Unlike his friend who has sat on a large corpus over the last three years and missed one of the biggest wealth-creating stock-market rallies, Value Research reader Saurav is much more disciplined and pragmatic in his investment approach. The 37-year-old data scientist has over the years kept on investing through the thick and thin. As a result, he considers himself fully ready on financial preparedness, i.e., 10 on 10, and gives himself a seven out of 10 in terms of financial independence.
Brought up in Ranchi and now living in Bengaluru, Saurav likes to approach investment in a simple no-nonsense manner: start early and be consistent. As a result, his best mutual investments have grown by 18-19 per cent annually and he remains debt-free.
He does not remember any money discussions happening at home when he was young. But his father had purchased ITC shares and that ensured those ITC annual reports at home. That doesn't mean Saurav started reading those bulky reports as a teenager. Actually, it was post his graduation in 2002 from the Indian Institute of Technology Kharagpur (B.Tech. in electrical and electronics engineering) that investments began to appeal to him. "My first vivid exposure to the stock market was the TCS listing in 2004. I realised at that time that the stock market is potentially a better way to generate long-term wealth," recalls Saurav, who was working in Tata Steel then.
Though stocks interested him a lot, like every other individual in those days, Saurav's first serious investment was not in a mutual fund. It was in a unit-linked insurance plan (ULIP). His ULIP experience ensured that he learned a key lesson. "Immediately after buying it in 2005, I realised that the investment was a mistake. I realised that I did not do the due diligence and the 25 per cent expense that the ULIP had was completely unknown to me. I also realised that I did not have a good way to come out of it. I continued the ULIP for the mandatory three years and then stopped. A key takeaway for me was the idea of separating insurance needs and investment needs," he says.
From then onwards, Saurav stuck to stocks and mutual funds. He has never been interested in gold or land/property. Stocks did give him good and bad experiences. When the fraud at Satyam unravelled, Saurav realised that the steep decline in its stock price was an opportunity. "Such a large company with good clients could not just collapse. I was sure things would turn around," he says. When Tech Mahindra bought Satyam, Saurav's conviction was proven right. He also made a handsome profit in Titan as well. On the other hand, he had to come to terms with multiple not-so-good experiences in stocks as well; he held Reliance Industries for over a decade and made no capital gains on it; he suffered losses in Airtel and NTPC.
It was about 12-13 years ago when Saurav came across Value Research. He was travelling from Hyderabad by train. At Secunderabad station, he picked up Value Research's Mutual Fund Insight. Since then, he has been a regular follower of Value Research.
For him, starting early in investments is important. Consistency is the key. It took some time, but Saurav has clearly understood the virtues of good investing. A major lesson is leaving the actual investment part to experts. So, these days Saurav does not have any direct stock exposure. His main financial goals are retirement, kid's education and buying a house.
Investing for him now is all about selecting the right funds. He typically reads the reports on Value Research website. "I am one of the earliest investors in PPFAS Mutual Fund and I picked their equity fund after reading a news article," he says. The Parag Parikh Long Term Equity Fund has delivered a respectable 12 per cent return to him.
Being a long-term investor, Saurav prefers mid- and small-cap funds. His best investments have been in Reliance Small Cap and Franklin India Smaller Companies Fund. He has seen 19 per cent annualised return in them. Kotak Standard Multicap Fund (erstwhile Kotak Select Focus Fund) has given him 18 per cent annualised return. HDFC Mid Cap Opportunities Fund has given him 15 per cent yearly returns. He also has exposure to large caps through investment in Aditya Birla Sun Life Frontline Equity Fund, where he has enjoyed 12 per cent annualised returns. To utilise idle cash effectively, Saurav has kept a bit of his money in Aditya Birla Sun Life Money Manager Fund and has seen 7 per cent returns so far.
Talking about his preferred investment method, Saurav says that a few years ago he preferred the SIP route. "SIPs force you to be disciplined. However, these days I sometimes invest a lump sum each month based on the projected saving for that month," he shares.
Despite being long term in his vision, Saurav has never taken his eyes off funds. He regularly adds funds that he reckons are doing well. This also means that he sells those funds that don't do well. "Every six months, I review my overall portfolio and ensure that all my funds are rated well. In case a fund has been downgraded, I might sell it off," he says.
Starting last year, Saurav has also started looking for signs that tell him whether his funds are all correlated or not. Given his desire to be truly diversified, Saurav believes his fund portfolio should have funds that are not all correlated. Because if all his funds are behaving in the same manner, that may not actually diversification. "I have not perfected that art," he admits candidly.
Like any other enlightened investor, Saurav is conscious about fund costs. While keeping costs low is a priority, he does not believe it is the right time to go the whole hog into index funds and ETFs, which are known for their minuscule expenses. "I think actively managed funds are performing well. They are beating their respective benchmarks with consistency. I think the Indian stock market still is at a stage where the spread between the index and active management is highly in favour of actively managed funds," Saurav argues.
Saurav also talks about the need to avoid anchoring. This is especially true for retail investors, who often fall in love with popular fund managers. Investors follow a big name or a great idea, but the common human tendency is to rely too heavily, or 'anchor', on this one trait or piece of information when making decisions. Saurav respects Prashant Jain of HDFC Mutual Fund and likes the idea of PPFAS Mutual Fund, but that doesn't mean he has been a blind follower. "I have good faith in HDFC because of Prashant Jain, whom I have been following for quite some time. I also fell in love with the idea of PPFAS and I was one of the early investors in the fund. But having said that, I do not have any extra weight on either HDFC or PPFAS. It is very important to be focused and not let such things affect your judgement," he signs off.