At first, chartered accountant Ravi Swaminathan comes across as guarded. If you listen to his investment experience, it explains why the 55-year-old is so cautious that he adopted a 50:50 debt-equity exposure. His investment journey is not a story of unqualified successes, but the mistakes he made and the challenges he faced along the way can offer many lessons to investors, who certainly have an easier time in the more tightly regulated markets of today.
Having started his career in 1985 and worked in various industries for around 25 years, Swaminathan took a sabbatical and a break from active service in mid-2009. He is now a practising CA.
Burning his fingers
Swaminathan's investment journey is full of interesting experiences. "I started investing in direct equity but later changed to 'mutual funds only' as I did not get quality time to monitor the market. However, for the past few years, as I am able to get reasonably qualitative time, I am investing some part of my savings in direct equity again," he says.
His first experience with mutual funds was ordinary, to put it mildly. "Master Gain 1992 fund did not perform well and I was stuck with this deadwood for over two decades. I sold it eventually and got a poor return. My investment of Rs 2,000 may be peanuts in today's terms. But in early 90s, for a man whose earning is only from salary and having a five-digit bank balance, it was a loss not to be ignored."
He also invested in some IPOs. Call it his luck or timing, this too was a thorny track. "That was the time, Shri Harshad Mehta ji was in full form! He not only pulled the wool over the eyes of the SEBI, business media was also gung-ho about this man and he was on the covers of all magazines and newspapers. But what affected the aam investor like me was the havoc wrecked by such crooked market operators and the failure of the institutions to predict and prevent such disasters," Swaminathan says.
His total investment in equity and mutual funds in the early 90s was around Rs 1 lakh. All of it (except one company's shares in which he was then working and had received them as employee quota) was reduced to junk. "One of the IPOs I was allotted shares in was Alacrity Housing. The company never made any profits and has been delisted now. That made me opt out of the market by and large. I was into only fixed deposits/PPF/NSCs for the next decade or so," avers the retail investor from Chennai.
But such extreme risk aversion can do damage to your personal finances, too. The regret that he has is that after counting losses, he chose to sit out of the markets entirely for a long spell. "I never took advantage of market corrections."
It was only in 2004-05 that Swaminanthan again started investing, this time mostly in equity funds.
His investments include Franklin Templeton funds (four equity funds), HDFC funds (two equity funds and a few FMPs/debt funds) and SBI Contra Fund. Of these, the biggest allocations are in Franklin Bluechip (7 per cent) and HDFC debt funds (10 per cent). He invested Rs 2 lakh in the NFO of Sundaram BNP Paribas Energy Opportunities Fund (now Sundaram Infrastructure Advantage Fund) and stayed with it for more than five years. But eventually, he sold the fund at a heavy loss. That was a lesson learnt the hard way about the dangers of thematic funds.
Despite his mixed experience with equities, Swaminanthan is confident that financial assets are the way to go. He does not own a gram of gold, nor does he plan to build a house on his own, as of now. "So, all my investments are only in financial assets and I expect a decent return for my reasonable material needs and health-care expenses," he says.
Many investors love to mimic investment legends like Warren Buffett or home-grown Rakesh Jhunjhunwala to make the right moves. Swaminathan doesn't believe in such hero worship. "However, I do keep myself updated on financial literature. In this, Value Research also helps me a lot as I consider the editorials unbiased and informative." He also finds the fund star ratings very helpful. He has been a regular subscriber of Value Research services since 2005-06.
Like many veterans, Swaminathan's goals are to protect and grow his savings so that they meet his retirement expenses. So, after so many ups and downs, how would he describe his investment returns? "Overall, deducting the losses I incurred and netting the gains, my returns are still marginally more than what one would get from fixed deposits. I do not claim that my returns are substantially more than that from fixed deposits. Considering the risks involved in the stock market, my honest answer would be that the rewards for an ordinary investor like me (who is not greedy and also careful in investing) are not that great. But they are certainly not negative either."
So what did the world of investments teach him? Swaminathan says
1. Do not invest in more than two or three fund houses because the schemes are more or less the same and the list of investments one has to monitor becomes so long that one may lose track. He knows this because at one point he had investments across eight fund houses.
2. Do not choose a banker or portfolio manager without understanding how he gets his commission. "I made the mistake of choosing an MNC banker who could have advised me better," says the investor.
His last one is not a lesson but a well-meaning suggestion to government/authorities. "It's high time that Investor Protection Fund or any other institution advocated the publishing of oral as well as the evidence-based history of ordinary investors like me. We must know how such investors lose money. Not all of them are greedy and not all of their investment choices are mistakes. Such a history, if written honestly, will speak volumes about our institutions and may throw light on how to make course corrections in the future."
This column appeared in the November 2016 Issue of Mutual Fund Insight.
Do you have an interesting story about how your investment journey unfolded? Share with us on [email protected]