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High Returns on Investment -If something seems too good to be true, It is too good to be true!!
High Returns on Investment -If something seems too good to be true, It is too good to be true!!
High Returns on Investment -If something seems too good to be true, It is too good to be true!!
It was a scheme run by scamsters (what else you call them) where they launched an app named "Choices (CHC-SES)" in Nov 2023 and disappeared within 2-3 months, leaving several crores lost for hundreds of investors.
Wealth Creation through Asset Allocation
High Returns on Investment -If something seems too good to be true, It is too good to be true!!
High Returns on Investment -If something seems too good to be true, It is too good to be true!!
Equity investments are inherently risky, considering the volatility involved in markets. While one would like to create wealth, the journey generally generally is not smooth but consists of
Investing – Is simplicity the Key?
High Returns on Investment -If something seems too good to be true, It is too good to be true!!
Investing – Is simplicity the Key?
In the personal finance and Investing world, there is an old saying that if you don’t understand something, don’t go for it. In other words, simplicity is the key to success.
Decision Fatigue and Investing
Decision Fatigue and Investing
Investing – Is simplicity the Key?
Many a day, I have felt that my decision-making capacity slows down towards the evening. I mean, it’s not like I don’t make decisions, but I generally avoid more significant and vital choices.
Multi Asset Mutual Funds
Decision Fatigue and Investing
Multi Asset Mutual Funds
Financial Markets have been going through a turbulent phase in recent times. While volatility is the market's nature, one can see up and down every other day, which is good enough to scare
Women and Investing
Decision Fatigue and Investing
Multi Asset Mutual Funds
Recently I had a chance to look at a video by Paytm, "The Divide". I suggest you see this before moving forward to read further:
Investing in Uncertain Times and the fallacy of Market forecasting
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
During a market downturn, a frequently asked question is, "what do you think about the market." Is it a good time to buy? My answer to this question invariably is "I don't know," which disappoints many. And I am generally reminded of John Kenneth Galbraith, who said,
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
Risk has a different meaning for different people. For some, rafting and bungee jumping is fun, but they can be a freighting experience for many. When I booked my mother on her first flight for the journey to Dwarka and Somnath in Gujarat,
High Returns on Investment - How true it is ?
If something seems too good to be true, It is too good to be true!!
We decided to write this note after recently reading the following news item:
App promises investors high returns... Vanishes.
This news item appeared on 29th January 2024 in Economic Times
It was a scheme run by scamsters (what else you call them) where they launched an app named "Choices (CHC-SES)" in Nov 2023 and disappeared within 2-3 months, leaving several crores lost for hundreds of investors. People got lured into this app through various social media campaigns, WhatsApp groups, and even press releases by some well-known websites. The app showed 100-200% profits on the investment by investing in IPOs and stocks. Among many others who lost money between Rs. 1 Lac and Rs. 1 Crore, a woman from Mumbai lost 49 Lacs to these scamsters, and another person from Mangalore lost 10 Lacs. These are significant amounts and maybe life savings of one's hard-earned money.
The critical question is why people fall prey to schemes offering high returns. There is a long list of people willing to make quick money. Since COVID-19, many people, including elders, newbies, and homemakers, have joined this group. When we speak with investors and people in general, many are keen to make higher returns, and when IPOs and stock tips give opportunities to make a quick buck, no one wishes to remain behind. And then there are websites, apps, and channels that are screaming and eager to tell you how to make quick money.
There is no doubt that stocks as a mode of investing are superior to other investments in the long run but expecting to earn 100%-200% in a week/month or year is highly irrational. Anyone coming out of the blue will not earn you an exceptional return. While it is true that the share market has given decent returns over the last many years and has considerably beaten other investment options, the key is consistently saving and investing, remaining in the market for the long term through various up-and-down cycles.
Any return proposal of over 20% per annum should ring alarm bells in your mind, and you must question the investment theses and walk away on any indication of doubt. There are plenty of quick returns and easy money schemes. Sometimes, you will get random messages or emails. Sometimes, your known ones will share their experience, but always remember that at the end of the day, it's your hard-earned money, and you must not risk your money to earn some fictional return. There are many ways to lose money while preserving your capital, and earning requires consistent effort.
Let us state one fact today: There is no easy and quick money in this world. Easy money claims come with a price. All the listed companies' shares are backed by the business, and stock can return as much in the long run as the business can earn, not the ones promised by scamsters.
End of the day, we must remember that if something seems too good to be true, it is too good to be true. There are no free lunches and no free money in this world. Let's be careful with our money and avoid the quick money theory.
Happy Investing...
- 8th February 2024
Wealth Creation through Asset Allocation
Equity investments are inherently risky, considering the volatility involved in markets. While one would like to create wealth, the journey generally is not smooth but consists of many ups and downs. Being 100% in Equity may not always be a good idea, and adopting an assets allocation strategy is advisable to ease out the volatility. Various assets class one case opt for are Equity, Debt, Gold, Real Estate, etc.
Assets allocation helps to pass through the volatility by reducing its impact. No market, whether Equity, debt, or gold, moves linearly. Going up and down is part of all the assets class, and there is no escape. The best route is to do asset allocation and invest accordingly. This may not give you the best return as generated by Equity over the long run, but it shall surely provide you with peace of mind.
Asset allocation strategies: While there are many strategies, two popular and most simple strategy are listed below.
- One of the popular ones is based on age. It suggests that you should keep “100 – Age” in Equity and the rest in other assets. So, if your age is 30 years, you should keep 70% in Equity and balance 30% in other assets.
- Other is based upon risk profile. If you are aggressive investors based on your risk profiling, you can allocate significantly to equality, keeping lower to bonds or gold. While if you are a Conservative investor, this tends to reverse.
Asset allocation between various assets class:
Assets allocation can be at different levels. The asset level can be between Equity, Debt, Gold, Real Estate, etc. In Equity, dividing investment between Large, Mid, and small-cap is the next level of assets allocation. Even holding cash is part of asset allocation.
Is Asset allocation a one-time exercise:
It may be noted that Asset allocation is not a one-time exercise. Asset values are bound to move up or down, and the portfolio needs to be rebalanced periodically to stick to standard asset allocation.
Choosing the proper asset allocation helps maximize your return relative to risk tolerance.
Investing – Is simplicity the Key?
In the personal finance and Investing world, there is an old saying that if you don’t understand something, don’t go for it. In other words, simplicity is the key to success.
John Bogle, a legend in investing world, said in January 1999, "to earn the highest returns that are reasonably possible, you should invest with simplicity.” If you follow the virtues of simple and common-sense investing, you are bound to be rewarded. But then, how do you stick to simple investing in this fast-changing financial world? Simple looks weird, and complicated looks fancy. There is no fun in simple things.
In investing, we tend to focus more on returns. We want to earn multi-baggers, higher and continuous positive returns, and whatnot, while the market loves being volatile, and taking swings. In summary, future returns are not in control; however, we can control risk, cost, and time elements. Let’s look at all these factors:
· Risk – The risk and return are positively correlated. If You wish to have a higher return, in all probability, you shall take more risk.
· Cost – Frequent churning on investment for short-term gains is bound to increase cost and must be avoided.
· Time – Equity and short-term are opposite to each other, however, people still look for fancy returns in the short term, while long-term investing is the key to higher and sustainable returns.
Most of the investors deviating from these principles are bound to get disappointment. As Bogle said, and we quote, “The relentless pursuit of unrealistic performance, through short-term strategy distracts from the most important secret of Investment success – “Simplicity.”
If we focus on factors we can control, investing shall be more simpler and rewarding.
Decision Fatigue and Investing
Many a day, I have felt that my decision-making capacity slows down towards the evening. I mean, it’s not like I don’t make decisions, but I generally avoid more significant and vital choices. And when I recently read about a term called “Decision fatigue,” I could correlate to this very well. The reason may be that the brain is too tired by evening, or one gets into Decision fatigue mode. Decision fatigue is a characteristic of psychology that refers to our brain’s inability to maintain the same quality of decision-making. Decision fatigue explains how our decision-making capacity goes down throughout the day as we make other decisions/choices throughout the day.
I am sure many of you must have observed that significant politicians and business people such as former United States President Barack Obama, Steve Jobs, and Mark Zuckerberg have been known to reduce their everyday clothing down to one or two outfits to limit the number of decisions they make in a day. Any idea why so?
When asked about this, Barack Obama, former USA President, said that “I don’t want to make decisions about what I am eating or wearing. Because I have too many other decisions to make.”
Now, the important thing is how you automate your investments. Things really can become challenging when it comes to finances and investing. While in daily routine life, one is required to make thousands of decisions, adding ones related to Investing is bound to create more stress. This is one strong reason one should look at automating investing decisions instead of regularly thinking or deciding upon the purchase/sale of shares/mutual funds/investments.
One good way is to have a good investment advisor who can take care of your investments based on your risk profile and update you regularly. This shall remove the significant burden of making regular investment decisions, and you can focus on making important decisions in your profession and life.
Another essential method to automate your investment is by adopting the SIP methodology. SIP stands for Systematic Investment Plan, whereby a fixed amount is debited from your account on an agreed date and is invested in a Mutual Fund scheme. It helps you to avoid spending your energy regularly thinking about your investments.
Now, as an important function of personal Investing is taking care, you can devote your time to handling other, more relevant decisions in your profession and life, conserving your energy and not getting into the trap of decision fatigue. As someone has said, the financial decision should not be stressful; they should take care of themselves in the background while they live a purposeful life!!
Multi-Asset Allocation Mutual Funds – Is it their time now?
Financial Markets have been going through a turbulent phase in recent times. While volatility is the market's nature, one can see up and down every other day, which is good enough to scare an ordinary investor. On the other hand, interest rates have increased in the last few months. They have reached an attractive range of 7-8%, leading investors to consider shifting between asset classes.
Investing in Multi Assets Mutual Fund schemes is a better way to beat this volatility and retain equity in investing portfolios. Multi Assets Mutual funds invest in multiple assets class, including Equity, Bonds, and Gold, to name a few. As per SEBI's definition, Multi Assets Funds need to invest in at least three assets class with a minimum allocation of 10% in each asset class. These funds enable exposure to all asset classes through a single investment.
While equity is always a preferred asset class to create wealth in the long run, multi-asset allocation funds provide many benefits, such as wealth creation through equality components, portfolio stability, income generation through debt, and hedging against inflation through the gold segment. Few multi-asset funds also have real estate/infrastructure exposure through investment in REITs, InVIts, etc. which investors can consider with liking for real estate as an assets class.
Are Multi-Asset Funds for Everyone
For investors new to investing world or with a moderate risk profile, these funds can be an excellent choice to avoid higher volatility and earn reasonable returns considering the lower risk involved.
However, experienced investors who understand the markets thoroughly or someone having investment advisors with them can manage asset allocation at their portfolio level and need not necessarily go for these funds. They can plan their asset allocation based on their risk profile and their investment accordingly
– 10th March 2023
Women and Investing
Recently we had a chance to look at a video by Paytm, "The Divide." We suggest you see this before moving forward to read further:
https://www.youtube.com/watch?v=F9CLFiPnOd8
In our society, women have traditionally been underrepresented in the investing world. This may be because of cultural patterns in our society where males have handled significant family financial matters. Women have usually been expected to prioritize family and household duties over pursuing financial goals, which can make investing seem like a low priority. Additionally, women face obstacles such as pay inequality and limited access to financial education, making it harder for them to build wealth.
However, things have changed significantly in the last few years, especially with women going out, working, and earning money independently. With money in their hand, they have started making decisions to handle money. But are women better at investing, and should they be included in family investment planning? Let's see.
In recent years, there has been a growing recognition of the importance of women's participation in investing, both as a means of achieving financial independence and as a way to help close the gender wealth gap.
Research shows that women are better placed to handle financial and investment decisions as they are more composed and balanced than their male counterparts. Males, by nature, are more repulsive (not all, though 😊), aggressive, and often make decisions leading to the obvious destruction of wealth.
Renowned Finance Journalist Jason Zweig wrote in 2009 after the financial crisis of 2008, and I Quote:
The masters of the universe have turned out to be masters of disaster. No matter which aspect of the financial crisis you consider, a man is behind it. In the testosterone-poisoned sandbox of the male investor, the most important thing is beating the other guy; the second most important: bragging about it. The long term is somebody else's problem, and asking for advice is an admission of inferiority. Worrying about risk is for sissies. Leverage is good since it raises
returns -- while the market goes up. Is it any wonder the male-dominated world of Wall Street has boomed and busted every few years for over two centuries?
Women, by contrast, put safety first. Even after controlling for age, income, and marital status, women are more inclined than men to wear seat belts, avoid cigarette smoking, floss and brush their teeth and get their blood pressure checked. They even are 40% less prone than men to run yellow traffic lights.
If we look at most of the financial crises that humankind has encountered, they have been caused primarily due to male ego.
Women are just as capable as men when it comes to investing. They may even outperform men in some cases because they tend to take a more long-term and conservative investment approach. Women should come forward and handle the investments, and the financial world shall be better.
To encourage more women to invest, addressing the systemic barriers preventing them from participating in the investing world is crucial. Here are a few things to keep in mind when it comes to women and investing:
Start early: It's never too early to start investing, and the earlier you start, the better. Women often have longer life expectancies than men, so starting early can give them more time to build wealth and prepare for retirement.
Educate yourself: It's essential to learn about the different investment options available and the risks and benefits associated with each one. Take the time to research and understand your investment choices.
Consider your risk tolerance: Women may be more risk-averse than men, but finding a balance between risk and reward is important. Consider your investment goals, timeline, and risk tolerance when deciding where to invest your money.
Seek advice: It can be helpful to seek advice from a financial advisor or investment professional (we are there to fill this role 😊), mainly if you are new to investing. They can help you understand your options and develop a plan for your financial situation.
Overall, investing is essential for building wealth and achieving financial goals. Women participating in investment decisions can be a boon to family investment portfolios.
While much has changed in the last few years, there is a long way to go..
-17th March 2023
Investing in Uncertain Times and the fallacy of Market forecasting
During a market downturn, a frequently asked question is, "what do you think about the market." Is it a good time to buy? My answer to this question invariably is "I don't know," which disappoints many. And I am generally reminded of John Kenneth Galbraith, who said, "There are two kinds of forecasters: those who don't know, and those who don't know they don't know."
Forecasting is an all-time venture. One can see forecasts being made regularly on various business channels and newspapers. While the history of forecasting has not been great, people still like to listen to forecasts. It gives them some sense of control or pleasure. The prime reason can be that stakes are high in the Financial Market. If you can correctly forecast the Market or stock and take the correct position (especially with leveraging), then you are done for life. Retire and enjoy the fortune. But If forecasting had been easy, the forecasters would have been the world's wealthiest people. But the reality is something different. Peter Bernstein rightly said, "Forecasts create the mirage that the future is knowable."
I feel following are two important rules to create sustainable wealth in the long term:
- Not making too many mistakes in your investment journey which can destroy your wealth consistently and
- Holding your investments for a longer time duration,
As an investment advisor and your partner in wealth creation journey, we intend to ensure that your wealth grows over time. In between, there shall be bumps, e.g., market fall, inflation, interest rate, wars, and whatnot. But these all have been part of markets and human history; however, markets have been going up for many years. Humans have this remarkable feature to overcome things and move forward in life.
The best strategy is to consistently buy suitable mutual funds or direct stocks (only if you can spend considerable time researching and keeping track of what is happening in all the companies of which scripts you hold). It helps in averaging the cost over time and generates wealth riding on the power of compounding.
In summary, timing is meaningless in the long-term story of things, while "time spent in the market" is significant. I can't entirely agree more with a well-known investor, Nick Murray, who said, "Timing the market is a fool's game, whereas time in the market is your greatest natural advantage."
And returning to the question, is it a good time to Buy in the Market? Well, I don't have any precise answer to this, but it is an excellent time to continue your regular SIPs and investments. And if you are yet to start, get started on your investment journey.
– 24th March 2023
Importance of Risk Profile in Investing and Understanding your personal Risk Profile
Risk has a different meaning for different people. For some, rafting and bungee jumping is fun, but they can be a freighting experience for many. When I booked my mother on her first flight for the journey to Dwarka and Somnath in Gujarat, she was uncomfortable throughout the flight trip because this was her first, while for many of us, air travel is routine. To an extent, it can be said that risk is personality driven. Also, one may be risk prone in one aspect of life while risk-averse in others.
Coming to Investing, risk assessment and management are essential for every investor. While it is easy to follow people advising on business channels or, for that sake, any famous investor, each investor must assess their risk capacity before investing their hard-earned money.
I take a very simple example to reflect on this. In the last three years, cryptocurrency mania has taken over the world, including India. While investing in a new asset class is not prohibited, but without understanding the pro and cons, just putting a significant portion of your money is not less than speculation and in no way can be termed as investing.
We must accept that Investing is an essential part of the financial planning and wealth creation journey, and risk assessment is a critical part of this journey. There are a few important factors that must be considered while assessing one’s risk capacity:
Life stage: An individual’s risk-taking capacity changes with age. A young person is typically open to more risk than one on the verge of retirement. Also, one is generally risk averse when having limited resources and risk-taking capacity grows with increasing wealth.
Financial Goals: If your goals are long-term, you can take more risks; if they are near, avoiding a high risk is better.
Knowledge: If you have good knowledge about your investment, you can take more risks. While someone is new to the investing world, starting with less risky investment instruments is advisable. Warren Buffet once said that “Risk comes from not knowing what you’re doing”.
Risk-taking capacity is not the same throughout life; it keeps on changing as we go forward in life, earn more, and save more. But it is important to assess one’s risk-taking capacity.
As part of our Investment Advisory practice, we insist on doing this risk assessment analysis
of our clients before advising them on the investment options. Whether you handle your investment on your own or through an adviser, this strategy must be followed, which will benefit your wealth in the long term.