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Crypto vs Stocks vs Gold: What Should You Really Invest In? | Raghvendra Nath(Ladderup) Explains
19 Plays13 days ago
Stop thinking about your wealth like a startup.
Your biggest strength as a founder - your bias for high-risk, high-growth, and breakneck speed - is your biggest liability when managing your own money. The instinct that built your company can easily destroy your personal wealth. This episode is the antidote.
In this episode, host Akshay Datt sits down with Raghvendra Nath, a 30-year veteran of the Indian financial markets. After a stellar 18-year corporate career in senior roles at the Aditya Birla Group, Raghvendra co-founded Ladderup Wealth Management in 2011. He has since grown the firm to manage an AUM of 2,000 Crore by challenging the industry's product-pushing culture. His core philosophy is brutally simple: protect the capital first.
This conversation is a masterclass in building and preserving wealth for entrepreneurs who have created something valuable and can't afford to lose it.
Learn:
👉The math behind compounding that can double your money in 5 years instead of 10.
👉Why Raghvendra believes most day trading is a zero-sum game destined to fail.
👉The surprising truth about gold’s performance and why central banks are buying it furiously.
👉A breakdown of when to use Mutual Funds, Portfolio Management Services (PMS), or Alternative Investment Funds (AIFs).
👉The single biggest mistake investors make when choosing a fund to invest in.
👉The powerful case study of Titan, and how a company’s revenue can become its profit over a decade.
If you're an entrepreneur or leader who has built something valuable, this conversation is non-negotiable.
#FounderThesis #Investing #WealthManagement #StockMarket #FinancialPlanning #Entrepreneurship #StartupIndia #AssetAllocation #Compounding #LongTermInvesting #IndianStartups
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
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Transcript
Introduction and Career Overview
00:00:00
Speaker
My name is Raghvendra Ranath. Thank you, Akshay, for inviting me on this wonderful podcast. Okay, Raghvendra, welcome to the Founder Thesis podcast.
00:00:10
Speaker
You have spent 30 years in the Indian equity market as a
00:00:18
Speaker
okay um rawra welcome to the founder thesis podcast you have spent thirty years in the indian equityity market as a wealth manager, somebody who's managing investments. Your first 15 years were with Bidlasan Life, the mutual fund.
00:00:35
Speaker
um The last roughly 15 years, you have been building Ladder Up, which is a wealth management company. um The reason why I wanted to talk to you is this.
Financial Literacy for Entrepreneurs
00:00:45
Speaker
As an entrepreneur, you often don't have money early in your life. And by the time you get money, which you can ah invest anywhere, it is very, very late in life. And I am at that stage where I never learned about how to make your money work for you until I i am now in my forties and now is when I'm trying to learn about it.
00:01:06
Speaker
So what I want to learn from you is how to make money work for you. If say I have five lakhs in my bank account, what is the best way to make that money work for you?
00:01:18
Speaker
ah So thank you Akshay for inviting me and a very interesting question. Everybody kind of has to deal with this question sometime in their life, you know.
00:01:31
Speaker
If you are fortunate and you know all the young startup guys who are making millions in their 25, that question is asked by them then. Or people like us you know who kind of started late in their entrepreneurial year journey, we need to start at some point in time.
00:01:50
Speaker
And it's really, really important that your money is working for you. you know so because the real wealth gets created only when when your yeah money starts getting compounded, the savings that you have, you know.
00:02:08
Speaker
Because other than those few fortunate souls if who have right time, right place, all the luck, and obviously some smarts, you know, oh most of us will make limited amount of money, which is proportionate to the effort that we are putting in and the value that we are creating.
00:02:29
Speaker
And therefore, it is very important that whatever money that we are earning and out of which whatever we are saving, that money should compound compound at a healthy rate.
Investment Avenues and Compounding
00:02:41
Speaker
And because it's it's yeah you have to understand that ah when when people think of investing and they start, there are these three, four broad categories of investments that you can do. You know, you are very, very, very risk averse and therefore you put your money into a bank.
00:03:02
Speaker
And then that money compounds at 7-8% or whatever is the interest rate at that time. And interest rates can vary. You know, they used to be 10-11% interest rates and now they are at around 6-6.5%, you know.
00:03:16
Speaker
or you invest in real estate because every middle class Indian's dream is to own a roof over their head. And so the moment you get money, you think of buying a house for yourself, you know, and, or, or if you have already bought a house, then buy further real estate in order, because you think that, you know, there are so many people who are owning these shops and houses and plots, and they have, they have become rich.
00:03:43
Speaker
that compounding is generally happening at you know again seven eight percent only you know because real estate generally when you look at long periods of time will follow inflation okay because inflation and obviously obviously economic prosperity but generally it is inflation plus a little And then you have gold and then finally equities.
00:04:05
Speaker
Gold, of course, you know and has been a wonderful asset. Last five years, people have tripled money and therefore they are thinking that, okay, it will continue to do so far for long.
00:04:16
Speaker
But anyway, you know I don't want to get into that, where the gold will be. but Gold, you're saying in the last three years, people have tripled money, like 100 rupees. Five years. In the last five years, people have tripled their money.
00:04:31
Speaker
yeah yeah historically what has been the return like you said six seven percent so gold fortune gold uh has turned out to be one of the best investments that people could make in the last 20 years wow you know so if you invested in gold your ah your investments has been grown at around 14 15 percent which is the kind of rate at which equity has grown know And most of the equity markets, pandits, you know, including me, if you ask our views on gold, we are always ambivalent.
00:05:08
Speaker
Because gold is only demand and supply. There is nothing else, you know. so So you can't judge the price of gold. So you say that, okay, anyway, why, why? Like with equity, there is a business that you're investing in that business. There's a business that you, yeah. So you can yes judge what should be the fair price, but with gold, there's no way to the fair price. It is purely. That's right.
00:05:30
Speaker
That's right. Okay. Yeah. yeah And, and the, the, the, so the demand for gold has been high because other than the individuals, you know, people always bought gold for centuries.
00:05:43
Speaker
Now the central banks are also wanting to invest in gold, you know, with all the and uncertainty that is happening in US, ah you know, there's this, all the talk about tariffs and dollar, you know, and there every day there is a new policy.
00:05:59
Speaker
So, you know, so so most central banks are now saying that, okay, my some of my savings or reserves have to be in an asset class, which cannot be touched by anyone, you know, and therefore,
00:06:13
Speaker
The central banks, ah so you you won't believe RBI, um the total reserves, let's say five years back or four years back in India was around, let's say $500 million, billion, And of that was in gold.
00:06:34
Speaker
so which means that we had twenty five billion dollars worth of gold five years back Today, that number has become 12% and our reserves have gone to 700 billion.
00:06:47
Speaker
so ah So, RBI's total gold reserves are now 84 billion dollars. So, from 25, it's gone up almost three and a half times and in just five years time. And therefore, RBI has been buying gold furiously. China has been buying gold furiously. you know And that's why you see this price, right? Is this happening because...
00:07:11
Speaker
The US government bonds were seen as the safest place to park your money. Like for your reserves, you would typically park them in US government bonds. But now because of US political uncertainty and threat of sanctions, maybe for a country like China, etc. So because of those reasons now, they want to diversify away from US government bonds. that's one of the chief reasons. Because most of the monies of pf governments, whatever.
00:07:40
Speaker
Because every government keeps some Forex reserves, you know, for the rainy day. And most of those Forex reserves were in US treasuries because Japan, the interest rates are too low. Europe has gone through its own problems, though a lot of money is still in Europe, you know, whether it's Swiss franc or you know even French Franc or you know so so it ah in Germany, in UK in pounds.
00:08:07
Speaker
So reserves are there there as well. But majority of reserves of for of governments are in US treasuries. And with all this geopolitical. Yeah, because it's very liquid. But there is ah and there's a kind of tendency to increase the percentage of gold reserves. yeah know Okay. So till the time this last, you will, you know, this price will continue to inch up.
00:08:33
Speaker
But at some point in time, the Reserve Banks will stop buying gold. Because it is it is also not very liquid. you know Why is it not liquid? You can always sell. So well so you can sell 10 grams, 20 grams, 1 kg, 5 kg.
00:08:51
Speaker
How do you sell 1 of gold or 5 tons of gold? Because when the government needs money, it doesn't need few hundred millions. you know It will need a few billions. right So when they go to sell gold, there should be somebody at that point in time to buy that gold.
00:09:07
Speaker
And they can't rely on 20 customers, the other 20 central banks who are right now buying gold. So, there has to be a limit to which you can buy, otherwise you will get stuck.
00:09:19
Speaker
Right. Okay. Understood. Okay.
Equities and Market Volatility
00:09:22
Speaker
So, that is about gold compounding at 14-15% and equities you said has the same rate, 14-15%. Yeah, so equities have been the same rate but the the good part about equities is that when you are investing in a share and that's why you know most people that you have come across and say that ah you are thinking about long term, are thinking about 10, 20, 30 years, okay, just go to equities.
00:09:49
Speaker
you know It's a fail safe investment. So, and, and, uh, why, whereas we are we are not thinking that way we are saying, my God, last six months markets corrected by 10%, you know, and then we remember global financial crisis when so many people actually committed suicide, then went bankrupt and they say, how is it fail safe?
00:10:11
Speaker
You know, when the markets can every day go up and down and we keep hearing stories that a stock was trading at hundred rupees and now it's trading at 10 rupees. How is it fail safe? and ah so and that So that's where the probably, you know, that confusion is there that or while the while the market experts keep saying invest into equities, but we are seeing this day-to-day volatility and we don't know whether it is the right right asset class for us.
00:10:44
Speaker
And even when we start investing, we start seeing these periods, you know. so if you let's say started investing you know one year back and if you were to if you were doing an SIP of let's say 50,000 rupees today you will find that your your investments are ah have earned zero return after one year you know okay and then you wonder that you know I could have made let's say if this happened for five years You invested 50, 50,000 rupees for five years, so which is you have invested 30 lakh rupees, large sum of money.
00:11:22
Speaker
And you find that my money has not grown at all. and So then you wonder that, arrey, manne FD medal diya hota, it would have at least, you know, given me seven, eight percent here. I want zero percent in the hope that I will make money in future. Who has seen the future?
00:11:39
Speaker
yeah So that is where the confusion happens. And so, so they are, So when you when you look at, there are two elements to stock prices or equity markets.
00:11:52
Speaker
Because when you see Sensex, it's nothing but you know those 30 stocks, the average of that 30 stocks which comprise Sensex. Or in case of Nifty, it's those 50 stocks.
00:12:03
Speaker
So ultimately, it boils down to how the company's stock prices are going to do. If your stock prices generally are up, Sensex will be up. Or if it they are down, then it's down. So there are two components. One is the long term growth of the business, you know, and that is something which will definitely show up sooner or later.
00:12:26
Speaker
Okay. So, and I'll explain about that in a bit. And the second is that market sentiment. Okay. So let me let me kind of give you an example. So you are running a very successful podcast show. you know Somebody comes and says, okay, I want to take this brand name over and please sell this podcast to me, the brand.
00:12:48
Speaker
ah brand And you say, okay, I need, let's say, do whatever, some number, I don't know, 100 rupees. Okay. So let's say I need 100 rupees for this podcast business because today I'm making 20 rupees out of it.
00:13:05
Speaker
Okay. And therefore I need at least five years of earnings. After that, the brand will be yours and you can continue to make money. And this podcast has been growing by 20, 30% in of viewership and but revenue and everything.
00:13:19
Speaker
so you know it it' So in a good market, for instance, you know everybody is doing podcasts and everybody wants to own a podcast successful. Therefore, instead of 100 rupees, the guy will be willing to pay even 120 or 130 rupees to you know But in a bad market condition where nothing is happening and whatever, let's say some people get arrested for podcasting and all that, which has happened in the few last few months, the guy will only offer maybe 75 rupees.
00:13:49
Speaker
But the fair value was 100, which you were asking for. okay So the sentiment actually governs some of this pricing, but 75 or or It can't be ah two hundred You know, when it goes to 200, somebody has overpaid and therefore the price is correct. You know, and so if you, if somebody, if you, he just paid 20 rupees and he got lucky, he makes a lot of money.
00:14:15
Speaker
He was early. The other element of that is the growth of the business. So your podcast was doing hundred rupees of revenue. Let's say two years down the line, it starts doing 500 rupees of revenue.
00:14:29
Speaker
Okay.
Company Growth vs. Stock Price
00:14:30
Speaker
Now, you are not going to ask for, ah you know, that that give me the same money five times, you know. Okay. You will ask for maybe, you know, event when it was 100, you were asking for, let's say 500. Today at 500, you will ask for probably 1000 bucks, you know, 1000, sorry, 20 times. So let's say 10,000 bucks.
00:14:54
Speaker
Why? Because 100 has become 500 in just two years. In another three years, this 500 can actually become 5000. So you are thinking that this growing to grow faster so you can demand a higher price.
00:15:06
Speaker
And that's what is happening in equities all the time when you're buying a Reliance cut stock, when you're buying a Titan stock. you know ah I was just looking at some data yesterday. i'm supposed to give a lecture.
00:15:21
Speaker
Titan in the last 20 years, 25 years has been one of the best performing stocks in the market. And 10 years back, whatever was the revenue of Titan has now become the profit of Titan.
00:15:40
Speaker
Wow. Okay. So Titan was 10 years back making 4000 crore of revenue. And today it's make three and a half thousand or three thousand. This year they made three thousand seven or eight hundred crore of profit.
00:15:55
Speaker
Right. Okay. so almost the same thing. And the revenue has grown ten times. So so from but not even ten times, twelve times, you know, from four thousand bucks, it's got four thousand crore. It's become fifty five thousand crore.
00:16:10
Speaker
So if I were to tell somebody, but let's say I were to tell you that, you know, buy Titan because in next 10, 15 years, what is its profit? Revenue today will become its profit tomorrow, you know, after 10, 15 years. So this 4000 crore of profit that you are seeing will actually become 40, 50,000 crore after 10, 15 years. And you say, are you mad? You know, this company has already grown so big and how can, how much can it grow?
00:16:35
Speaker
You know, But so when you bank on scalable businesses, which are continually discovering new markets, new products, new way to sell things, you make money. And equity is a wonderful thing. You know, you make as much money as Mukesh Ambani is going to make.
00:16:50
Speaker
yeah Proportionately. you know yeah it' so ah So just imagine that you it's so easy to latch on to the good fortunes of the most successful people in this world.
Compounding Magic and Equity Valuation
00:17:05
Speaker
But just buying the stock, you know you want to make as much money as Elon Musk, you buy Tesla stock. You want as but as much money as Bill Gates, you buy Microsoft. your so So because their fortunes are linked to the stock price. When you say that Mukesh Ambani is one of the richest men, it's the market cap of reliance, which you also own.
00:17:29
Speaker
you know The only thing is you own 100 shares. Okay. So um I want to understand a little bit about the compounding impact.
00:17:41
Speaker
What is the difference between your money compounding at 7-8% versus your money compounding at 14-15%? That's such a… you know I'll tell you, it the compounding is magical.
00:17:56
Speaker
It's but it also very, you know, it requires patience. and know First few years and all that, you just don't see any growth at all. you know And that's where people start losing patience. You know that, you know, I invested for 10 years. Oh, my money has only doubled.
00:18:16
Speaker
you know, what is a big deal? You know, so so that's how they start talking about. ah So there's this simple formula and it's a very popular formula, financial circles, but there's a simple for a rule of 72. Okay.
00:18:32
Speaker
okay So if you if you, let's say, want to know how many years will your money double up, you know, you just divide 72 by the interest that you are earning or the return that you are generating. So let's say you are in fixed deposits.
00:18:45
Speaker
and you are earning 7% rule of 72 means that 7.2 years, 10 years, almost 10 years. yeah right if you are If you are, let's say thinking that, okay, I bought a real estate and I'll get 10% per annum, then your money is going to double up in seven years.
00:19:02
Speaker
And if you are equities and you think that my ah equity investments can give you 15% return, then it's f five years. so you ah So every five years you are doubling your money. So you know so you start doing the two power cut table, two less power one in the first two, then to second second ah block, it's four and then eight and then 16.
00:19:26
Speaker
And that is why what starts happening that after, let's say, five years, after 10 years, your money has multiplied four times. you know After 20 years, it's multiplied 16 times.
00:19:40
Speaker
Whereas if it was at 7%, then after 20 years, say after 30 years, it's multiplied 64 times. you know So Sensex has multiplied in last 45 years, 810 times.
00:19:55
Speaker
So if you had 10 lakh rupees in Sensex in 80, it is now 81 crores. and know And so people say Sensex, can it continue to grow? Of course, it will continue to grow.
00:20:09
Speaker
You know, so it's like because the component of the Sensex will continue to grow and the Sensex components keep changing. Sometimes back P&G and Colgate, Parmaliv corgate palmelley when all these were part of Sensex. Now they are no longer, you Yeah, yeah, yeah. Okay, because the new companies have come in, bigger companies have come in, you know. So, but the Sensex keeps growing up.
00:20:29
Speaker
What is... The ah ah growth rate of Sensex for the last 40 years, you said 800 times it has... Yeah, so I think around 13%, 13% or so, 13%, 14%.
00:20:42
Speaker
And do you expect it to grow at the same rate going forward also? So no good question actually. So the point is that it is that market sentiment okay which I said that how much value can you ascribe to a business.
00:20:59
Speaker
So let's say you ah you are earning 100 rupees and I ascribe a value of 500 rupees. but you know But if there are far more number of people willing to buy your business then that 100 rupees they will ascribe 1000 rupees of value.
00:21:13
Speaker
you know So for 30, 40 years back, very, very few people had the smartness to invest into equities. You know, in fact, most people didn't have any money only.
00:21:24
Speaker
So there India was a few rich people and everybody poor or middle class. And but that that's changed in 40 years. and' And so ah more and more people are looking at investing into equities, you know, and therefore this concept of valuation has also undergone a change.
00:21:44
Speaker
You know, in 40 years back, if you gave 10 to 15 times of ah profit of the current year's profit to the company, it was considered reasonable.
00:21:56
Speaker
Today, that number is 35, 40 times. This is called the PE ratio, right? P.E ratio, price to price to earnings. you know So, earnings are 100 rupees and price is let's say 4000 rupees.
00:22:08
Speaker
So, 40 times. right so so ah So, this number used to be 10, 15 and now it's 35, 40 reasonable. you know At that time expensive was 30, 40. Now expensive is more than 100.
00:22:21
Speaker
Oh, wow. Okay. You know, 100 times the earnings. So what? that so So what is the PSU for Titan? Titan is around 75, 70, 75 times.
00:22:34
Speaker
Okay, so it is ah seen as expensive, but then yeah it's yeah, it's a yeah, it's a it's it's it's we call it fully valued. Okay, fully valued that means that I am not going to get further expansion in valuation.
00:22:51
Speaker
I'll only gain from the profit growth of the company.
00:22:56
Speaker
Okay. Okay. Okay. Interesting. Okay. Got it. So, okay. So you're saying that equities are a great way to invest, though with the caveat that today equities are more expensive than they used to be 40 years ago. But you feel like... ah there will not be a correction in this like it it's like like today you said a reasonable price of uh uh reasonable price is 40 times of profit which earlier used to be 15 times of profit but you feel like this will stay 40 times of profit this will not it will uh it is or it may even become more expensive because what happens is that as more and more people start becoming aware
00:23:41
Speaker
of the power of compounding that equities offer. The increased power, everything has power of compounding. you know This has a little more because of the reasons I described. More and more people become aware, more and more people become literate, they would want to come into the market. channel And therefore, the demand for equities will remain high. so soul What if people started feeling that it's better to invest in cryptocurrency?
Cryptocurrency Skepticism
00:24:10
Speaker
like ah you know that it So they are, the thing is that, see, so crypto should have an underlying value because it is solving something.
00:24:22
Speaker
You know, i I have done, you know, I keep reading a lot, but most of the time when I start asking them, you know, questions and I meet a lot of crypto experts, but it it kind of comes to a dead end when I ask them that, okay, what world problem are you solving?
00:24:40
Speaker
You are consuming a lot of energy. You are generating some codes and because of which I can create a crypto. and But what what world of problem are you solving? And till now they are saying, no, we are very efficient in transferring money. This money cannot be hacked.
00:24:56
Speaker
But if I lost a password, I lose my billions and millions or whatever, a few thousands immediately, you know forever. you know which Whereas if I lose a passbook, I can go to a bank and get another.
00:25:08
Speaker
so But here there is no such thing. and keep scams keep happening because it's completely unregulated the prop the the the the bigger reason why crypto is not going to fail is that it is is not going to succeed is crypto instead of becoming a medium of exchange has become a store of value Okay, so you feel that if ah if if if a hundred rupee note, if it's buying you a, ah let's say a can of Coke will buy you a can of Coke probably after one year also.
00:25:46
Speaker
Okay. And most likely it will buy a little smaller can than a little larger can because most most economies have inflation because they have growth.
00:25:58
Speaker
and They are too interlinked. you know Without inflation, there cannot be growth. So it will they'll always be, you know the rupee is losing its power gradually. So there is no point in storing that rupee. You don't put it inside your pillow. That's what we are discussing. Where to invest and make your money work.
00:26:16
Speaker
In crypto, you want to put under your pillow. If you buy chance, basically but bought the Coke with that one Bitcoin, you have lost basically a opportunity to to buy a car.
00:26:30
Speaker
Because that's what has happened. You know, 10 years back, you could buy a pizza with Bitcoin and you today you are buying a car with Bitcoin. yeah motro Maybe to five, 10 years down the line, you could buy an aeroplane with Bitcoin.
00:26:42
Speaker
But what is the use of that Bitcoin? Nobody knows. How is it getting mined? It's like basically mining gold. And that do you know what has happened to diamonds? you know So natural diamonds, millions of years, store tremendous store of value. And then somebody basically creates a furnace and starts creating pressure and starts making lab grown.
00:27:05
Speaker
And the natural diamond market has gone down 50%. and okay So the the the biggest beneficiary of a crypto is the guy who creates the crypto. hey you know Got it. So ah coming back to then, so what you're saying is if I have money in the bank, the best place to put my money is in equities.
00:27:29
Speaker
So now my next question to you is this. How do I know which equity to invest in? ah Like you mentioned, Titan is... ah Titan was a great investment, but today you feel that it is fully priced. Like the yeah chance of getting an outsized return on Titan is not really there.
00:27:49
Speaker
Everybody knows that Titan is a great stock. So there is more demand for it. And therefore, the price equity ratio is very high. So it is fully valued. So it's the opportunity to make money by investing in Titan is not there. So as somebody who It is there. You make it the excess returns.
00:28:06
Speaker
You are making market return. Market return means 14%. Like you're saying, 14% return. Whatever. Titan may be growing at 12-13%. So you make 12-13%. Okay, whatever is there, growth of profit will make that kind of return.
00:28:21
Speaker
Okay, okay, okay. So outsized return opportunity is not there, but it's a good safe investment. Yeah. Got it. Okay. So, but yeah, as as someone who's not a full-time investor, how do I decide what to do with my money? Yeah, so and and that is the, yeah in fact, this this new trend which has happened. In US, it was Robinhood.
00:28:42
Speaker
In India, it's been Zerodha. You know, And everybody wants to open an account. That account gets opened in five, 10 minutes. And then you start basically trading and then you start making some money or losing some money and then you get hooked on. And then after a few years, you have realized that you were on a treadmill, you know.
00:29:02
Speaker
you uh you know you were standing at this your money is standing at the same place but but whereas you know you were running uh all the time you know and uh with money also it happens many times that you know you get some some trades you basically made monies in some others you lost money and you are standing at the same place you know because Ultimately, ah you know when when you when yeah there are two things like what we talked about. There's this sentimental reason why the prices go up and down.
00:29:36
Speaker
And then there is a business reason why the prices trends are generally up if you have invested in a good company, of course. So most 99% people do not know anything about a business that they're investing in.
00:29:51
Speaker
So like Titan, I just told you 55,000 crore of profit. So, okay, you know, one information, then you know, Titan is in jewelry and watches. Okay. But then beyond that, my understanding of that business stops.
00:30:05
Speaker
I don't know how many stores do they have, how what's up what's their market pricing, how competitive are they vis-a-vis other jewelers, you know what's the what the what' the demand for gold in the country, at what pace it's growing, what are the alternatives to gold, what is the fashion jewelry doing to the gold jewelry, is there a demographic shift from older people to younger people. There are hundreds of things to know to figure out where Titan as a business will be five years, 10 years down the line here.
00:30:36
Speaker
And that information is never enough. Whereas a typical trader buys Titan ki achha lagta hai. Sab log gold kharid rai hai gold price badhara hai khari do. You know, because he is not looking at, he's saying that, okay, I'll buy a stock at 100 bucks and I'll sell it at 120.
00:30:56
Speaker
And then I will somehow figure out another stock which is at 100 and which should go to 120. But it's all a speculation, isn't it? So if I were to ask you today that okay so markets will open maybe or or just open, where will the markets close at the end of the day today?
00:31:13
Speaker
Plus or minus? What is the answer to that? I know. It's like a coin toss. Yeah, it's like a coin toss. Where will the markets be tomorrow? and Whether they will be up or down tomorrow?
00:31:24
Speaker
that It's like a coin toss. Yes or no? So if I can't predict what's likely to happen in six hours or 24 hours, how can I predict what is going to happen in 10 days, 20 days, 30 days, 40 days?
00:31:40
Speaker
So it's only everybody's talking power. So I should invest in power. Everybody's talking defense. So let me buy some defense stocks. So pure speculation basically leads to nothing generally, you know.
00:31:53
Speaker
So, and that's why there's a very well-known saying in equity markets, trading is a zero-sum game. So, you'll make some pluses, you'll make some minuses, but your total will always be zero. And because most investors, so if you are a retail investor, either you have lots of knowledge and lots of time.
00:32:17
Speaker
Okay, then you can be a successful savvy investor. In fact, I tell youngsters, okay, invest in equity market and lose some money, but because you will gain something out of it, at least some learnings and which will make you a better investor.
00:32:31
Speaker
Okay. But if you don't have the time or the inclination or the skill, then rely on professionals. They are wonderful. You know, you have so many PMSs and mutual funds and, you know, who are charging one and a half, 2%, you know,
00:32:45
Speaker
you know You think if you have a crore of a crore, the fund manager charges you half lakh rupees for a year. And he gives you world class expertise.
00:32:57
Speaker
as You are hiring some of the best known managers in the world at your you know for for for yourself to work for you for one and a half lakh rupees, two lakh rupees.
00:33:08
Speaker
And forget it. And so easy because you you can hire ten guys rather than just one guy. and So let's say you are because you are planning to run a marathon and you can actually hire the five best coaches in the world and still pay them maybe a few thousand rupees.
00:33:27
Speaker
Would you do that? So you're saying instead of investing in individual equities, if if my goal is to compound my wealth, then I should pick funds instead of picking equities.
Funds vs. Individual Equities
00:33:39
Speaker
Always. See, always in the sense, unless you have the skills to pick up the goodies. Right. Unless you can invest enough time to learn and research and yeah all of that. If you're doing it as almost full time, then you should do that. But otherwise, it's better to pick funds.
00:33:56
Speaker
so So then the next question is, how do you pick the right fund? Yeah, that's so that's the, again, you know that's the biggest rule problem that people are facing today that people know I need to do SIP.
00:34:10
Speaker
People know mutual funds and therefore they want to invest. But where do you put it? So there are hundreds of funds. and the And because you don't know anything about that fund, who the fund manager is, what is the investment style, what is the portfolio,
00:34:29
Speaker
you know whether he's cons conservative or aggressive you just go by how much has he generated last pass returns it's like uh if you know in eki kushnima so let's say the the horse race that one last time you think that okay this guy has something special let me bet on this horse know So you bet on the winning horse all the time. That's, you know, that's what any uninitiated person will do. And that's what is happening in mutual funds.
00:34:58
Speaker
You just pick up the guy based on what is the past return, last one year, last three years. And, you know, or somebody else's recommendation, let's say, you know, you will go to money control. They'll tell you the best five funds to invest in.
00:35:12
Speaker
Most of that is, again, past returns, know. And with the hope that this past returns will continue to work in future. You know, so I'm not saying that past returns don't give you some idea. or Of course, if a fund manager has delivered one of the best performing, but but one of the best performance, of course he has done something right.
00:35:36
Speaker
Okay. But will he be continue to remain number one or will become number 10 or number 20 or number 50? That no one knows. He also doesn't know. And therefore, ah both the things are important. How you are picking up the funds.
00:35:52
Speaker
and know i've I recently met an investor. He has only funds of one AMC. and also So only because ah maybe the advisor or the banker, whoever he was dealing with was only giving him one that one fund.
00:36:11
Speaker
So he had large cap fund from there, mid cap also, small cap also, some IPO also, some thematic fund also. Everything was in one AMC. And multiple, hundreds of folios.
00:36:23
Speaker
So, so its like basically, the point is that what you where you are investing, you know, so when you are investing in ah in ah in a fund ah or you or you are buying a bouquet of funds, there has to be a little more than what the the the past return is actually, you know. Okay.
00:36:47
Speaker
ah
00:36:50
Speaker
Then, like like, but how do you decide then? like Like you're saying, it can't just be possible. So again, so so like you if you don't know equities, you go to a fund manager or a mutual fund or a PMS.
00:37:03
Speaker
If you don't know how to select funds and mutual funds and PMSs, then you go to an advisor, a ra wealth manager, you know, or an asset, people like us who will have, you know, who are basically doing this full time again, you know, because there are 500 funds.
00:37:22
Speaker
to actually monitor these funds, how they are doing and what they are doing, what kind of portfolios do they have, which sector have they over-weighted, what they have under-weighted, who's managing the fund, is he still there in the job or has he left and go join something else, who's the new fund manager.
00:37:42
Speaker
How does various funds complement? So let's say if I have two large cap funds, do they have same investment style or do they have different investment styles?
00:37:52
Speaker
You know, so all of these things ah require, again, a lot of information and scale. And then access to information, you know. So if I have to meet a fund manager, I can just make a call and in another maybe three to four days, the guy will give me an appointment and I'll meet him for an hour.
00:38:13
Speaker
Is it possible for an individual investor to do that? Because ah when when when I'm meeting a fund manager, i am having a very, very, oh you know, frank conversation with him, you know.
00:38:28
Speaker
when that fund manager is going on TV, At that time, he's not having a Francois. He's just giving his house view, a general view on what the what he thinks about. He's not going to discuss is ah where he has invested in, why he has invested in, the mistakes he has made, what well why those mistakes happened, how did he correct those mistakes, what is his outlook about the future, is the portfolio representative of his outlook or not.
00:38:57
Speaker
you know So those questions, the deeper questions, the second level questions, ah most investors won't have access to in fact that is the that that that will decide whether I invest into a fund or not not as past returns the past is past you know it's like the the portfolio three years back might have been completely different from what it is today so how can I say that three year return last three years will get replicated in the next three years Okay, got it.
00:39:28
Speaker
So let me kind of zoom into the options now in front of a lay investor. One is mutual fund. The second you said is a PMS. And the third is... ah financial advisor.
00:39:40
Speaker
Third is an AIF, alternate investment fund. So when you're looking at professional funds, managers in India, regulated, these are the three categories which are available to clients, AIF, where the minimum investment is a crore of rupees.
00:39:57
Speaker
yeah Okay. You know, so therefore, they basically meant for rich investors. Okay. PMS, where the minimum investment is 50 lakhs, again, somebody who's sophisticated, understands equities and all that.
00:40:08
Speaker
And mutual funds, which is for retail investors, any amount can be invested. So but there are these three categories of fund managers who are available. Got it. Okay.
00:40:19
Speaker
So now mutual fund of course is well understood. You're saying that mutual fund will typically charge one and a half percent as management fees every year for the amount of money that they are managing for you.
00:40:32
Speaker
That is how they will earn. um Help me understand PMS and AIF, what are the charges for these and are they the same as mutual fund in terms of what they invest in? What is the difference?
00:40:45
Speaker
PMS and AIFs of course charge much higher. Because they are there are smaller vehicles, they the the minimum requirements are high.
00:40:58
Speaker
Investors also have access to the managers. Managers talk to their investors regularly. you know If you have a problem, you can actually arrange a call with the manager and he'll give you 5, 10, 20 minutes to explain what has gone wrong and all that. That's the thought.
00:41:13
Speaker
And therefore managers end up charging a little more and then they can have more themes plus because they are they are they are independent guys, you know, so they they are loosely, the their investment strategies are little more flexible.
00:41:31
Speaker
okay you know so so they can they can churn portfolios much higher they can have concentrated portfolios so generally it it is you know it is considered that pms and aif scan in the longer run give you better return than mutual funds okay because of these reasons how much is the difference in return See, again, so when you do an average, it may not be look like very different.
00:42:00
Speaker
And so most people fall prey to that because, you know, average of mutual fund return, average of the entire PMS industry, average of the AI, more or less the same because they are good guys and bad guys. Not bad guys, good guys and average guys.
00:42:15
Speaker
But there's no bad guy, you know, anybody who's managing money is very, very capable. But so they could be but good to be good guys or and then they are average performers. and so so So the the returns may end up being very similar on the outside.
00:42:33
Speaker
But, you know, the because the fund generally in PMSs and AIFs, fund manager is also the founder. Most of the time, you know, other than these big institutional houses, you know, who are running their PMSs.
00:42:50
Speaker
Most of the time you will find founder as fund manager and therefore the commitment level is very high. ah There is no change in the fund manager. The founder again is basically struggling as you is we were discussing to kind of make ah big big in the marketplace, both monetarily as well as from his image perception also, you know, for his brand.
00:43:15
Speaker
so So they work really, really hard. and um So obviously, I see that there there is a merit in investing in AIFs and PMSs also besides mutual funds.
00:43:27
Speaker
But if you don't have enough money. Provided identify a good manager. And you should have enough money to invest. If you have, let's say, one crore and you put all your one crore into AIF.
00:43:39
Speaker
and then this guy doesn't turn out to be as good as expected, ah then you are putting your, you know, your money is not working as hard as it should have.
00:43:50
Speaker
Okay, important to diversify. ah Okay. yeah yeah So, ah between PMS and AIF, is there any other difference besides the minimum investment, 50 lakhs, 1 crore? Yeah, PMS, is the the entire investments are held in your name.
00:44:05
Speaker
AIF, you are in an NAV based product. It's in pool. okay So PMS manager, like we run a PMS, for instance, you know ah which is a buy and hold strategy.
00:44:17
Speaker
And from the day we started, we said that I will hold on to the profits of the company.
Investment Strategies: PMS, AIF, and Index Funds
00:44:22
Speaker
So if I discovered Titan and Titan grows 20 times, then I will not sell.
00:44:29
Speaker
Because it can become 200 times, you know, as it has become in the last 20 years. So i as long as Titan is a strong business and its growth is something that that convinces me the potential growth, I'll stay invested.
00:44:46
Speaker
So what has happened is every client portfolio has become different. So let's say we have we invested into a stock called Indian Hotels, Taj Group of Hotels, you know, five years so it's one of the best brands in the world.
00:44:59
Speaker
Four years, five, four years back when we invested, it was at 120, 130 rupees. Now it's trading at around 750 rupees. So the stock has grown four five times.
00:45:09
Speaker
So for a client who bought 4%, he is now holding 11, 12% in the portfolio. Okay. But for a new customer, I'm still buying that same 4, 5%. I'm not buying 12%. Okay. So in PMS, you can have this differentiations.
00:45:24
Speaker
Okay. depending on the time i don't i don't i don't smoke and therefore please don't invest in itc for me and pms manager will comply okay got it okay okay so pms is essentially more uh custom portfolio builder like like almost not fully because the pms as you you believe in the fund manager's approach and you align with his value system and his vision so that's why you're giving him money and so you don't want to you don't want to force him to make investments ah based on your thinking. You want him to use his thinking, but at the same time, it can be customized if you want to.
00:46:03
Speaker
ah Whereas in an AIF, it is like a mutual fund almost except higher ticket size and all the money is pooled into that vehicle and the fund manager has complete discretion. And the advantage of AIF as opposed to mutual fund is agility.
00:46:16
Speaker
The fund manager has the agility to take big bets, to move fast, to, churn the portfolio all of those ah things are not really available to a mutual fund to have that kind of agility because there is a much larger investor base and so they they need to be more measured with their moves yes yes yes and they are retail investors who have no knowledge nothing the adjustments are depend they dependent they are investing out of faith and ah ah what does an aif and pms charge
00:46:52
Speaker
generally uh so they have they have multiple sharing formulas so most of them will charge a fixed fee which is but and hundred three one and a half to two percent and then if they do really well then they will charge a performance fee.
00:47:09
Speaker
So which is a profit share based on how much profit share based on, let's say some hurdle rate they will have, I generated 15% return, then I will on top of that excess of that, I'll charge 15% from you or 10% of that profit from you.
00:47:25
Speaker
Okay. Okay. okay Okay. Got it. Okay. So I understood the three types of fund managers that you can choose from. Um, What about the cheapest of all, which is the index fund?
00:47:41
Speaker
Like if i like like you know if I just do a Nifty, which is like a collection of 50 stocks, and if I invest in a fund which is basically mirroring the Nifty, the fees for such funds is like 0.15.
00:47:54
Speaker
0.2, 0.3%. Yeah, 0.2, 0.3%. one five one two four point three yeah point two point three yeah point two point three percent So it's like ah so so why not just do that It can actually, that trend is catching up very, very fast and it emerges emerged from developed markets.
00:48:16
Speaker
And people realize that you know collectively all these funds are just giving average returns what Nifty is generating. In fact, 35-40% of the mutual fund industry on an average every year underperforms the benchmark.
00:48:34
Speaker
so uh for benchmark uh fund which is tracking nifty 40 of those funds are not even able to beat nifty only 60 are able to beat you know or 40 or mid cap or 40 small cap so why bother you know why speculate where you are going to uh be okay just invest in nifty so if you don't have an advisor
00:49:00
Speaker
I think that is a good strategy to do. Okay. Because you will save one, one and a half percent. In any case, you didn't have any skills to identify which mutual fund to buy. And therefore you just went to Nifty and Midcap index and whatever, whatever, and then you just bought index. Now you know that, okay, my, my returns are locked in next 40 years. Let's say last 40 years, I've got 800 times returns from Sensex. Maybe next 40 years I'll get 500 times. I don't care, but still it's lot.
00:49:30
Speaker
Okay. ah so So that's an approach. But the point the thing is that most of us want to make our money work harder. okay And therefore, you are going to active managers because they are not buying some of the obvious mediocre companies.
00:49:50
Speaker
So let's say Coal India Limited. In last 20 years, it has grown at 4-5% per annum. Okay. There is just no reason why coal India in this era of new energy and this and that and hydrogen will grow at 10%.
00:50:07
Speaker
It's impossible.
00:50:10
Speaker
It's impossible. So when you know that outcome, I think so. i I don't know. Or it will be part of some index. Yeah, some index. but But when you know that obviously this company is not going to give me the same return what I expect, you know, and then why should I invest in it?
00:50:30
Speaker
Okay. Now, Nifty has DCS as the largest market cap. you know, largest weight. So TCS will have around 11 percent weight into the index.
00:50:42
Speaker
a in but So when you give ten thousand rupees and invest in Nifty, eleven thousand of that is getting invested into TCS. And we know TCS cannot grow more than seven, eight percent. You know, the best years of TCS, the highest growth years are behind it And they claim that they cannot grow. TCS management itself says they cannot grow more than Okay.
00:51:09
Speaker
okay So when you when the growth in their business is going to be 7-8% and 11% of your money is invested there, how will your money grow at 14-15?
00:51:21
Speaker
So a fund manager, for instance, mutual fund manager will say, no, TCS is a nice company and I need it for stability in my portfolio. Let me have 2%. Not 11. Okay.
00:51:33
Speaker
okay So that is why when you look at longer term, let's say when you look at eight years, 10 years, 12 years, and you have monitored your portfolio well, you know, then you end up beating the market handsomely.
00:51:46
Speaker
I'll tell you last 14 years. And so what I did when the day I started, I said, let me have a report card for myself, you know,
00:51:58
Speaker
ah Unfortunately, most wealth managers don't keep it because they have ah they have a basket approach. You know, they will they will identify 50 funds and then they will tell the guy, is message a ko punleto you know, so when you read, when you go to him, we said, no, we don't want this basket approach. You know, I will have a standard menu.
00:52:18
Speaker
So when you are coming, if I like these eight funds, I will give the same eight funds to you as I will give to every single investor. So I created a report card. My ah performance, so all the clients that have invested with us in the last 14 years, their aggregate performance is around 17% per annum compounded annualized, which means that ah you know if a client started on 1st April 2011, his money has grown eight times.
00:52:50
Speaker
In Nifty or Sensex, that money would have grown just four times. Okay. So, so that extra that we have created is the value of good advice.
00:53:03
Speaker
you know, it's not extra, actually it's double. So one has become four and one has become eight in the other instance. And so that five, 6%. Now, if you were investing, if you were giving one and a half percent or 2% to the mutual fund guy mutual fund, and still you can make five, 6% more than nifty, it's not a bad proposition.
00:53:25
Speaker
So but the the the the more the story is that you need to have a good advisor with you. you know If you are able to find, then you should invest in actively managed funds and fund managers.
00:53:37
Speaker
But if you don't, if you are doing, then rather than speculating and investing based on past returns, it's better to invest in ETF. Okay. okay okay So ah how does an advisor earn?
00:53:52
Speaker
Yeah, so good questions. You very logically keep asking the next one. So advisors in India, there are two models, three models actually.
00:54:05
Speaker
Third model is just emerging. The first model was that advisor used to earn just commissions okay from the major fund. okay so Mutual fund will earn 1.5%, out of that they will give 0.5%, 0.6%, 0.7% to the advisor.
00:54:23
Speaker
Depending on its size, if it's large advisor, he can negotiate a little more and get higher.
00:54:30
Speaker
But some advisors were also charging fees on top of this. So, SEBI said, okay, either you take commission or you take fees. You can't take both. So, they created a new class called ah RIAs, registered investment advisors, which can only take fees. They cannot take commissions.
00:54:47
Speaker
Okay. That community is very small still, you know, but but that that's another model that has happened. and I guess Indians don't like to pay fees.
00:55:00
Speaker
Yeah, right yeah so that's the so indeed so even somebody agrees in a bad market and markets are going to be two years good, one year bad. So two years I'll earn my fees.
00:55:11
Speaker
The bad year, the guy will refuse to pay me. yeah Either I'll lose the customer or I'll have to basically just have a hard one. Okay, got it. So the third model which is reversed therefore is ah you know is basically advised through the PMS.
00:55:28
Speaker
Okay. So we do, ah you know, you invest in the PMS. So like, for instance, we have created a fund of fund. and So it's like basically it is a PMS which invests into mutual funds and to their direct clients where I don't get any commission and I charge a fee to the investor.
00:55:48
Speaker
But now because it's in PMS, i you know I don't have to ask customer for fee. There's an agreement based on which the fund accountant, which is Axis Bank, keeps charging these fees on a monthly basis, you know, that 200, 500, 1000 rupees, whatever it is that it keeps getting charged.
00:56:07
Speaker
ah directly from the corpus this amount is uh debited like the corpus of the investor yeah from the corpus like mutual fund is debiting every every day they charge one and a half percent so you don't feel you know that one and a half percent you see it in the enemy you know only evolved investors will know okay okay interesting okay uh ha okay okay interesting so okay So in case of a PMS, what do you charge? What what is your...
00:56:40
Speaker
So we charge only 1% of the advisory fee as an advisory fee and then whatever is the direct b plan fees. So 0.7, 0.6, 0.7, 0.5 depending on various funds.
00:56:54
Speaker
So then I'm i' actually, I don't even know what the fund what the fee is charging. Because you're investing in the direct plan. Because I'm investing in direct plan. I don't care whether the fee is 0.5 or 0.7. I'm only looking at Am I banking with the right fund manager?
00:57:12
Speaker
And then if the vendor fund manager stops performing, I say, I don't want to stay with you. It's like basically, let's say you are on a highway, you know, and you you have to reach your destination. It's the shortest possible time.
00:57:26
Speaker
and you ride, you're sitting on a car and that car starts sputtering, what do you do? If you had an option to get another car, you win. Because you need to reach your destination or time.
00:57:39
Speaker
So you are not leaving the highway of equity. But if one fund manager is somehow not working in a pure particular period of time, I just go over to the next car.
00:57:50
Speaker
and oh And you don't charge a profit share. It's flat 1%. There is a model. So we don't charge a hybrid. We say that, okay, you pay us this. or If somebody says, no, no, I don't want to pay you fixed fee. I'll pay you with the all of the profits. So I say, okay, give me 10% of the profits.
00:58:09
Speaker
Okay. Okay. And when did you start this PMS? Yes, it is recent. Very recent, around around two years back. two years So, what has been the performance in the last two years? Decent.
00:58:22
Speaker
Yeah, so this is good performance. We are beating markets basically. Okay, okay, okay. Got it, got it, got it. Okay, interesting. so So, the PMS is almost the same as our other, the regular wealth what we were doing for the last 13, 14 years.
00:58:37
Speaker
The thing is that here we have a little more flexibility. Okay. So, in in the regular wealth advisory model, You were earning the commission that 0.6, 0.7% or Yeah. Yeah. Yeah. We still, ah yeah. So that's bulk of our assets actually.
00:58:55
Speaker
Okay. Okay. Okay. So compared to that, this is like a, uh, the advice to execution cycle is faster.
00:59:06
Speaker
Like in the regular wealth advisory, you don't execute, you will tell your client, you should sell this and buy this. ah But the client may or may not execute that. Most of the time they start applying, the market is too high, a market is too low, let me do this, let me wait for some more time.
00:59:24
Speaker
you know And that's actually, that was one of the key reasons why we started this. Okay. And the advice, communication of advice is also kind of inefficient, you know. So let's, we have around thousand odd clients.
00:59:44
Speaker
Okay. Now communicating to thousand clients and then making them understand the change and then making them agree to the change and then executing, it becomes, you know, five months, six months, eight months process.
00:59:59
Speaker
Yeah. Okay. Okay. Okay. Right. Got it. Okay. So, uh, I think that that model, that wealth advisory model, probably only a pure digital company can do it because like say, I deserve deserve is also wealth advisor right deserve also has some a model like what I just explained a P it's also PMS basically the same concept okay so uh in fact we borrowed the concept from deserve so they started we said oh okay now this seems to be a good approach let us also adopt it uh because you know
01:00:36
Speaker
So I thought deserve was like the mutual fund commission earning, like like earning through commissions and they would recommend. They have both the models. So they have like if a client has doesn't have 50 lakhs or whatever, then they say, okay, you come in this and I'll manage you independently and whatever. And if he has enough money, then he they say that, okay, you come into the business.
01:00:57
Speaker
The primary model is the PMS. Okay. Okay. But PMS of funds. I guess for a small ticket investor, ah it probably the wealth advisory model probably doesn't make too much sense also is what I'm guessing because ah the...
01:01:17
Speaker
Like the inefficiency in that model between that advice being given. Not really actually. See, not everybody is as large as deserve or as large as, let's say, ladder up asset managers.
01:01:28
Speaker
you know So basically, there are lots and lots of... See, we are only talking mutual fund at a particular instance of time.
01:01:39
Speaker
And... So you need to, ah so let's say, what, let's say you are an investor. Okay. We started with five lakhs. Okay. You go to DISA or Zeroda or money control or whatever, which is digital.
01:01:55
Speaker
They use figure out, okay okay, they are saying that, okay, buy these five funds and you trust that they their their thing and they are really, really good people. Okay. So everything is fantastic and right.
01:02:09
Speaker
and you invested five funds.
01:02:13
Speaker
These five go down, go into a cold storage. You know, the rebalance and you have another five lakhs after two years, one year. You again go to some website. But these digital platforms also do rebalancing, if I remember correctly. really but they they they Will, you will have to do it now for you.
01:02:36
Speaker
right Right, they will tell you that you should. They will tell you, but you should have time to go and revisit that platform and see what is happening. And all and see the and that's where the issue is.
01:02:49
Speaker
When I have a digital platform, and I have lakhs of investors, I cannot have a five funds approach. Okay. I cannot say these five funds are good and rise to the 450 are bad.
01:03:06
Speaker
Okay. ah Have you any ever seen any broker saying that, okay, you invest only in 10 stocks and not the other 6000?
01:03:16
Speaker
They cannot have that. like So they will the model is that they will keep giving you which is the best performing funds. and They will not give you advice. They will never ever tell you that buy this fund and sell this one.
01:03:32
Speaker
you You go to any digital model and if it's doing, I'll be very surprised because now you are getting accountability. Okay, the moment you say buy this fund, there is an accountability.
01:03:47
Speaker
When you say sell this fund, it is accountability and it is advice. Most of these digital platforms, if they are earning through commissions, basically, then that accountability they would not like to take.
01:04:00
Speaker
They will say I'm a platform, you come and buy like it's an Amazon, you know, you get some sponsored ah products which are come right up. So they encourage you to buy that, but you can buy anything else as well. Okay.
01:04:14
Speaker
Okay. Okay. Got it. Got it. Okay. Okay. and Understood. So advisor is always a better thing, even in a, let's say somebody is in a small town. Okay. Now, someone is sitting in a and is there, he knows more than him.
01:04:38
Speaker
You know, he knows more than him and will continue know more than him, more than that individual investor. So it's better to go through that advisor than start attempting directly because We have to understand that one is it ah most of our investment decisions in our life will only not be only about investing into equity funds.
01:05:04
Speaker
We may also get, as you just discussed, you know, that excitement to invest into crypto. Tomorrow somebody will offer me a plot of land for 5 lakh rupees in Goa and I say, let's give it 5 lakh.
01:05:19
Speaker
Okay. Or somebody who says, he you know, I have short term money. i have my daughter's marriage two years down the line. Bank is offering me 7%. And that guy says, I'll give you 15%.
01:05:33
Speaker
And I give money to him and now that money never comes back. And my daughter's marriage is ruined. So there are these huge amount of investment decisions that a person takes.
01:05:45
Speaker
if A wealth manager or an advisor becomes like that guide, that like the bouncing board who has already experienced these things with other investors.
01:05:57
Speaker
And therefore he says, kid no, no, don't go there. This is fraught with high risks. Okay. So because the first rule of wealth management is protect your money. bae yogagato broca carring and yeah right yeah So growth comes later.
01:06:16
Speaker
Growth is the difference between compounding at 8% 15%. You know, whether your money becomes nine they double in nine years or double um double in five years.
01:06:26
Speaker
That's the only difference. You know, so growth comes later. Once the protection has happened, then the then growth will automatically be there. Okay. Okay. Okay.
01:06:36
Speaker
Got it. Okay. So, like if someone wanted to have someone like you as an advisor, what is the minimum ticket size for ah your wealth advisory business? So, we people are basically, you know, not in the retail space.
01:06:54
Speaker
You know, people who have, you know, who have earned a certain amount of money, they've created some corpus, let's say a couple of crores. okay And now they are looking this somebody to manage this corpus well. Because they know this these two crores need to be definitely protected.
01:07:16
Speaker
And they they know that this two crores cannot be earned again. and Right. and know So those, there so we invest, we but differ generally manage. Those are your target. Because we are very, very conservative. you know For us, this this protection is our dharma. Right.
01:07:34
Speaker
So, how do you acquire customers like this? So, you are saying like this is almost like UHNI, right? Ultra HNIs. ah yeah Not UHNI, yeah, HNIs. UHNI. The definition of the definition in has changed. What is UHNI? No, Ultra HNIs are really, really rich people. Now, 2 crore is like, you know, if you have worked for twenty twenty five years a, let's say, in a PSU and you are retiring, you will get 2 crores of provident fund.
01:08:02
Speaker
Okay, got it. So you don't call that guy an HNI, you know, so it's like ultra HNI. Got it, got it. So what what is your...
01:08:15
Speaker
sales and marketing yeah how do you how do you find so it's mostly word of mouth uh mostly word of mouth because uh trust is a tricky business you know and uh uh this ah wealth management is a it's a it's a very interesting field here on
01:08:39
Speaker
and The worst guy also says that i'm i'm I'm really delivering goods to people. And the other negative about wealth management is that I i cannot peep into other people's portfolios.
01:08:57
Speaker
I as a client I'm saying that let's say you came to me and said but you cannot audit and me how you have done I I just told you we multiplied money eight times sure we we aggregated and we created a report card and all that but uh you know and I got it audited also so uh it's okay so uh so at least okay there's some certificate that you can do But most of us, let's say if you were to ask this question to me two years back or three years back when I had not done this exercise, I would tell you something when you have to just believe.
01:09:30
Speaker
You say, okay, show me x client's portfolio. Okay. You cannot. it a Sorry, it is private. And I can't show your returns to anybody else. And similarly, I cannot show other returns to you.
01:09:42
Speaker
And so this is, ah so that is the biggest challenge that people have, you know, that how do you, how do you select a wealth manager? That, ah you know, that guy, and that's, that comes with experience. So, you know, I always say that there are three components to wealth management.
01:10:03
Speaker
integrity, transparency, and competence. You need integrity, you are entrusting your money, you are going to advice based on act on based on that guy's advice and therefore he needs to have honesty and all that.
01:10:16
Speaker
He should not look at his interest, he should look at your interest. Second thing is transparency. When bad things happen, he should come forward and accept that bad things have happened.
01:10:28
Speaker
and And he should be available when bad things happen. I'm making an easy statement, but it's most difficult. So when bad things happen, the guy just stops disconnecting. ah oh okay Or he doesn't tell, unless you ask him.
01:10:47
Speaker
Or he's not aware only that bad things have happened. and So there can be possibilities. And the third thing is he should have competence to advise. You know, so he just because if he's if he's if he's making a act of competence, it's not enough.
01:11:05
Speaker
should You should see what is the what is the compet competence level that this guy is, what is his education background, what is is what are the clients talking about him, how well is he coming across in terms of investing, you know.
01:11:18
Speaker
Is he basically talking very aggressively or conservatively? Is he talking about 20, 30, 40% returns because they can never happen, you know. uh so it's like if you started with one rupee and you started doubling your money you know you have rajaka story sonnaana upneki brahma gayos skipa and raja do you want and the king said to the brahmin that okay what do you want He said, sir, kuch nahi sir, meri paas yeh chess board hai.
01:11:50
Speaker
This is here, the chess board.
01:11:57
Speaker
Just keep doing this. Keep doubling. Okay. Okay. Just keep it for 64 times. Okay. So you have 64 boxes in that. You just keep putting one dana here, two dana here, four dana here.
01:12:10
Speaker
and And this guy basically got the entire kingdom. Instead of, Raja said, what's the big deal? And they are advisors who say, last five years, i have compounded wealth at 40 times.
01:12:27
Speaker
and they say and they And they are trying to say that, okay, I'll compound this for 40 times, 40%, sorry, 40% per annum, not 40 times, i would forty percent but okay and then you say oh this guy that other guy was trying I'll compound at 12 percent per annum this guy is better he's giving me better value you know so the the more conservative the guy the better he is actually when you are going and selecting either a fund manager or a wealth manager because the guy who's basically saying 10 percent 12 percent he understands the value of risk
01:13:05
Speaker
and know That risk is something that you don't know, the things and which will happen in future. That is risk.
01:13:16
Speaker
and right Three months before, we didn't know that there will be a Pahlgaam attack and there will be a war, a mini war. trima We didn't know. ven When people are aware that these events can happen you know with regularity, know so those are the people that you have to be banked upon. you know we Most of us, in good times, we tell these people, this guy is kind of mad.
01:13:45
Speaker
He's just too conservative. He'll never make money. How did you get your first five clients?
01:13:53
Speaker
Because you didn't have any track record at that time. No, I didn't have. In fact, I worked in mutual fund. I had zero clients. I had only Gyan and nothing else. So I actually, so me and ah so we, so three of us partnered. So my, I have two partners and Sunil and Manoj and they were running a very successful tax and audit business.
01:14:15
Speaker
They started in 1991, they became chartered accountants and instead of working, they said, let's open a, you know, kind of an office and In fact, there's this place called Dhobi Ghat in Bombay, very famous, Jambulwadi. They took a desk.
01:14:32
Speaker
They could not afford office. as They took a desk. So they kind of, they are very successful. So they had a running tax and audit business so they already had I said let's marry the two together you know my experience and uh and understanding of markets and your clients who have trusted you with their taxes obviously they can trust you with their wealth so that's how it started ah interesting okay the first few clients actually happened because of that and then obviously some of my word of mouth and my heart okay okay okay interesting amazing amazing uh thank you so much for your time Ragbendra it's been a real pleasure
01:15:10
Speaker
And thank you, thank you, Akshay. I hope this is useful. OK.