Wise Wealth Advisors

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

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This is your edge

Posted by Muthu on January 17, 2018

You’ve been our clients for many years and by now know what your edge is. Still, as always, let us keep revisiting and reinforcing our investment philosophy.

Let us take last 2 years, 2016 and 2017. Markets corrected by more than 20% in the beginning of 2016. In June, Brexit happened. Markets corrected. November 8th, two events; demonetisation was announced and Donald Trump got elected as President. Markets corrected.

Coming to 2017, in February UP elections happened. Market was worried whether BJP will win. GST, another structural shift and hence disruption happened in July. Market stumbled. Every other week in 2017, there was a worry about nuclear standoff between US and North Korea. In December, Gujarat elections became a point of worry.

I don’t know what will happen in 2018. But markets always keep finding a new reason to worry. Despite all the imaginary and real fears in 2016 and 2017, your portfolio is doing very well. This is because you are staying invested through ups and downs over last very many years.

I wrote a piece in 2015. During the previous 20 years, many equity funds have multiplied between over 40 to 100 times. Based on a HDFC mutual fund presentation, I wrote how scary those 20 years were. I would like to revisit the same again.

In 1996, Congress lost the general elections. This resulted in communist supported and participating third front government coming to power. A hardcore communist, Indrajit Gupta, was India’s home minister from 1996 to 1998.

You would also remember that BJP first came to power in 1996 and could survive only for 13 days. So between 1996 and 1998, there was huge political uncertainty and we had three governments in 3 years.

In 1997, Asian financial crisis happened. Much of East Asia went through severe currency crisis raising fears of serious economic meltdown.

In 1998, BJP again formed government, which only lasted for 13 months and was in constant turmoil due to tantrums of coalition partners.

In 1998, India conducted nuclear tests. Western sanctions were imposed crippling the country’s financial situation.

In 1999, we had a fight with our neighbour Pakistan. Kargil war brought both the nations to brink of a major confrontation.

In 2000, tech bubble burst. Technology stocks world over crashed eroding investors’ wealth.

In 2001, 9/11 attacks happened, creating a huge geo-political crisis. Markets tanked.

In 2001, Ketan Parekh scam happened. UTI crisis happened. IT stocks in India lost value as much as 90%.

In 2001, Indian parliament was attacked by terrorists.

In 2004 general elections BJP lost. Congress government dependant on left support for survival came to power. There was common minimum program and weekly breakfast meetings. Government has to keep on yielding to the left tantrums to stay in power.

After 2004, the global commodities prices started rising. Oil prices also started rising sharply.

In 2008, global financial crisis, considered as worst financial crisis after great depression happened. World markets collapsed, Sensex dropping more than 50%.

In 2008, Mumbai terrorist attack happened.

From 2010-13, corruptions, scams and scandals started hitting the government. 2G, Common Wealth Games and Coal gate are some of the major scams. UPA-2 was most part immobilised and was fighting one corruption scandal after another.

In 2013, markets panicked due to QE tapering worry. GDP growth slowed down. Current Account Deficit (CAD) and Fiscal Deficit (FD) worsened threatening ratings downgrade. Inflation was very high and the currency weakened.

In 2014, rise of ISIS.

Despite all the above, investors wealth multiplied multi-fold.

As Morgan Housel says, “Progress happens too slowly to notice. Setbacks happen too quickly to ignore.”

As a nation, we would continue to progress. Media will keep amplifying fears and anxieties. What you need to do is continue to stay invested. What can be simpler than this?

You’re able to follow the conviction of staying the course by doing nothing. There are very few long term investors in the market as many find it difficult to adhere to this. Markets would create wealth for you as long as you don’t keep tinkering.

Being a long term buy and hold investor and staying the course through ups and downs is your greatest edge.

Keep up the edge.

Posted in Stock Market, Wealth | 5 Comments »

Bad News and Good News

Posted by Muthu on January 2, 2018

Bad News: Inflation destroys wealth

Good News: Compounding builds wealth


Bad News: Discipline is painful

Good News: Outcome is enjoyable


Bad News: Equities are extremely volatile

Good News: Equities create immense wealth


Bad News: Media amplifies greed and fear

Good News: Good books and blogs impart wisdom


Bad News: Short term is unpredictable

Good News: Long term is reasonably predictable


Bad News: Bad things can happen any time

Good News: Proper planning & risk covers can reduce negative impact


Bad News: Life is ephemeral

Good News: Most of us would live to reach old age


Bad News: Cannot control returns

Good News: Can control savings


Bad News: Markets are not under our control

Good News: Behaviour is under our control


Bad News: Disruptions can happen anytime anywhere

Good News: Continuous learning is the available antidote

Posted in General, Muthu's Musings, Wealth | 5 Comments »

12th Year

Posted by Muthu on January 1, 2018

Wishing you and your family a wonderful 2018.

We never believe in forecasts, especially of short term. In the beginning of 2017, there were many predictions that markets would do badly due to demonetisation. GST implementation strengthened these voices further. However Sensex has delivered around 28% return in 2017. As a policy, we don’t make any index forecasts and would stick to the same for 2018 as well.

If past is anything to go by there are more good years than bad years. Roughly markets are up 70% of the time.  Need to stay invested during the 30% bad years as well, to reap the benefit of good years.

As our clients, you all have created significant wealth. This would accelerate in the years to come. We hold views based on broader picture. India’s GDP per capita would continue to grow over next decade and this would result in many companies doing well. When companies do well, earnings would grow. Growing earnings would get reflected in stock prices and hence in mutual fund NAVs.

We believe that there is huge potential for wealth creation over next decade though the ride, as always, would be bumpy. You’ve been sticking to your investments despite bull and bear markets, positive and negative news flows and your own emotions of greed and fear. Once we buy right, all we need to do is to sit tight.

We are entering into 12th year of our profession today and are grateful to you for being our client.

Though we started the profession in January 2007, it took around 3 years for us to get our focus right. We then realised investor management is more important than investment management. Choosing investments or making portfolio changes is only 10% of the work. 90% is focusing on investor management, which is managing behaviour, emotions and psychology.

By helping you focus on what is important, we’re able to make you achieve excellent results. Through all our communications and interactions, we would continue to focus on investor psychology and behaviour.

Good investing is very simple. It is like daily exercise or consuming good diet. Though these are simple to understand, very difficult to implement on a consistent basis. Our focus would continue to be making you do these simple things consistently. Simple and right discipline, when repeated regularly, would lead to exponential results.

Be it health, wealth, career or relationships what we do everyday matters. To quote Darren Hardey

“You will never change your life until you change something you do daily. The secret of your success is found in your daily routine.”

Stick to simple and effective discipline. Keep reinforcing it regularly. You’ll then be successful in whatever you focus.

Once again, wishing you a great 2018.

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

Hard and Harder

Posted by Muthu on December 23, 2017

Hard: Making money

Harder: Keeping money


Hard: Start investing

Harder: Stay invested


Hard: Saving

Harder: Properly investing the savings


Hard: Avoiding fads

Harder: Sticking to a portfolio for 10 years


Hard: Controlling greed in bull markets

Harder: Controlling fear in bear markets


Hard: Saying no to easy money

Harder: Sitting tight for long term compounding


Hard: Not looking at daily prices

Harder: Not reacting to price fluctuations


Hard: Looking at opportunities in bear market

Harder: Looking at risk in bull market


Hard: Analytical skills

Harder: Discipline and Patience


Hard: Not chasing multi-baggers

Harder: Contentment with modest returns

Posted in General, Wealth | 1 Comment »

This one is must

Posted by Muthu on December 17, 2017

Though we’ve not received any formal communication, we understand through articles in media, as quoted by AMFI (Association of mutual funds in India), the deadline for linking Aadhar with your mutual fund folios has been extended till March 31’st 2018. We would continue to co-ordinate with each one of you and complete the process well ahead of above timeline.

The average mutual fund holding period in India is around 18 months.

A book, Capital Returns mentions that the average holding period of stocks in Asia is 10 months. So for India too, it should be around this number.

I was reading this article today.

As of 2010, the average holding period of US investors has fallen to 6 months from 8 years in 1960.

Warren Buffett once said “What makes sense in business also makes sense in stocks: An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.”

No owner holds his company for 10 months. The holding period is measured in decades.

The idea of owning stocks or equity funds is to grow along with businesses. How much growth would happen in 10 months, the average holding period for most of the investors?

In our family portfolio, be it stocks or equity funds, we buy with an intention to hold not less than 10 years. Not that we would not make course correction, but as a principle it would be less frequent. If we buy right, churn can be kept at the minimum.

All of you have good experience in investment made through us in mutual funds. Why it is so? Because based on our advice, you’ve been holding your investments for many years. Longer the time horizon better would be the results.

You’re a rare breed because very few hold on to their investments for 10 years or more. I’ve earlier shared with you many examples how churning leads to poor returns. Chasing performance in a good fund, investing after few good quarters and redeeming after few bad quarters, would give you subpar returns. But staying invested without hopping in and out even in an average fund, would give you excellent returns.

It is time that matters in investing. This is least understood and followed.

Coming back to the above mentioned article, Warren Buffett’s average holding period for many of his stocks is 20 years against the average of 6 months for the investor community.

He buys right and sits tight. We’ve also seen about a fund manager in UK, Nick Train whose average holding period is 18 years. Once you invest in good funds or stocks, what is required is staying invested for long time.

This one is must. This trait alone would ensure you build a fortune over time.

Posted in Stock Market, Warren Buffett, Wealth | 1 Comment »