Habits of a highly effective investor

Hailing from a middle-class family, Sanjay Simha picked up the habit of saving money quite early. He has kept this habit intact to date. His tryst with mutual funds happened unknowingly in 1995, but this 'blind date' is still very much on. Over the years, Sanjay, who is now retired, has learnt another important lesson: saying no. Here is his fascinating story.

Background
Sanjay Simha's hometown is Bangalore, but he has been living in Ghaziabad (NCR) for the past 32 years. He had a fairly good education - electrical engineering from Bangalore and an M.Tech from IIT Chennai. Having worked for an MNC most of his career (over 31 years), Sanjay has hung up his boots. He lives with his spouse, who worked in a school and is now engaged in writing books for school children. Sanjay's lone son is married and is working in the U.S.

Money has been important. "We were from a middle-class family. My father was in central-government service. He had retired by the time I started my college. This made me strive in my education and develop a good understanding of the importance of saving money. I learnt to keep my accounts when young," Sanjay told Value Research.

Sanjay says as he gathered more responsibility, he started driving things towards optimisation and acquired some good financial knowledge. This made him aware of the world of financial investments. Though, being risk-averse, he did not instantly take a plunge. "Initially, for quite many years I was a spendthrift, with less funds going in for savings and investments," he reveals.

Goals
Investments helped him achieve some of his financial goals. "I thought some funds would be needed for my son's higher education and wedding. I was able to manage these with my income. My son was able to get scholarships. I also had some decent savings for the wedding. Subsequently my focus moved to targeting a higher corpus for my retirement and it is still in process...I guess I have been able to manage what I wanted to. Thanks to the guidance from the articles on the Value Research website and the advice from Mr Dhirendra Kumar," Sanjay elaborates.

Investing in mutual funds
Investing in mutual funds was not a conscious decision for him, at least not initially. "Though formally I started investing in mutual funds from mid-2007, I made my first mutual fund investment unknowingly in 1995; I invested in UTI Retirement Benefit plan, more from a savings perspective. This was on suggestion from a UTI agent as I was already investing in UTI's ULIPs at that time," quips Sanjay.

He admits that during those early days he didn't know much about the concept of targets in finance. "Initially, it was more about savings and we were somehow misled into LIC and UTI ULIPs to save tax. And as you say many times, it was more of an obligation to please someone known," Sanjay concedes.

He came across Value Research somewhere around end-2014 when he felt the need to understand investing rather than keep blind faith on advisors. He says attempting to learn about stocks and mutual funds was an inquisitive journey.

Sanjay says from 2006 to 2008, his investments in mutual funds were in bits and pieces. He started out with SIPs. Then came some NFOs, with one being that of a gold fund. "My serious efforts towards investing started in 2010 with some initial lump-sum investments and some SIPs. My advisors - two of them, one in 2007 and the other in 2010 - somehow pushed some NFOs and also some specific AMCs. It was only in 2014 that I started to realise this and tried to get out of those funds," Sanjay recalls.

He gives the credit of his 'new life' as a direct mutual fund investor to Value Research. "It was quite late for me. I started switching over from regular schemes to direct growth plans. I chose funds of good standing based on the knowledge I gained from VRO and other such websites," Sanjay says.

He still holds some not-so-good debt funds. He has been waiting for the three-year period to get over to get the benefit of long-term capital gains.

Sanjay is focused on balanced funds and debt funds - ultra short term and dynamic bond funds, including some hybrid debt funds. He has some mid-, small-, multi- and large-cap funds but is not interested in reinvesting in them.

Sanjay realises that he has too many funds. Initially his asset allocation was around 75-25 equity to debt, but prior to his retirement Sanjay brought the ratio down to 65-35. It now stands at 50-50. The majority of debt allocation is in ultra-short-term funds. He stopped his long-running SIPs the previous fiscal.

He also did some STPs from liquid funds to equity over the last one-and-a-half years, mostly in BSL Frontline/Top 100, FT High growth, Prima Plus, Prima, Smaller Companies. He has also regularly invested some surplus money in equity, balanced and debt funds over the last 18 months. "However, now I am not doing any SIPs/STPs but diligently doing some periodic switches from debt to balanced funds," Sanjay adds. He happens to have an NPS tier 1 account, which he opened just about a year ago.

Investment lessons
Sanjay confesses that he did not take any big advantage of market corrections. He believes that being focused on regular investments has paid off for him.

He admits that at times he got carried away by advisors' recommendations without understanding/verifying the basics.

Another area that investors should focus on is cutting out noise. Sanjay talks about how emotions played a role in his investment decisions when he bought ULIP policies to accommodate his relatives and friends as well as mutual funds through advisors. "...Eventually, I learnt that it is quite okay to say 'no' and decided to do what was best for me," Sanjay notes.

Gold is not big in his menu. He had some gold funds and some gold ETFs, which he has sold off. At present, he holds some minimal amounts in gold ETFs. Direct stock investments are also not his cup of tea.

So, what are the things that he does before making any fresh investment? Sanjay says he decides what asset class he should invest in. If it's for the short term, his choice is debt. He goes for equity mutual funds only if he is investing for the long term. He is a regular reader of Mutual Fund Insight. He also checks the VRO website for fund ratings and yearly performance. Only when is he fully satisfied, does he take the final step of making the investment.

Sanjay has a few simple rules. The first is having a clear goal/target. Second, holding onto the mandate, irrespective of market situations. Third, consulting good sources of financial data. Lastly, Sanjay asks investors to get financially educated and utilise the knowledge in arriving at their own conclusions, even if one uses the services of financial advisors.