This time is different!! Its indeed different time

While writing this note, all major indices are negative except for the Banking and Financials. They have corrected substantially from intraday peak!! This has a lot to say about the market mood!! 

Despite the greater and timely response from the RBI, the market is unwilling to cheer!!

“Market is collective opinion of many investors” which means market is still sceptical about the future outlook. Respect market opinion at the moment. Some people are trying to do bottom fishing and some are trying to trade in market. Like I always mentioned trading is job of professionals and is double edged sword. Don’t you start trading, chances are that you will not make quick money (rather make quick losses).

As I mentioned in my earlier blog, “CASH IS KING”. The view further strengthens. I still feel systematic Investing is the way to go. Lumpsum, if at all, should be considered in Asset allocation funds or Multi Asset funds.

Currently all eyes are on Equity Market, but Debt market also has great value to offer. At the time of writing, 6.46% G-Sec is trading at yield of 6.09%, down by roughly 20 bps in two days.

Investor with low risk appetite and who are typical FD type investor should consider the Debt fund. As I always mentioned, please check which category of debt fund you are investing in. There are MF schemes which are volatile and safe like FDs also. So selection of scheme is more important. Best is to check with your advisor!! Investing in Debt funds offers good cushion and decent downside protection to overall portfolio. Wise investor invests for stability and consistency and not returns alone. Risk is high at the moment and we are not aware of how much risk can come from which side!!

As I mentioned in earlier blogs and TV shows, that sector wise, I liked Healthcare, Consumption and Infrastructure. While Infra hasn’t done good, Healthcare and Consumption has been good value protector in this mayhem. They will continue to do well in recovery mode also👍 .

Hereon, Largecap, Large & Midcap and Multicap Mutual Funds are expected to do well. Small caps might look attractive but are to be avoided at the moment. Economic situation is worsening hence there will be more casualties on Smallcap space. If you are stock investor, be careful while investing in Smallcap (and Midcap). It might look cheap but may turn out to be expensive buy😒. Value buy could be value trap.

I would also urge all investors to take help of a good advisor while investing. Don’t dare doing it yourself. This time is different as this is unique crisis (worldwide health crisis with uncertain period of lockdown) and not sector or country specific crisis. If you use this crisis well, you can make handsome returns otherwise you will lose opportunity and capital both🙏. If you don’t have good Advisor/ Relationship Manager/ Wealth Manager or he/she is not smart enough to gauge situation, quickly look for good advisor.

If you are fully invested in equity and have suffered mark to market loss of equal or more than the index, do not panic. A good advisor will help you navigate thru this tough water. Good advisor can do health check and impact analysis of existing portfolio and draw a plan for future. If you don’t have good advisor or can’t find, do not do any adventure!! Just stay put.

In case you are stuck on what to do and how to do? Please feel free to speak to me on 9833778887 or write to me at wealthcarein@gmail.com. I will be happy to help you without obligation.

If you find our blogs helpful, please 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"

                                 

  

Your Investments v/s COVID-19

While there are lots of news, advisory and expert opinions, Investor gets confused and out of place.

I am attempting to put a brief note on all this in one place. It might look easy task for you, but believe me it’s not. I am happy doing this for the larger interest of Investors.🙏

You must ask yourself - Where is your sight at the moment? Is it on your goal or the short term market mayhem❓

I am trying to give some perspective on whats happening now and what lies ahead.

What is happening this time?

1)      First time we are seeing Lock downs across world. It has never happened.

2)      It’s not financial crisis but the Health crisis of different magnitude. Fear is the highest this time around. Not sure if Social media adding fire to fuel?? This is first major crisis with highest social media users.

3)      Such a sharp correction in less than 3 weeks is historic. Indian stock indices have corrected in range of 30-35% in 3 weeks. World over the story is same. Investors are caught in this fall and couldn’t act in time.

4)      Volatility Index (VIX) is higher at around Oct 2008 levels (Subprime crisis).

5)      All asset classes are falling. Be it Gold, Crude, US Treasury. People feeling safe in cash only. CASH IS KING phenomenon back after 2008.

6)       The war is still on. Hence the extent of damage is yet to be ascertained. World is trying to guesstimate the loss. Actual loss can be ascertained once crisis is behind us.

7)      Human trials have started this week in USA. Results will take 6 weeks to come. Credible vaccine will take another one year to reach us.

8)      Major countries will have to resort to monetary stimulus and Interest rate cuts. Both are being used since 2008 hence the weapons are limited and few. Interest rates in western world are zero or near zero.

9)      Largest consumer of the world, USA and Europe are gripped with COVID 19. Meaning demand and growth will fall dramatically. World may slip into recession. Who knows!!

10)   Europe and USA are in 3^rd phase or COVID-19. Their COVID 19 numbers are going to be crucial for world’s growth and economic outlook.

11)   1% rate cut by US Fed and other programs failed to cheer the markets. More announcements will come but may not have teeth to reverse the blood bath trend.

12)   As per Goldman Sachs, Global GDP estimate stands at 2% which is lowest in 30 yrs.

Your Investments interalia goals are sacrosanct and must be funded for. What should you do as investor now? Here are few points that you can consider. Trust me I am also in same boat as you!! May be less or more. I have my sight set on revival and long term.

If you have already invested and your goals are coming up in 6-12 months?

You should have been watchful of the same at least one year in advance. Timing markets at end is always risky especially in times like this, when valuations were stretched and economic situation was poor. May be you have learning for future and your kids to educate on. You may have to use other source of assets to fund the goal or delay or reduce your goal. For non-negotiable goals, speak to your Investment advisor and figure out the best way.

If you have already invested and your Goals are coming up in 12-24 months

You don’t have to worry much!! COVID 19 dust would have settled by that time and you should be on course with your goal funding. But please do remember that you need to start planning to withdraw as you approach your goal time. Don’t try to outsmart market and wait till last few months. Remember funding goal is important than extra returns.

If you have already invested and your Goals is only long term investing!!

You are possibly the best placed category🤴🏻😊 

While there are so much negative that I have enumerated above, there are few positives too!!

1)      India’s attempt to curtail the outbreak of COVID-19 is praised by WHO. Yesterday announcement by PM suggested that they are going to response will be quick and meaningful to steer out India from any economic crisis

2)      Country of large population with high density, the patients’ numbers are quite low as compared to any developed country.

3)      Indian Government is proactively working and entire machinery is working hard to curtail the Pandemic.

4)      Crude is corrected substantially and is trading at 18 years low!! Yes you read it right. The oil prices are likely to remain low for good part of 2020 as the global demand for crude is not likely to go up any time soon. Also Russia and Saudi Arabia would not like to lose market share and hurt their economic growth.

5)      Drop is crude price by 1 USD per barrel helps India save upto USD 1.5 billion.

6)      As per some reports India is likely to save USD 30 Billion due to fall in crude. That’s staggering Approx 2.25 lakh crore if prices remain lower thru 2020.

7)      India’s major GDP contribution comes from domestic consumption. Hence we are unlikely to face so much trouble due to fall in exports due to global recession. However since we are not decoupled, we will be part of the onslaught but we will recover faster as our economy will not be too much out of shape as it happened after subprime.

8)      India received good monsoon last year hence the Rabi crop is likely to be much better which means rural demand may pick up.

9)      India’s GDP growth has been below potential since many years hence the valuation was accordingly. Now if it goes up, it will be significant on lower base.

10)   India’s current Market Cap to GDP ratio around 58%. Long term average number is 76%. The highest Market cap to GDP was 149.5% in December 2007 and the lowest was 45.9% in December 2003.

11)   Current P/E and P/B ratio are lower than long term average. Its lowest in past 4 yrs. 3 years returns of major indices are negative despite the fact that India’s GDP has grown, albeit at lower pace.

12)   Froth of the Indian market has gone away now sanity prevails in broader markets.

13)   Considering point # 10 and 11, it’s not at all good levels to exit equity. But good levels to average cost or start fresh investing. One must be careful about how much and when to invest. Consult your financial advisor. Also please note that markets have already discounted the bad news in price. Market may substantially only if the news gets gravely worst.

14)   As per Goldman Sachs, global recovery would come by Mid- 2020.

15)   Since India will be better place among Asian and Emerging Markets peers, foreign flows are likely remain robust.

16)   Last but not least, after all crisis that has gone by, equity investing has been rewarding after the crisis was over. This too shall pass😊✔.

We were not positive on markets and were having cautious call since 3 years. Hence we had decently good allocation to Asset allocator fund, Hybrid funds, liquid fund which has helped our client to minimise the notional loss. We are gradually increasing the equity allocation hereon!!

In case you are stuck on what to do and how to do? Your Wealth Manager is not responding or clued on or you are willing to take second opinion, please feel free to speak to me on 9833778887 or write to me at wealthcarein@gmail.com. I will happy to help you without obligation.

As an investor, you must follow these 2 lines

“Never let a good crisis go waste”- Rahm Emanuel.

“There are decades where nothing happens, and there are weeks where decades happen.”-Vladimir Lenin

If you find our blogs helpful, please 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"

Less is More!!

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

Need for writing on More credit is relevant today than ever before! I am getting at least 3-4 SMS, emails and calls daily enticing me to take quick (and easy) loans, credit cards etc. The case will be no different for you also👍 . Having access to money makes you think about (irresponsible)spending so not having excess credit is boon😊. Recent fall in market by  20% is another interesting time to write on credits.

People relate higher credit limits as social status, credibility, comfort and confidence booster of having money(credit line) as disposal👍 . Its absolutely perfect and justified feeling😊 .

However, how much do you talk about that in social circle? What kick do you get by talking about it?

Higher credit limits be it in personal finance (higher credit card limits, Personal loan, Home loan or loan against securities) or business (Term Loan or Working capital loans) have to be used with extreme caution. Remember that it’s a LOAN WITH INTEREST THAT NEEDS TO BE REPAID, AND NOT A GIFT. In olden days, one could get away without paying up or part paying the dues but now the scenario has changed completely. Your defaults makes it difficult, if not impossible, to borrow anytime in future. Therefore, exercise extreme caution 🙏.

This is a personal finance forum so we will keep business borrowing aside and focus on personal borrowings. Loan against Property and shares are also being taken by Investors for making quick gains. They pay heavy interest on the borrowed money and take undue risk to outperform the borrowing costs. Since Wealthcare Investments’ inception, I can imagine only 2009 and 2013 as the only period where you could have generated returns over the interest cost😊. But I would not advocate Investing with borrowed money!! Problem with borrowed money – You are investing in products that have uncertainty of return whereas the Interest meter is working daily. Net result, your patience is tested. Most often than not, you will break before the market breaks out (market rises). Even today, after about 20% fall across indices, there are Investors (sorry traders) who have taken these loans and trading to make returns in stock markets/commodity market. Looks like good margin of safety in trade currently, but not sure how many will be winners at the end. My best wishes are with them.

What I enumerated so far are the perils of available credit limits. If you don’t borrow, you don’t have credit available to venture.

Lets examine what excess credit does to financial wellbeing of a person? Investments are discussed above. Now lets talk about undue borrowing for consumption. Practically everyting is available on easy credit today. Days are not far that you will get to convert your food bill also on interest free EMI.

Not sure if all Interest free EMI offers are really interest free or you sacrifice spot discount for it. Even if its genuine interest free EMI, you are better off with paying upfront/credit card. As you are not allowing irresponsible credit consumption culture in you😊 .

Excessive credit card limit is even more dangerous, this is more apt and relevant to Millienials who believes in SWIPE culture. They fail to realize that any preponement of consumption today leads to sacrificing many consumptions tomorrow 😢.

I strongly suggest everyone to see the Marshmellow test in below link. It was conducted by Standford university in 1970 https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment

I personally do not buy product or service just because its available on credit. Even my daughter is trained in similar fashion. I don’t even look at cash back or offer which are temptation to indulge in consuming. Most of the time, I buy with spot payment instead of consumer credit (even if its genuinely interest free). This is just to stay clear from habit of credit.

In Technology enabled world, there will many smart and innovative products and services available to us that will make us feel “Must have”. Social pressure will also play its role to force us to consume! In such times, self descipline and restrain will help us to consume whats needed and not reckless. Once you put self restrain, you are sure to not get indudged into reckless credit.

Responsible Credit is good for individual and economy, but reckless credit is bad for individual but still good for the economy!! You have to decide😊 .

What should you do?

1)      Avoid entertaining such calls unless you are in need of it.

2)      Don’t pay attention to advertisements/ hoardings. They are impulsive.

3)      Spam such emails and SMS so that it doesn’t hammer you continuously.

4)      Check you credit card spending everytime. Also pay attention to cash flows v/s EMIs.

5)      In investing, resolve to not take any credit at all. You are fine investing without borrowed money.

6)      Don’t forget excessive credit has drown nations/companies and individuals. You are no great personality.

7)      If you are already burdened by credit, try to reduce it by cutting some corners and pay off.

8)      If you cant pay off, look for alternate cheap source of funding.

If you need to know more about money wisdoms, feel free to contact me. I am available at 9833778887 or wealthcarein@gmail.com

If you find our blogs helpful, please 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.