I make my advisors compete with me


Self-made multi-millionaire. Successful pharmaceutical entrepreneur. Chairperson of Assocham - Western Region. Economist. Independent thinking, high conviction based investor. These are just some of the many faces of the multi-faceted Ahmedabad based Bhagyesh Soneji, who shared some great insights on investing in a free-wheeling conversation with us. There are four minds that go into managing her portfolio - three advisors (one of whom is Madhu Menon of Oxyzen Financial, Ahmedabad) and the fourth is her own views as an economist and entrepreneur. She gets her advisors to compete with her, bringing out the best in them, which translates into a very well managed financial portfolio - one that has grown significantly over market cycles.

Take responsibility - its your hard earned money

I don't have one advisor - I have three and the fourth is myself - as a self-advised investor. I make my advisors compete with me and at the end of each year I take stock - who did what and how things are shaping up. I look for two things from my advisors - sound knowledge and a clear strategy on why and how an investment fits into my portfolio and serves my objectives.

I believe as investors, we have a fundamental responsibility towards our money. Its our hard earned money. We better create some time to manage it as well. You cannot blindly follow an advisor and do whatever he/she says. You must understand what you are doing, where you are investing and how it serves your goals. You cannot afford to be lazy about your savings after having worked so hard to create the savings in the first place. By all means, take advice from advisors - they are experts in their field - but before investing, you must do your independent research, track what other experts are saying, and build your own conviction around where you are investing your money. Itsyour money at the end of the day.

I started investing 17 years ago, when I was in my early 20s. Initially, money would accumulate in the current account, because I didn't give time and effort to managing my savings. Over time, I became a self-taught investor, and today I make sure that all my savings work hard for me, just as I continue working hard to create my savings.

Diversify and hedge in a manner that suits you

I was taught early on not to put all eggs in one basket - and that's a lesson I continue to live by. I have invested in mutual funds - equity, balanced, debt, liquid, in property, in shares, in insurance. Never go overboard in either direction. I invested early on in insurance also - although my advisors tell me that it gives poor returns. I am not interested in insurance policies that pay out after my death - for me, an insurance product that promises a certain sum of money when I turn 55 or 60 is relevant - it has a place in my portfolio. That's my way of hedging market-risk investments.

Build your convictions - and then stay with them

I invested a significant amount of money on the way up in the last bull market - when the Sensex was around 14,000. It went up, and then crashed all the way to 8,500. I didn't sell out. The reason was my thinking on the long term prospects for our economy, based mainly on demographics. Between 1981 and 2000, India's population grew by 26 crores. By 2008 and in the following years, that means 26 crore people who reach an economically productive age - which can significantly support and spur GDP growth.

Now, the events of 2008 were largely international in nature - none of which impacted my core thesis on why India's GDP should grow in a secular uptrend over the long term. So, I saw no reason to pull out - I stayed invested through the crash.

In fact, I found myself in a tricky situation in 2008, unrelated to market fluctuations. There was a plot of land next to our bungalow which our family was keen to acquire, to prevent it from being sold off for commercial development which would disturb the peaceful neighbourhood that we enjoyed. I didn't have spare liquidity, and I was very clear that I will not sell my equity funds at depressed prices. Since the family was very keen on not letting go of this plot of land, I decided to mortgage my bungalow and my office properties to raise cash for the purchase. As it turned out, the value of the land grew 3 fold in the next 3-4 years, thus making us good money in the process.

I believe you must build your convictions and then back them up fully. Sometimes, you need to take bold decisions - go ahead if you are convinced. And conviction can come only when you take the time and effort to build your knowledge.

Let's take today's scenario - some people are worried about equity markets. I am not, and I am planning to remain fully invested in my equity holdings. One is the long term demographics which I have already discussed. The second is a simple observation about markets in the 2 years ahead of a general election - markets are always in good shape in the run up to an election. Lets not get into the reasons for this - but that's the way it has always been. I have in fact advised my sister recently to sell her property investment and put it into equity funds.

Think carefully about your property investments

I believe property will not appreciate the way it did in the 20 years from 1995 to 2015. Cash has been a significant driver for property markets historically. We are all aware of the changes happening on that front. Secondly, while demographics should suggest a boom for housing, I am not so sure it will play out that way in urban centres. Increasingly we are seeing a trend of single kid families and DINK families (double income no kids) in urban centres. As families shrink in size, the need for purchasing new homes also comes down. So, if a couple of the key demand drivers for property are looking relatively weaker than the past, the outlook for property prices does not appear very promising to me. Its time for property investors to carefully evaluate and re-think their asset allocation.

My advice to new investors

  1. Don't go overboard with equity investments just because recent market performance has been good. When you are beginning, don't go beyond 40% in equity. Build equity holding beyond 40-50% only after you have experienced market ups and downs

  2. Never get into trading - I tried it only once, I burnt my fingers, I promised myself never to trade again in markets

  3. Invest only that money into equity from where you don't need any income, nor the capital for at least 5 years. If you need any income from your equity investments, you are heading for disaster.

  4. Never make equity markets your bread and butter. Never depend on markets for your earnings. Equity is for you to put your long term savings - not for you to earn your livelihood.

  5. Understand what you are investing in and how it fits into your plans. Then stay invested for at least 5 years. Give it sufficient time to deliver, and let your convictions give you the patience you need during this period.

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