to ignore market, some are influenced by the non stop information pouring in and the noises created by the media.

Our general advice is NOT to review portfolio regularly. Still there are some who check everyday. I know people dealing in shares checking it many times a day.

People keep checking their portfolios through mobile phone even when they travel.

Faster… Instant… these are the mantras offered by today’s technology. It may be useful elsewhere but not when it comes to investing. Investing takes time and is actually a boring process.

If you want something interesting, try stock trading. Though you would loose money, it would be faster, instant and exciting.

Broker makes money through activity and the investor makes money through inactivity.

The more you review your portfolio and listen to daily noises; it is easier for you to get lost.

Fear raises its head whenever there is a correction in the market.

I’ve started getting queries from some clients who are concerned with the fall in markets since the beginning of this month.

Seeing a negative value in the portfolio statement may be very painful for some. The only way out is to accept this pain and overcome it.

If we cannot master this negative emotion, we would be taking impulsive decisions which would be injurious to long term wealth creation. We would end up making the loss which we precisely want to avoid.

Markets are cyclical. This sounds acceptable when the going is good but is difficult to follow when the markets are tumbling.

For people who are investing through SIPs, please note that the wealth is created mainly due to this cyclical nature.

Why get into doubt mode after few months of investing, when your investment tenure is 20 years+.

Let the market go through its cycles and review after 5 years. That would give you conviction.

For people who invest lump sum in equities, it is no good to make a meaningful inference about the portfolio performance before completion of 5 years.

For MIPs, we discourage investments if the holding period is less than 3 years. We position MIP only as a 5 year product capable of delivering returns superior to fixed deposits.  MIPs are impacted mainly by interest rates and to some extent by equity markets.

When the interest rates are hardening and stock markets going down, MIPs would temporarily under perform. The fund manager actively manages the debt portfolio too based on the interest rate scenario. Still when the tide is strong, the fund manager also needs to wait for a while.

Do not get distracted by short term impact on MIPs. Review the performance of MIPs only after completion of 3 years.

Having a long term perspective would ensure that we do not end up making impulsive decisions out of fear.

My wealth now would have been atleast 5 times more, had I developed long term perspective initially. I learned this only by experimenting with my own money and also getting the opportunity to learn from wisdom of investment legends like Warren Buffett.

Having a long term perspective helps me avoid many investment mistakes.

I believe in sharing what I know.

I also know that I cannot control the emotions of investors. That is something which each one has to do it for himself.

I can help you in the process by sharing some pointers and what I’ve learnt from observing capital markets for last 17 years. Ultimately the conviction has to come from within.

That’s why the ultimate credit of building and managing wealth goes to the investor and not the advisor. A good advisor can only provide the right advice and recommendations but he cannot control the investor’s emotions.

It is in the investor’s hand not to get panicked or greedy.

If notional loss in your portfolio disturbs you seriously, you may not do well in markets. You would end up precisely taking wrong decisions.

The alternate is NOT non-investing as time keeps eroding the value of your capital.

Sounds tough?

It is, as long as you are unable to detach yourself.

Once you develop detachment, wealth grows.

Sound Paradoxical?

It is.

Posted in Weekend Jottings | Leave a Comment »

Weekend Jottings

Posted by Muthu on January 9, 2011

Last year it was moving away from home office and setting up a separate office. 

Now we would be moving away from MS-Office, finalising and investing in our back office software before end of this month.

Once we import our database to the software everyday from the respective RTAs (Registrar and Transfer Agents) servers, we should have all the required clients and internal MIS at one point.

Having back office software would significantly increase our bandwidth to handle the growth in profession.

We’re continuing to invest in profession in terms of time (continuous learning) and money.

The nature of financial planning and investment advisory profession is going through a very tough time and more than 80% of the individual advisors have quit the profession in the last 2 years.

Why someone should be interested in building or managing other’s wealth if there is no adequate financial incentive for him or her?

I can only hope market recognise the need for good and honest advisors and reward them suitably.

Otherwise crooks like the wealth manager involved in the recent Citi bank fraud case only would thrive. They directly appeal to the two strong negative emotions, greed and fear of the investors.

Recently saw Kamal’s movie ‘Manmadhan Ambu’. As one of my fellow practitioner who also saw the movie pointed out, as long as Kamal was genuine and advising the truth, his client (Madhavan) would not see any value and would not reward him. The moment he builds a story and make things look very complex, he would be amply rewarded.

If you reward honesty and competence, you would be helping yourself. As Kamal has penned the dialogue for the above movie, he would mention ‘Honesty is the ultimate luxury’.

On a lighter note, he has also penned ‘Alimony is better than matrimony’.

It was indeed moving to see him forgive a girl who was inadvertently responsible for the death of his wife.

It is an average movie. People who like Kamal may see it once.

Media houses have their own preferences and biases. I’m talking about Gujarat. From whatever data and information I could dig out, Gujarat looks like the best performing state in the entire country. I do not know how many outside Gujarat are aware of it.

I think the media has totally blacked out the positive side of Gujarat post 2002.

2002 is big black mark on Gujarat and the entire country. No doubt that who are all involved in the incidents, irrespective of religion, should be brought to justice.

What I’m unable to understand is why media completely ignore lot of good things which has happened in the state post 2002 and only keep highlighting the negatives.

I only hope that people  of all religions get the benefit of growth in Gujarat and some are not pushed on the sidelines on the basis of communal colour. May be media can dig into this and get us the true and fair picture.

Anthony de Mello mentions that people who kill for ideas are most dangerous than people who kill for money or power.

He is absolutely right.

Did you notice the glorious smile on the face of the assassin of Pakistan’s Punjab Governor?

For humanity, beliefs are becoming more important than anything else and we do not mind sacrificing other human beings in the name of the same.

I suggest you a book. It was written by a political scientist by name Samuel P.Huntington in mid 1990’s. The name of the book is ‘The clash of civilizations and the remaking of the world order’. Amazing insights.

We have already started seeing the happenings of what he wrote then.

Which are the civilizations that would survive and which may become extinct?

Only God knows.

I made an error in calculating a mutual fund’s return in my last article.

The same has now been corrected and updated in our portal.

Some who read the last article could not believe Rs.10,000 invested in Wipro in 1980 becoming Rs.465 crores now.

You should not simply multiply 1980 price and today’s price for one share. Unlike real estate, a financial asset like shares keeps multiplying both in numbers and in value.

Real estate only multiplies in value.

Here is the break up details.

Suppose you invested in Wipro Rs.10,000- 100 shares each @ Rs.100 in 1980

1981 – 1:1 Bonus =200 shares

1985 – 1:1 Bonus =400 shares

1986 stock split to  Rs.10 face value =4000 shares

1987- 1 :1 Bonus =8000 shares

1989-  1:1 Bonus =16000 shares

1992 – 1:1 Bonus =32000 shares

1995 – 1:1 Bonus =64000 shares

1997 – 2:1 Bonus =1,92,000 shares

1999 stock split to Rs. 2 face value =9,60,000 shares

2004 – 2:1 Bonus =28,80,000 shares

2005- 1:1 Bonus =57,60,000 shares

2010 – 3:2 Bonus =96,00,000 shares

Value of one Wipro share on last Friday is Rs.477.

So your investment is worth around Rs.458 crores today. The difference of Rs.7 crores in value from my previous article is due to severe fall in the markets for the last few days.

Please note that the above data do not capture the dividend income earned during the last 30 years at all. For example in last year the dividend declared was Rs.6 per share. So you would have earned  Rs.5.76 crores last year alone as dividend income.  Not bad for a Rupees ten thousand investment!

Power of equity and compounding! Hope you make best use of it.

Posted in Weekend Jottings | 1 Comment »