Wise Wealth Advisors

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

  • Blog Stats

    • 870,588 hits
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 835 other followers

  • Follow me on Twitter

Nuggets for 28th September

Posted by Muthu on September 28, 2017

Some of my recent tweets:

1) When you a buy a stock, tell yourself loud and clear that you are buying a business.

2) Behaviour matters more than analysis and math.

3) Since performance happen in spurts you’ll let go big winners by churning for underperformance. Once you buy right, sit tight.

4) Borrowing implies spending tomorrow’s income today. Future is always uncertain and may not pan out as per plans. Remember this when you borrow.

5) Mastering emotions is very difficult. But if you can do that, you’ll definitely get rich someday. Market rewards this mastery abundantly.

6) We understand how difficult it is to stay the course. Repeated reinforcement is required to internalise the same.

7) In markets, pessimists sound very intelligent. But it is the optimists who make money.

8) Being an investor and advisor, one doesn’t feel redundant with age. This is one area where experience and wisdom from it counts a lot.

9) Highlight process not performance. A strong process can always be adhered to but it is difficult to always deliver performance.

10) Our preference for inactivity is due to understanding. When you are inactive positively, you’ll also know when to act decisively.

11) Stock markets allow us to benefit from the skills of great capital allocators. What a blessing this opportunity to participate is.

12) Not all can start or run a great business. Still markets provide us opportunity to participate in their growth and profits. Grateful.

13) But for the presence of markets, many of us would not have any other way to obtain financial independence and create wealth.

14) Though very basic, at the time of big falls, I tell myself the price has changed but not value. The business is running as usual.

15) Wealth built through following an investment strategy and process is more sustainable than ad hoc investing.

16) You may even get rich by chasing fads and returns. But it is very difficult to stay rich if not backed by a sound process and strategy.

17) Simple investment discipline would beat sophisticated models over long run. We keep forgetting that simple wins over complex in investing.

18) In tough times, we tend to think good times never come and in good times, we tend to think it would last forever.

19) In 2027, you would not even remember about a 10% correction in 2017. Understand your time horizon instead of worrying about volatility.

20) You need not worry about bear markets or corrections if you’ve no plans to sell.

21) There is never a time where we’ve perfect information and the future is clear. Investing needs a leap of faith.

22) Even if journey is long, it would be less accident prone and relatively safe. Get rich slowly through quality businesses.

23) ‘Safety first’ is equally applicable to investing. Avoid junk and chor companies. Usually when they fall, they fall forever.

24) We know 10% corrections are very normal & almost happen every year. Still whenever it happens, we always panic. Strange investor psyche.

25) 10% correction once a year, 20% fall once in few years and 30% fall once a decade is very normal. Don’t panic. This is how markets work.

Posted in Tweets | Leave a Comment »

Underperformance is inevitable

Posted by Muthu on September 23, 2017

I always get queries as to why we rarely churn the portfolio. We could always keep changing portfolio based on recent performance and convince you how much we add value to your portfolio. That is an easy path. Why we have chosen the difficult path? Why we prefer inactivity? Why we discourage you from chasing performance?

Based on our experience, we tell you that all funds and fund managers go through periods of underperformance. What matters is the long term track record and not a specific period of underperformance.

I recently came across a study done by Davis Advisors. They have found that all good investors, funds and fund managers underperform around one third of the time. The funds which ends up in top quartile over a 10 year period spends not less than 3 years in bottom quartile. During one third of the time, all long term best performers become worst performers.

We’re committed to provide you long term superior performance and not to keep chasing performance and provide suboptimal returns. Vanguard studies have also shown that performance chasing hurts long term returns significantly where as buy and hold strategy offer good returns. I’ve shared this Vanguard study earlier.

I also shared with you a study came in ‘Mutual Fund Insight’. If you’ve invested in a large cap fund in 2007 and kept changing the same each year based on the previous year top performer, you would have got an annualised return of 3.93%. Whereas buying a fund in 2007 and holding it for 10 years would have delivered an annualised return of 12.84%

Not that we keep quiet during periods of underperformance. We speak to fund houses and regularly keep getting their inputs. Most of the time we feel the issues are temporary and were subsequently proven accordingly. In rare instances, where we believe the future may not pan out well, we recommend change.

So please look at overall portfolio performance and not each fund’s performance. Since you hold around five funds, it is most likely one of them would always be going through a period of underperformance.

Our idea of value creation is not through activities. It is easy for us to do some tinkering frequently and show you action. We’ll never do that. What matters to us is you should reach your financial goals, build wealth and attain financial independence. We would hand hold you through various business and market cycles and help you reach there. We’ll do only what is required. Many a times not tinkering with your portfolio and not allowing you to do so in itself is a big value addition.

Don’t equate activity with progress. Investing is one area where activities should be minimal. Neither you should chase performance nor ask us to do it.

Underperformance is inevitable. Keep this in mind when you look at your portfolio.

Posted in General, Mutual Funds | 1 Comment »

Good periods are more

Posted by Muthu on September 21, 2017

Many investors are afraid both when the market goes up and down. Markets are rarely in equilibrium.  Moving up and down is its very nature. During bear markets, media hype creates enough scare for people to exit investments. In bull markets, as markets keep making fresh highs, there is a strong fear of fall again hyped by the same media.

Markets do not follow any rules. Each market situation is unique. Every bull and bear markets occurs on different triggers. Over valuation or under valuation can last for long periods of time too. Our investment philosophy is not to time the market. We would go through periods of high returns, low returns, no returns and negative returns. We need to go through all these to get good long term returns.

In terms of years, markets are usually up 70% of time and down remaining 30%. There is no proven method or strategy to only capture good years. You need to go through bad years to get the reward of good years.

Also a 10% correction happens normally once a year. A 20% fall occurs once in few years. During a decade, we may even face a 30% fall too. These are only averages over a long period of time. Actual occurrences may significantly vary. Nobody has consistently timed all these profitably. Neither we nor anyone else can predict short term. Like seasons, long term is more predictable. Like weather, short term is unpredictable.

Because of my profession and interest, I read many good things and some nonsensical ones too, just to get a feel of what is happening around. You’ve no such requirements or compulsions. All of you have full time occupation. The best way to avoid noise is to completely shut it out.

Ignore any ups and downs. Just stay the course. Avoid or minimise use of online portfolio access. Our yearly review is more than enough.

Keep in mind that good periods are more than bad ones. It is easy to remember it now in a bull market. A 10% correction or 20% fall may always be around the corner. Don’t forget to remember it then.

Posted in General, Stock Market | Leave a Comment »

Nuggets for 20th September

Posted by Muthu on September 20, 2017

Some of my recent tweets:

1) Bonds are for storing wealth and equities are for creation of wealth.

2) In my opinion, the biggest asset one can have is zero debt.

3) The greatest discipline in personal finance is living below your means.

4) As Ben Carlson says, emotions cannot be back tested. That’s why past bear market always looks like opportunities and future ones scary.

5) Early financial independence and early retirement are completely different. To me, the former is a blessing and the latter is a curse.

6) Don’t think how it would have been if you’ve started 10 years ago. Start today and visualise how you would feel 10 years from now.

7) The neighbourhood we live determines our life style & spending. Need to be careful in choosing one which matches our goals and personality.

8) Paying minimum balance regularly on credit card is the maximum sign that you’re getting into debt trap.

9) Many are long term investors till next bear market.

10) Don’t take aggressive bets. Take measured risk. Remember one blunder can push you back by a decade or more in terms of wealth.

11) Big money can be made through high savings, wise investing and lots of patience.

12) One sign of progress in individual investor’s portfolio is no churn or very less churn.

13) Trying to get rich fast is a foolproof way to lose what we have.

14) Losing opportunities is far better than losing money. Don’t invest in fads.

15) “Making as much money as quickly as possible” is not an investment strategy. Unfortunately for most of us that is the strategy.

16) Aggressive strategy cannot be a substitute for high savings. Save high and take moderate risk than saving less and taking high risk.

17) The day we realise not losing is as important as winning; we would stop blindly chasing returns.

18) Good periods are more than bad periods. By not timing, though we go through bad periods, do not miss even a single good period.

19) We’ll stop looking for quick money the moment we consider stocks as businesses and realise that our wealth grows in line with business growth.

20) There are periods of high returns, low returns, no returns and negative returns. We need to go through all these to get long term returns.

21) Listening to market forecasts is not only useless but can be very harmful too; if you start acting on them.

22) The hard truth is only around 3% of our population are in a position to aspire for financial independence. Don’t waste this rare privilege.

Posted in Tweets | 2 Comments »

Nuggets for 12th September

Posted by Muthu on September 12, 2017

I’m receiving positive feedback from you for regularly sharing my recent tweets. I would continue to do so. Also I’ve not stopped writing regular blogs. I’ll keep doing it from time to time.

1)The first step to come out of debt is to change the lifestyle which got you into it.

2) Like many aspects of life, in personal finance and investing too, avoiding problems is much better than solving them later.

3) It is your savings and not income which determines your wealth.

4) Envy gets us into debt to lead others lifestyle and chase fads to match someone’s investment performance. Envy is all pain and no fun.

5) Sacrificing certain things today for a better tomorrow is not stupidity. It is delayed gratification which is the key for secure future.

6) A stock may not move for many years and suddenly rise very steeply. As long as underlying business is doing fine, patience is the key.

7) If you borrow and buy a house, you work for the asset. If you save and invest in equity, the asset works for you.

8) Those who achieve early financial independence share two common traits; they are high savers and live well below their means.

9) Planning is not about Excel projections but getting your approach right about managing money.

10) In a 10 year holding period, 30 or 40 best days would contribute to all gains. You need to stay invested to get the benefit of those days.

11) There is no point in being asset rich and cash poor. Need to invest in assets which generate cash flows.

12) Some of us want to get rich fast. Time is the critical factor in compounding. There is no way to compress it. Be ready to get rich slowly.

13) Stock market does not guarantee riches. If we behave well, it helps us to compound wealth at a better rate than other asset class.

14) Over emphasising skill and under emphasising luck is the way to get into ego trap. Luck plays a significant role in our investment success.

15) Quoting Buffett or Lynch does not make us one. It is to draw inspiration so that we can try to be better than what we are.

16) The difficulty in investment strategy is not in formulating it but diligently sticking to it especially during the periods it doesn’t work.

17) Worst would be saving 5% of salary and investing it at 7%. Best would be saving 30% of salary and investing it at 15%.

18) An ounce of gold was $19 in the year 1800. It is around $1350 now. Annualised return of 1.98% over last two centuries.

19) Higher savings help if future turns out differently than we planned. Who can be sure about future?

20) If expenses keep matching income, we would never be out of financial slavery.

21) If you really want to understand what an hour of your time is worth, the easiest approach is to simply divide your annual income by 2000.

22) If your annual income is Rs.10 lakhs and you buy a car for Rs.6 lakhs, it means you’re paying 1200 hours of your time for it.

23) Your net worth should be your age times your annual income, divided by ten. Twice the number, you’re really wealthy.

24) Age:50 Annual income:Rs.24 lakhs Net worth needs to be Rs.1.2 crores. Twice the amount, Rs.2.4 crores, is considered wealthy.

25) This is the wealth equation provided by Thomas Stanley. This is not applicable to those who are in the initial phase of their career.

Posted in Tweets | 5 Comments »