Less is More!!

In the series of “Less is More” Today we will discuss “More churn in portfolio”

When we talk about more churn alias frequent churn in portfolio, opinions are divided!!

Investors feel, frequent churn is optimising the return and risk and should be done with high frequency. May be once a quarter, half yearly or maximum yearly. Well investors are not wrong!! Investors usually behave how the advisor/agent/ Relationship Manager educate them.

Relationship Managers of Banks, Broking firms or distribution house usually do this for fulfilling their annual targets therefore promotion and bonuses!!

Many agents or distributors who are independent or quasi-independent do it for optimizing their revenues or self goals. Many of them do it due to sheer unawareness of financial markets and its behaviour or their ability to do so much deep research.

I will restrict to comment on “why these Relationship Managers or agents do it”. I believe, when you are entrusted to manage investors hard earn money, you must put that extra to take care of investor’s money🙏

While there is no certain time frame or how much should you churn, there is definitely a strong rationale that must be present for the churn. 

Let’s examine, why someone should churn the portfolio.

1)      Churn portfolio if you are nearing your goal. So you protect your corpus for goal funding.

2)      Churn portfolio if your employment status has changed. Retired or disable.

3)      Churn if there is demise or disability of the earning member of family.

4)      Churn if the performance of the investment has attained the peak.

5)      Churn if the performance of the Investment is sub-par or below expectation for reasonably good period of time.

6)      Churn if the portfolio strategy is failing. And do not see it playing out any time soon.

7)      Churn if there is any change in the Mutual Fund scheme’s fund management team, ownership or mandate!!

There could be more reasons to churn portfolio, but one thing to note is – there is not timeline compulsion to churn!!!😊 Monthly/quarterly or yearly👍

Here are some of the reason that Investor’s or advisor's churn portfolio completely.

1)      Markets have peaked out so exit total equity.

2)      Other asset looks attractive so let’s enter that asset class.

3)      Commentary or narrative of market is changing so let’s change portfolio. Full large cap or midcap or small cap.

4)      Geo Political news are bad.

5)      Economy is doing bad.

6)      General elections around the corner so exit. US elections/Brexit etc.

If you have acted on above rationale, you know what exactly happened post your action.

I have simple principal of managing money!! I do take active bets in segments, capitalisation or asset class but I never take complete bet. I don’t believe it complete exit or entry into any asset class or market capitalisation or sector. I strongly believe that market is GOD and you can’t figure out what will come next?

See the picture to which asset class did well over last 10 years. Spending some time and making own inferences will help you understand perils and dynamics of chasing asset class for returns.

 If you have invested thru us, you will know we didn’t exit equity at any point in time in last 10 yrs!! We did take active calls in Midcap, Small cap, Infra in 2013-14 but didn’t put all money there. We kept monies in largecap, Multicap and Hybrid funds also. In 2017-18 we didn’t exit full equity, but reduced allocation considerably. Now also we haven’t put all monies in Small, Midcap etc. We believe in Balanced and rationale approach in investing. This has paid off well to you as investors!! Reversion to mean is fact, it happens for sure👍. Do not look at me for 100% active bets and portfolio construction.

I define my job as optimising returns for my clients with smooth investing journey!! That’s why the name of the firm is “Wealthcare Investments”. We endeavour to take care of your wealth from unreasonable shocks of aggressive investing.

Let me share another thought!! Successful investing is having core portfolio and satellite portfolio!! Our philosophy is to have up to 80% of your investment to be core portfolio (depending upon risk appetite) and remaining to be in satellite portfolio. So active bets are to be used for the satellite portfolio where you take call on market timing, sectors, geo political news, economical news etc. but remaining money must stay in investments. The 20 -30% of satellite portfolio could generate alpha in overall portfolio return/risk.

So to sum up, no one can time the market nor can be accurate most of the time. People have lost fortunes in attempt to outsmart the market!! Love your money and be wise! Be satisfied with good returns rather than extra ordinary returns.

If you need to know how to grow your money slowly but surely without frequent changes, feel free to contact me. I am available at 9833778887 or wealthcarein@gmail.com

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Disclaimer: We respect all individual approaches. Sole objective of this series is to burst a few myth in Investing. There could be genuine reason/experiences and “less is more” may not be appropriate. Investor must consult own advisor to figure out right approach before adopting any of these suggestions.

Less is More!!

In the series of “Less is More” Today we will discuss “More Liabilities”

India is known to be country of great savers (unfortunately not great money managers). So its likely that when it comes to borrowing, Indians borrow less and are also inexperienced. When you borrow you create liability. That’s what we will discuss today!!

Borrowing are mainly of 2 types- Borrowing for asset creation and borrowing for spending.

Borrowing for Asset creation can be Home Loan, Loan for Investing in Equity/MFs, Lease rent discounting, Education loan (I call it asset creating because eventually education loan will help family to earn more and therefore create assets), Home Improvement loans provided it improves the durability/life of the structure. Money spent on Interior decoration is not asset creating.

Borrowing for spending can be marriage loan, vacation loan, consumer loan and Vehicle loan (if its not used for enhancing productivity) as vehicle are depreciating asset and yields lower resale value with age, mileage, updates and tech obsolescence.

From financial wisdom view point, asset creating loans are good, and borrowing to spend may not be wise.

Asset creating loans can be bad if the cost of borrowing is high and underlying asset outlook is weak. For example – People who took loans for buying properties over last 5-8 yrs!! These investors have hardly made money in property appreciation over the interest cost payment. This is double whammy- you paid interest and blocked money in asset class which didn’t grow in 5-8 yrs, therefore missed opportunity in creating wealth in other asset class also😢.

By and large any loans taken for real estate as an asset class has proved to be poor decision for investors during this period.

Loan taken for investing in Equity or MF is also avoidable!! As your Interest outgo is fixed and return outlook is volatile. Also not having own money seldom makes you long term investor and risk appetite also falls. Unless you are novice investor, you should avoid it.

Indians have another mentality of switching loans from one to another lender!! While you may do it, be aware of the fine prints before you jump. Examine all term and conditions before you sign up. Verify all claims of the sales person with the company for “dudh ka dudh paani ka paani”.

Investor must try and keep his loan book very small and short term. You may also deal with only 1 or 2 lenders instead of many lenders. Look for service quality and transparency also besides lower rate.

Home loans are the cheapest loan available with tax benefits (Income Tax conditions are to be met) therefore investors may not opt for pre-closure or advance payments. Home loans are cheaper but loan against house is expensive therefore its good to run loan for full tenure. I see people repay their home loan before term, which should be avoided if possible.

Lets examine borrowing for spending!! Any loan taken now is cutting your ability to consume or invest in future. If you understand this line you are prudent. People take loans for practically everything these days. This leads to culture of buy now and pay later. Even if you are getting interest free loan, you need not take it as will lead to habit and eventually you may be victim of overspending and upset your financial wellbeing. Know what you need and finance the same thru own resources. Spending is impulsive in nature and have seen many people burdened with loans. Avoid it please🙏 . If you borrow more and miss even 1 installment, you credit score will be hampered. I am sure that in times to come, your credit score will decide you interest rate also. So higher credit score, lower interest rate😊.

What should you do?

1)      If you have to buy, buy it on credit. Have strong reasoning and logical decision of consuming.

2)      Buy on credit, only if you can examine if its really interest free.

3)      Consume only if you can afford. Pay attention to maintenance as that doesn’t come on credit always.

4)      Never take outstretched loans which can lead to anxiety in routine life. I know people took hefty loans for swanky house and are struggling to service or sell the property.

5)      Leverage to invest is art of novice investors. Don’t you try until you are 100% sure of outcomes.

6)      While taking long term loans, make sure that you have enough liquid assets to repay that debt. Also note that EMI should be easily serviceable.

I am personally having zero debt!! I am going to take home loan for bigger house in some time. I will also take term plan for the full loan amount so that, if something happens to me, Insurance cover can take care of my outstanding loan and home need not be liquidated. My loan amount is going to be two times of Annual Income.

Debt is double edged sword. It has trapped many business tycoons and countries too. Be wise.

If you need any assistance on what and why’s of Debt, feel free to contact me. I am available at 9833778887 or wealthcarein@gmail.com

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Disclaimer: We respect all individual approaches. Sole objective of this series is to burst a few myth in Investing. There could be genuine reason/experiences and “less is more” may not be appropriate. Investor must consult own advisor to figure out right approach before adopting any of these suggestions.

Less is More!!

In the series of “Less is More” Today we will discuss “More Assets”

If you are in your 50s or 70s, you are more likely to have a millennial in your family. A Millennial, as widely defined, are people born between 1981- 1996. Millennial are also known Generation - Y. People born after that are called as Generation- Z. So if you are below 50s than you are going to have Generation Z in your family.

You might wonder why Bhavesh is discussing Generation Y and Z in the topic of “Less is More”!!

Our Assets are largely not for us but for our beloved next generation! Hence it’s important to think about them. Its most important how will our Kids think, do and behave?

Generation Y and Z are quite different in their approach than ours!!

They believe in convenience, less cluttered, simple, easy and quick to manage products and services. Same is true when it comes to Investing also. Ask Gen Y and Z about their approach to products, services and Investments. You will be shocked with their responses.😊

New generation may not look at the cost, return or taxes alone, they look for care to their investments and convenience. They like being taken care of, beyond anything else. They look for someone who owns responsibility for maintaining Assets and Investments. Between returns and taxes v/s goals, they are going to be more leaning towards goals.

Imagine you have large portfolio of multiple assets like residential or commercial properties, Many Shares in multiple A/cs, too many MF schemes, Many Post office A/cs, too many FDs etc. It’s likely that the next generation will have no patience and intention to manage them or resolve them all and/or get them transmitted/transferred to the next legal heir. I know of Investors who are not working for the claim of their deceased family members as it involves hassle, paperwork and labour (at times bribe too). Amount involved here are quite small for them and they feel it doesn’t merit the efforts😢. Ultimately those cases remain unresolved.

In times to come, we also will join the idea with next generation that “Spread till it’s manageable and handy.”

Personally, I own 1 house, 1 Bank A/c, 1 Demat plus trading A/c and MF schemes, that’s it. I do not 

own Insurance policies, PPF, Post office, PMS, structured products, Arts, P2P lending, or any other Investments!! I have done this so that after me, my family should have ease of managing them or liquidating them. None of these Investments have lock-in. This helps me also to wind up in my own lifetime.

Financial assets are also easy and convenient for transferring of wealth equally among the heirs.

Concentrated investments if done with enough research and advise, pays off well. If you diversify more, it means you have low confidence on your decision. Investors should think over this and consider narrowing asset holding (refer my last two blogs on Many schemes and over diversification). Also keep in mind the next generation’s mentality and thought process. Thinking should be on lines of “what if I am not there tomorrow”.

The new generation seeks everything to be at click of button, easy to understand and convenient to manage.

Our philosophy over 10 years has been the same!! We believe in investing in fewer options, more transparent and easy to manage products. Feel free to contact me if you think we can be helpful to you in investing? I am available at 9833778887 or wealthcarein@gmail.com

If you find our blogs helpful, pls do like, share and comment.

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Disclaimer: We respect all individual approaches. Sole objective of this series is to burst a few myth in Investing. There could be genuine reason/experiences and “less is more” may not be appropriate. Investor must consult own advisor to figure out right approach before adopting any of these suggestions.

Less is More!!

In the series of “Less is More” Today we will discuss “Over Diversification”

Usually what comes to our mind as we speak about diversification is having many products in the basket of Investments. "Many" here is not defined!! Its relative term😊.

I met people who have too many MF schemes, Many Insurance policies, many Properties, NPS A/cs, Post Office deposits, NBFC deposits etc. Investors invest in all available options/products. You need not buy all that is available on sale🙏

Simple answer I receive is I have diversified my Investments. Well that’s half true.

Let’s examine all of these hypothesis and see is it good to do?

We have already discussed MF schemes in last blog. Adding to that, having too many scheme in same segment i.e. Large cap, multicap etc doesn’t mean diversification. Real diversification means having one (and maximum two) schemes each in Large cap, Multicap, Midcap and Small cap. In case you are investing in debt Mutual funds, do look for scheme mandates as to where they can invest. Recently it is observed that people have moved their FD monies into risky debt schemes and are concerned about the capital safety and returns due to defaults and mark downs of securities. No Debt Mutual funds are equal to FDs. There are few MF categories which are close to safety of FDs which are capable to offer FD Plus returns. Do check your risk appetite before you invest.

In case of Insurance policies, Investors buy them thru many Insurers. The reason given is what if the Insurance Company winds up? I know investors who buy Insurance (ULIPs) against MFs with the same reason of diversification in different asset class! This is classic myth👍. ULIPs and MF would invest in same asset class i.e. Debt and Equity.

Investor should ideally buy a term plan from a reputed Insurance company which has long track record of death claim settlement. Do not wish for lower premium which has low claim settlement ratio. Investor can (if really convinced) buy ULIPs also but should examine all the charges including surrender charges. Besides that, Investor should look at the long track record of their fund performance too. To my understanding, endowment, money back etc aren’t great wealth creation products.

For Health Insurance, again the same thing would apply as I mentioned above. Have two Insurance companies instead of many policies from same company. Ideally to reduce the overall cost, Investor should buy one individual policies for all members and another should be family floater policy with higher sum assured. Do check exclusions and other critical clauses which affect claim settlement.

Now coming to favourite asset class of Affluent India –Property. Investors feel diversified by investing in many projects in same vicinity or same segment like -residential, commercial, land and Industrial plots. Real diversification would mean mix of residential and commercial premises. I do not feel safe when it comes to buying land as its observed that, in many cases, they have issues like –title/demarcation, encroachment etc. Also when it comes to land buying, cash component comes in as a deterrent. Ideally investment should be made in a location you stay in as this is more convenient to manage, lease out and also helps in understanding real price while buying and selling (you might end up buying expensive or sell at less than market price, in other locations). Depending on family members or broker seldom leads to efficient management of property and or returns.

Retirement house is another fancy since a decade!! I am not sure why should one invest in retirement house even 5 years in advance? One must consider buying retirement house only around retirement time as at that time you are sure of which location you finally decide to retire. You also get the latest concepts, products and facilities if you buy at the appropriate time (and not in advance) and you are seeing the connectivity and infrastructure being developed. Retirement home as a product hasn’t delivered great returns since it became popular.

Now coming to favourite asset class of the Mass India - Gold. Simple investment advise here would be to buy the bar or coin as per the investible surplus. Buying ornaments as investment is loss making proposition while buying as well as selling😒. Melting charges (or any other name), making charges, certification charges go up to 15-25% in case of Jewellery. This eats up most part of your gains😢.

 For HNIs, opening an NPS A/c or some small tit bit Investments in Post office doesn’t help in diversification but it adds to hassle of managing too many investments. For middle class its fine to do some tax planning👍. HNIs are beyond tax planning, they should rather focus on tax efficiency😊

If you are facing the same issue as described herein and seeking someone to anchor your emotions and manage you investments? Do contact me at 9833778887 or wealthcarein@gmail.com

Wish you all Happy and prosperous T20 💐💐

If you find our blogs helpful, pls do like, share and comment

Author –

Bhavesh D Damania

Founder - Wealthcare Investments

EduPrenuer, TV show panellist and Blogger

You can reach him at 9833778887 and wealthcarein@gmail.com

"Risk comes until you know what, where and why you are Investing"

Disclaimer: We respect all individual approaches. Sole objective of this series is to burst a few myth in Investing. There could be genuine reason/experiences and “less is more” may not be appropriate. Investor must consult own advisor to figure out right approach before adopting any of these suggestions.