Why long-time tenant Shenoy is planning to buy a house
6 min read . Updated: 07 Apr 2023, 01:07 AM IST
Premium- Deepak Shenoy says he has sufficient resources to buy a home, is financially comfortable now
- Shenoy says the debt markets are in a state of flux, so it is not wise to bet on any particular duration segment
After years of renting, Capitalmind’s founder and chief executive officer (CEO) Deepak Shenoy, 48, is planning to buy a house for his family in Bangalore. And, what prompted him to go house hunting? “Affordability," says Shenoy.
“It is better to wait rather than buying a house when it is not affordable and then take a big loan. Right now, I am in favour of buying a house because I am comfortable financially," Shenoy said during an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services industry share how they manage their own money.
Lifestyle changes
Shenoy says he has shifted some of his funds to liquid funds. After his family finalizes a house, he will use the funds to purchase the property. Shenoy says he prefers to buy a house that is ready-to-move in and not one that is under construction. He says his affordability funda is that even if he was to take a loan to fund 80% of the home purchase, the EMI (equated monthly installment) should work out to less than 30% of his monthly income. However, Shenoy says he may not even have to take a loan for this purchase.
“I don’t ever plan to invest in real estate unless I want to make it a business. Real estate is a business where you need to have the capital to buy at least 10-15 houses; you need to have capital to renovate them, resell them at a different time, choose the right location, maybe different cities. That is when you look at real estate as a business. As for me, I don’t have the time. I think there are better return profiles in the stocks. One can be far more diversified in stocks than in real estate. That’s why I don’t see myself investing in real estate soon. A house to live in is for consumption, not investment," he says.
The other lifestyle change that Shenoy is keen on is buying a new car. “We want to upgrade from our existing car. So, we are looking out for that as well. Again, I have moved some money into liquid funds for that," he says.
Investment strategy
Shenoy has maintained his asset allocation mix of 85:15 in equity and debt. His equity exposure had decreased due to weakness in the stock markets, but he has restored it to his original asset allocation target. All his equity investments and most of his debt investments are through his own PMS (portfolio management service) product, where 40-45% of the equity portfolio is in large caps, 32-37% is in mid and small caps and 8% is in the US market.
His exposure to US market has come down slightly from 10% previously due to the weak performance of US market last year. Meanwhile, his exposure to large caps has increased from 30% to 40% previously.
Given the correction in mid and small caps, as well as the US markets, his equity portfolio was down 6.7% in the past year (April 2022-March this year). His debt portfolio was up 4-5% during the same period. But it is on the debt side where Shenoy has been more active in changing his portfolio mix.
Shenoy rejigged the debt portfolio in his PMS before 31 March, to ensure that his customers and his own debt investments get the benefit of long-term capital gains, after the finance bill was amended to remove this benefit on new investments from 1 April.
He has moved some allocation to long-tenure debt funds as he is unsure whether yields are going to gain meaningfully from here on. He has also invested in target maturity funds. “This is more of a strategic allocation as there is some surplus which I don’t need right now," he said . He also has some allocation in shorter tenure funds.
According to Shenoy, the debt markets are presently in a state of flux, so it is not wise to bet on any particular duration segment. “For the first time in 4-5 years, bank fixed deposits (FDs) are giving higher returns than government bonds for roughly the same tenure. One-two years down the line, this should flip again. Banks could go back to lower deposit rates, government bonds could yield higher and corporate bonds could yield even higher," he says.
He adds this is the reason why he has ended up with a laddering approach on the debt side. He has some investments in maturity buckets of 3-years, 10-years and 10-year-plus.
Up until last year, Shenoy was also quite active in the corporate bond market. But, now, he says his allocation has significantly reduced. He attributes this to the fact that the corporates he prefers are no more issuing bonds at yields that can give decent post-tax returns.
He says this might change in the future as corporate bonds start yielding at higher rates again. He is in a wait-and-watch-mode on the corporate bond market.
Shenoy says when it comes to choosing corporate bonds, he doesn’t blindly go by the gradings assigned by rating agencies. “A double A-rated corporate bond may not necessarily be a good investment and a single A-rated bond may not necessarily be a bad investment. So, I have my own way of assessing the creditworthiness of the bond issuer. I look at the underlying business, the financials, disclosures such as potential credit loss in the case of NBFCs (non-bank financial companies). Even if all the parameters are borderline, I look at the parent company’s track record," he says.
Health and leisure
Shenoy and his family visited Australia last year. “We couldn’t take many holidays because of my son’s Xth exams," he says. This year, the Shenoys plan to revisit Australia. They might also visit Europe, but this would depend on the visa wait time. They might also add South East Asia to their holiday plan.
“Every year, we try to go on at least one holiday abroad and one in the country. This year, we are trying to think of a domestic holiday, apart from our Goa trip, which we try and do almost every year," he says.
On the health front, Shenoy has just started intermittent fasting. He says this helps him manage his asthma. Also, he has set a target of December 2024 to reduce his weight to 75kg from 91.5 kg at present.
Family and finances
Shenoy says his wife has now started taking active interest in the family’s finances. “She is quite involved in our house buying plan and is aware of our investments. Earlier, she was not much interested. Now, we regularly discuss our finances. I bought a family dropbox account, family google drive account, where I created folders and shared all my life insurance and medical insurance policies. I have also shared emergency contacts in case something was to happen to me, my account details, etc., in these family folders," he says.