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- We don’t bombard your inbox with ‘BUY!’ mails every morning. The financial market loves to keep showing new fund offers and structured exotic products which are typically just the flavour of the season. People feel intellectually left out if they are not participating. These are, however, expensive products that do not increase the probability of returns.
- Financial engineering doesn’t make money, it increases cost. We stay clear of this. We like to invest in low-cost, plain vanilla products which have predictable outcomes.
- Compounding is achieved by time. Intellect is useful, but only up to a certain point. After that you need patience and stability. Think of the bailouts of ITC Classic Finance in 1999, government bailouts of UTI in 2000, Citibank and Bank Of America in 2008, and fiascos such as Yes Bank, ILFS, Harshad Mehta, Ketan Parekh, Washington Mutual, Global Trust, Bear Stearns, Evergrande, and Karvy. Hence, we stand for long-term investment instead of quick-in-quick-out trades. Minimizing bad decisions and making course corrections when you realize a decision is going wrong is essential to avoid flameouts of portfolios and compounding of wealth is ensured only after that.
- We don’t sell Unit Linked Insurance Plans (ULIPs) which all foreign and private sector banks do.
- We don’t sell Capital Structured or Capital Protection Schemes, Quant Models, or Leveraged Products, which all foreign and private sector banks do. Good asset allocation is cheaper and more tax efficient than these so-called sophisticated products which tend to be very expensive and the client pays for it any which way. Risk is integral to financial markets.
- We don’t put NFOs as more than 2% of our portfolio, if at all. We have not sold an NFO since 2008.
- We are clearly focused on asset allocation, not on market timing, and hence approach investment with a longer time horizon. We recommend holding equity mutual funds for more than 5 years, stocks for more than 7 years, debt instruments for one day to 5 years, commercial/logistics real estate for 10 years and beyond, residential estate maybe forever, and retirement plans for more than 30 years.