Giving up one binge a month can help you make a crore, and how!
We celebrated SIP day on Aug 31. It is our small way of underlining how important SIP is in wealth creation. Take this thought experiment: if a young professional of 25 years of age did a meagre SIP of Rs 5,000 in midcaps in 1999, today his/her corpus would be around Rs 1.20 cr. Effectively, just giving up one bingeing a month and investing in a disciplined way would have delivered a crore. That is what SIP is. It rewards resolve, foresight and discipline – and costs marginally.
But rationality is a wonderful aberration in our world of biases and emotions. Let a fund performance stagnate for a year – or worse, two. The itch to stop the SIP or to switch it would be so severe that very few can resist it. And that is what mostly happens. As a result, the performance gap between a self-managed portfolio and market return is usually large enough to impact performance.
This is what I call the advisory gap is. This gap is the value a good adviser will fill up by ensuring that the confidence and discipline of the investor remains firm in a poor market. It is advisers who manage investors’ emotional biases at nearly all stages of sales and post sales. It is observed that more often than not, an investor is looking for confidence rather than information in his decisions. It is the advisers that supply this confidence. In turn, it our job as professional managers to give a stable ground on which this confidence can be built.
Having said that, as finance professionals, we need to be right big and wrong small to generate long-term wealth. A Balanced advantage fund is structured on that thought. It is willing to let go of appreciation opportunity at high valuations rather than lose capital. But it also allocates big when the market valuations are cheap and levels attractive. Therefore, investors who seek equity performance with reduced risk, find this asset class a good bet. I continue to invite you to our Kotak balanced advantage fund. We have taken a long time to finetune its allocation model. And now we believe that it’s time we let it run the field.
In a slight turn of subject, India’s Q1 FY19 GDP numbers have come as a pleasant surprise. My anecdotal stories of rising consumption in rural and urban areas now have data to it. The industrial sector is growing at 6.6per cent year on tear (July 2018). The credit offtake from the banking sector is at around 13per cent year on year. Advance tax filings are up 44per cent. GST collection continues to remain robust and continues to widen the tax net. This is indicative of robust growth trajectory. Now, what needs to be seen is will this growth rate take root and sustain without causing inflation.
My view is that inflation in India used to be some combination of unproductive government spends, crude oil and production bottlenecks. Crude while high on a YoY basis is well below the three-digit crude prices India used to pay. Rising investment in infrastructure to some extent has resolved the issue of unproductive spends by GOI. Similarly, GST in many ways is addressing the structural bottlenecks. Although a lot still needs to be done.
Now what India needs is an income stimulus. Previously, we had pointed out that as Chinese imports attract further US tariffs, India would be presented a manufacturing opportunity. And like most opportunities, this too is coming forth as a half-opportunity. Now what we need is initiative and entrepreneurship to convert this into full prosperity.
But rationality is a wonderful aberration in our world of biases and emotions. Let a fund performance stagnate for a year – or worse, two. The itch to stop the SIP or to switch it would be so severe that very few can resist it. And that is what mostly happens. As a result, the performance gap between a self-managed portfolio and market return is usually large enough to impact performance.
This is what I call the advisory gap is. This gap is the value a good adviser will fill up by ensuring that the confidence and discipline of the investor remains firm in a poor market. It is advisers who manage investors’ emotional biases at nearly all stages of sales and post sales. It is observed that more often than not, an investor is looking for confidence rather than information in his decisions. It is the advisers that supply this confidence. In turn, it our job as professional managers to give a stable ground on which this confidence can be built.
Having said that, as finance professionals, we need to be right big and wrong small to generate long-term wealth. A Balanced advantage fund is structured on that thought. It is willing to let go of appreciation opportunity at high valuations rather than lose capital. But it also allocates big when the market valuations are cheap and levels attractive. Therefore, investors who seek equity performance with reduced risk, find this asset class a good bet. I continue to invite you to our Kotak balanced advantage fund. We have taken a long time to finetune its allocation model. And now we believe that it’s time we let it run the field.
In a slight turn of subject, India’s Q1 FY19 GDP numbers have come as a pleasant surprise. My anecdotal stories of rising consumption in rural and urban areas now have data to it. The industrial sector is growing at 6.6per cent year on tear (July 2018). The credit offtake from the banking sector is at around 13per cent year on year. Advance tax filings are up 44per cent. GST collection continues to remain robust and continues to widen the tax net. This is indicative of robust growth trajectory. Now, what needs to be seen is will this growth rate take root and sustain without causing inflation.
My view is that inflation in India used to be some combination of unproductive government spends, crude oil and production bottlenecks. Crude while high on a YoY basis is well below the three-digit crude prices India used to pay. Rising investment in infrastructure to some extent has resolved the issue of unproductive spends by GOI. Similarly, GST in many ways is addressing the structural bottlenecks. Although a lot still needs to be done.
Now what India needs is an income stimulus. Previously, we had pointed out that as Chinese imports attract further US tariffs, India would be presented a manufacturing opportunity. And like most opportunities, this too is coming forth as a half-opportunity. Now what we need is initiative and entrepreneurship to convert this into full prosperity.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)