On this episode of Bulls & Bazaar by Outlook Business, we delve into the mind of a market veteran - Himanshu Kohli, Co-founder, Client Associates, and an experienced fund manager. Mr Kohli joins us today for a deep dive into stock markets as macro turbulence continues to threaten investor mood.
With over three decades in the financial world and over a decade in managing a private wealth management firm, he has seen it all — the ups, the downs, and everything in between.
In a candid conversation with Harshita Dudeja, Sub-editor at Outlook Business, Mr. Kohli shares insights on how young investors can navigate today’s markets, why timing matters, and how discipline separates the successful from the speculative. He also unpacks one of the most underrated yet powerful forces in investing: the magic of compounding.
With over three decades in the financial world and over a decade in managing a private wealth management firm, he has seen it all — the ups, the downs, and everything in between.
In a candid conversation with Harshita Dudeja, Sub-editor at Outlook Business, Mr. Kohli shares insights on how young investors can navigate today’s markets, why timing matters, and how discipline separates the successful from the speculative. He also unpacks one of the most underrated yet powerful forces in investing: the magic of compounding.
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NewsTranscript
00:00Down, down and moderately down again. That's exactly the direction of stock markets so far
00:05this year. Yes, there is a mayhem in the market. Markets have corrected. Last six months we have
00:10seen a bit of a higher volatility in the market. There are two kinds of investors. One, who knows
00:15that they don't know. Second, who do not know that they don't know. Practically no one knows.
00:19Market is smarter than everyone else. What is your advice for young investors who are just
00:24entering in the market? So the best way is stop watching news channels. Stop watching all these
00:30traders which are happening which is giving you too much of excitement. If your investment is giving
00:34you too much of excitement, if it's taking too much of your mind share, that means you are not doing
00:38too well. There are four things which impact the success of any investor. First is the discipline.
00:43Second is market timing. Third is which product to buy, which product to sell. And fourth is luck.
00:49Compounding is the eighth mantra of the world but if you read it you say it's the first mantra of the
00:53world. Every five years you double. 10 years you make it four times. 20 years you make it 16 times.
00:5840 years you can make it 256 times. And 50 years you can make it 1000 plus times.
01:14Down, down and moderately down again. That's exactly the direction the Indian stock markets have picked
01:20up so far this year. Since last September, markets have tanked over 15% from their peaks.
01:26Now, we may blame it on Trump's tariff stance, continuous foreign capital outflow,
01:30hot valuations and of course the overall macros playing in the background. But the bottom line
01:36remains the same which is an uphill battle for retail investors who are now seeing their portfolios in red.
01:42Thankfully, March brought a relief for investors, putting a temporary pause, if not a complete end,
01:47on the free fall. Now the question is, have we reached the bottom or is there more pain coming
01:52ahead? That's exactly what we are going to break down in today's podcast. Welcome to the second
01:57episode of Bulls and Bazaar and today we have with us Mr. Himanshu Kohli who is a co-founder of
02:02Client Associates and has an extensive experience in capital markets from DSP Merrill Lynch to Deutsche Bank.
02:08Welcome to the show sir. Thank you Harshita for having me over here.
02:11So, before we start, I just want to understand like how are markets treating you? Because in my
02:18circle, the new joke is, if you want to make a profit of 2 crores in the stock market,
02:22you need to invest at least 4 crores. And then there is this complete cohort crying out in the
02:28corner that Papa, FD, FD did probably right. So in all this mayhem, as a fund manager, how are you viewing the
02:36current market trajectory? So first of all, I would say expecting 2 crores from a 4 crores portfolio,
02:43which means 50% returns from the market is a very, very optimistic view. Yes, there are certain years
02:50where they have given it, but the probability will be in a low single digit number over there.
02:55Normally markets give you what low double digit returns 12 to 14% on a yearly basis over a long term
03:03period of time. Yes, what you mentioned, there is a mayhem in the market. Markets have corrected.
03:09Last six months, we have seen a bit of a higher volatility in the market. But if you ask me,
03:16there are two kinds of investors. One, who knows that they don't know. Second, who do not know that
03:23they don't know. Practically no one knows market is smarter than everyone else. Now, a lot of people,
03:30they saw the recency bias last three years, four years, markets were very good. They were putting
03:35everything into the markets, which is where they were becoming greedy. So the biggest hurdle in the
03:42markets is the emotions when they come into picture. Sometimes there is an emotion of fear,
03:46which is there these days. Maybe six months back, there was an emotion of greed, which was catching up.
03:50So if one can control the emotions and become slightly more disciplined,
03:56you can actually take advantage of the volatility. So if you ask me, first-time investors, they are
04:03going through a pain. There is a bit of an anxiety. But there are some sophisticated investors who have
04:09seen different cycles of the market and who have followed a very disciplined approach. To me,
04:14Harshita, that is what we cater to. They are pretty, pretty excited with this fall in the market,
04:20with this volatility. It's actually giving them excitement because they were waiting for this sale
04:26to happen. Typically, you go and buy certain things, whether it's a Good Friday or Black Friday,
04:34you do those things. Now, there is a sale which is happening. Similar things are available at a discount
04:40today. And if you are getting at a discount, it's actually an excitement for people who are waiting for this
04:45chance.
04:46Yes. So speaking of volatility, we saw India's volatility index breaking the historical inverse
04:55pattern. Just to give our viewers some context, the nifty wicks, also known as the fear gorge of
05:01the market, basically represents a volatility presence in stock market. So, sir, my question is,
05:08during the last correction period, we saw a breakdown in that inverse pattern. Usually more the panic,
05:15more the sell-off, nifty volatility index rises. So, do you think markets are somewhere getting
05:22difficult to read? So, if you ask me in my 30 years of experience, this is the first time I'm seeing
05:29this, where market fall is there, but wicks index has not risen as much. Now, normally there's an inverse
05:37relation. When the market fall happens, wicks index goes up. Right now, maybe there is also a sense of
05:43optimism about India's story, long-term trajectory of India. And that's the reason nifty wicks has not
05:51risen too much. Besides this, there are also tariff wars happening. This volatility is there across the
05:56globe. India is still considered relatively better over there. And that's the reason wicks is not going
06:02up. So, yes, long-term trajectory, long-term hope about India's story is far stronger today than it
06:08was maybe during global financial crisis or COVID times or 2012 period or tech burst. Today, this
06:17India is very different than what we have seen in the last 30 years. And that's the reason people are
06:22still bullish about India's long-term trajectory. And even with this kind of a 15-20% fall, which has
06:28happened, wicks index is not rising because they still believe India's sentiment is positive and
06:34things will turn out to be good over here. That's such a good story to hear. But if we talk about Q3,
06:42we saw the worst downgrade ratio since the first quarter of FY21, somewhere before or around the
06:49pandemic period. And yet the confidence of domestic investors was so resilient. And that too, despite
06:56when we are witnessing heightened geopolitical uncertainty due to trans tariff stance, do you
07:02think somewhere domestic investors' confidence is overplayed? So, I would say to some extent,
07:10yes, domestic investors' confidence is overplayed. If we see in the month of October,
07:16domestic investors invested 95,000 crores in the market. Last month, when market fall was very high,
07:2336,000 crores came in. Still positive money, but far lower than what it was there in the month of
07:29October. FIS have been continuously selling it. They sold more than about a lakh of crores in the month
07:35of October. They were almost about 30,000 crores sellers in the month of February. So, their selling
07:42has also come down. So, over a period of time, we have seen FIS, they were selling. There is a reduction in
07:48the selling. Domestic institutions, they were buying. There is a reduction in buying which is happening.
07:53Good thing, Harshita, what has happened is we were over-dependent on FPI flows. We were over-dependent
08:00on FPI flows and that was correct at some point in time. Like in the year when globalization or India
08:06opened up, India's market cap was hardly anything. Today, our market cap is four and a half trillion
08:14dollars, five trillion dollars. Now, even if FIS take out 10 billion dollars on a yearly basis,
08:21it's hardly anything. It's hardly anything. While at some point in time, 10 billion dollars
08:27could have resulted maybe 30%, 40% fall in the markets. But today, that is hardly anything.
08:34Domestic flows on the other side are far stronger than the FIS flows. So, there is a resilience which
08:40has been built in the market because there is a high quality money which has come into the market.
08:44Domestic money is slightly more long-term. FI money is slightly more short-term or we call it as a hot
08:49money. And the best part is retail investors participation, which is what we call SIPs. Now,
08:56that has been continuously increasing over a period of time. Since COVID, every month, minimum of billion
09:03dollar has come in through SIP mode. Last few months, it is closer to almost 3 billion to 4 billion
09:11dollars which is coming in. Now, that is something which is high quality money which is coming on a
09:16continuous basis and it's really a long-term money which is there. In fact, I must say, 2002 when we
09:21started Client Associates, there was a million dollar SIP which happened in the year 2002. Million dollar.
09:29Dollar was somewhere closer to its 40s. So, 4,000 crores. Million dollar was, no, 40 crores kind of an SIP
09:38which happened at that point in time. There was a celebration which happened in Mumbai circles. There
09:43was a celebration of top 40-50 professionals who came that equity has got its respect. Today, it's considered
09:50as an investment asset class. Otherwise, so far, we were thinking it's a trader's asset class. Today, equity in
09:56sophisticated investors has become the biggest long-term value creation asset class. So, a
10:02billion dollar, couple of billion dollars on a monthly basis has become a norm. So, we have come
10:09a long way and today, the dependence on foreigners has come down. Even to your previous question, VIX index,
10:16it's not rising too much because there is so much of belief about India's story. There is so much of
10:23capital which is available within India and that is something which is giving so much of strength
10:28to the market. So, even if they take out a couple of lack of crores per annum, market is not reacting
10:34too much because there is inherent strength of the market and there is also liquidity which is backing
10:40this market and a better quality long-term liquidity is backing this market.
10:45So, as a retail investor, I don't think so, I can deny the fact that sometimes market sentiment
10:53sways away my decisions. But what about big ticket players, H&Is, family offices? Are they also
10:59influenced the same way? Have you witnessed any change in their portfolios during the current market
11:04correction? So, there are four things which impact the markets. First is sentiment. Global tariff wars,
11:11geopolitical tension. This is what determines that sentiment. So, today I would say sentiment is
11:17relatively poor across the globe. But within that global poor sentiment, India still considers as a
11:23better spot to be. Second is liquidity. Liquidity, you can put it into foreigners. Liquidity,
11:29FBIs which is what we call. That's more like a hot money. Right now, it's relatively low
11:35over here because liquidity chases the global sentiment. Domestic liquidity as I mentioned is fairly
11:43strong. Yes, it has come down in the recent past compared to what it was six months back. But SIP
11:50liquidity which is a real liquidity or a long-term wealth, high quality wealth which is coming into the
11:56market, I would say the movement has just started. That is going to go up. So, sentiment is poor. Foreign
12:04liquidity is poor. Domestic liquidity is above average. Retail liquidity is very high. Then comes
12:10the two other things which are very important because sentiment and liquidity play a role in the
12:14short term. In the long run, it's just fundamentals. And fundamentals can be divided into two parts,
12:20macro and micro. So, macro if you see GDP. Today, we are one of the largest economies growing at one of the
12:28healthiest rates across the globe. Our twin deficits, fiscal deficit, current account deficit,
12:34they are far under control. We are going in a very very disciplined manner. So, this government's
12:40logo is Pran Jai but Vachana Jai. If you just see how they have actually managed the fiscal deficit,
12:46I would give 10 out of 10 to this government in terms of how they have managed this whole piece.
12:51Then, you actually look at the Forex reserves. We have been at a highest point about six months back.
12:57There is a bit of a dip which has happened because of the currency fluctuation. But still, it's far,
13:01far more comfortable. Our interest rates, which globally, there has been a hue and cry about the
13:07interest rates. We are far, far more comfortable. Our inflation rate, which is four plus minus two
13:13percent, we are within that range. Nothing compared to whatever happened across the globe. So, macro basis,
13:19if you have to paint a picture, paint a picture about India, I think we will be in one of the best
13:27painted spots at this point in time and that's the reason VIX index has not risen so much because
13:33our macros are very very strong. Yes, there was a bit of a concern on the micros part of it.
13:39Micros basically entails what is the valuation which we are paying. We were paying slightly expensive
13:45valuation to the markets. Large jobs were overvalued. Mid-caps and small-caps, they were
13:52really overvalued. Small-cap was actually touching two standard deviations above the normal range.
13:57Which was, it was a sort of a bubble which was developing over there six months back. But with
14:02this fall, large caps have actually become slightly undervalued. So, Nifty is actually eight percent
14:07undervalued compared to its historical ten years average. While mid-cap and small-cap, they are not at
14:14two standard deviations but they are at one standard deviation. So, they are in a reasonably expensive
14:18zone but nothing compared to a bubble what it was there six months back. So, valuations,
14:23corrections which has happened. So, micros have improved from that front. The other is the earnings
14:29growth rate. We were seeing a healthy double-digit growth rate which was happening post-Covid.
14:34There was a baseline effect also. But yes, last three quarters, earnings growth rate has not been that
14:40great. But yes, in the last quarter, it has picked up compared to the previous two quarters.
14:45We hope next two quarters, three quarters, earnings growth will actually pick up from here.
14:49So, if that happens, micros will be set. So, if you see India's macro story, which is very good,
14:56certain things in micro have improved, certain things have gone down but there is a likelihood
14:59of that improvement which is happening. Domestic liquidity is strong. The moment foreign sentiment
15:06improves, I do not know when, but the moment it improves, foreign liquidity will also start
15:12improving. So, at some point in time, FYI's will stop selling. Now, we'll see some jump happening in
15:18the market because of that. But the moment they come back, we'll see a new high in the market.
15:24So, sir, talking on macro lines only, usual ups and downs common for markets. That's the nature of
15:30the beast. That's the nature of our stock markets. But while this correction was happening, like even you
15:36said, it was a healthy correction, something that markets really needed. And some district players
15:41called it a cyclical slowdown. But, sir, their theory was that once overall capex and investments
15:52starts kicking off, we will see a revival, a pure revival in stock markets. And indeed, government capex
15:58has risen. But private capex is still lagging. I guess there was this report by rating agency that
16:04said the share of private capex in India's economy is a decadal low. So, of course, consumption can be
16:11blamed for some part of it. But my question is, if that does not pick up, then putting a pause on the
16:18cyclical slowdown might be a tough task. Do you think we are overestimating the resilience of our markets?
16:24So, I would say government capex program was happening at a decent pace. Last one year, it has
16:33slowed down. Maybe first half, it was because of the elections, because there was pause on everything.
16:39But we have seen last few months, it has started improving. Private sector, it has still not improved
16:45the way it should be improving or the market is hoping. Yes, if that does not happen, there is a matter
16:51of concern. There is a matter of concern, so market resilience will not be there in case growth doesn't
16:57happen. And anyone who invests in India, whether it's the foreigners or all of us, India is a growth
17:03market. And if the expansion doesn't happen, capex doesn't happen, there will be a question mark on
17:08the growth part of it. So, yes, it's the responsibility of all the business owners
17:13that they start focusing on the expansion. If interest rates comes down, it will actually
17:21help in that particular cross. But yes, there is some bit of anxiety around that. Private capex is
17:27not picking up. It's not happening. Everyone is focusing more on positive India. Is there actually
17:33a real picture which is emerging out of it? Yes, there is question marks over there, but I am still bullish on
17:38India. I hope it's a matter of time. Private capex will also pick up. But if it does not happen,
17:44there will be some turbulence in the markets also. So, as a retail investor and as a person who has just
17:50entered the market, I feel that there is so much information available. Like every day, I wake up
17:57in the morning, I would open my phone, five stocks to pick, five sectors to watch out for. And then there
18:03is a new one. 10 things that changed for the Dalal Street while you were sleeping. Of course, this
18:09information is useful. But not everything might impact the beast, right? So, what is your advice
18:16for young investors who are just entering in the market? How can they separate the noise from the
18:21signal? So, the best way is stop watching news channels. Stop watching all these triggers which
18:28are happening, which is giving you too much of excitement. So, Harshita, my 30 years of experience
18:33and some people who have even deeper experience than this and even far more sophisticated investors,
18:39if your investment is giving you too much of excitement, if it's taking too much of your mind
18:43share, that means you are not doing too well. So, again, as per various research which has happened
18:50across the globe on developed markets, emerging markets, developing markets, there are four things
18:56which impacts the success of any investor. First is the discipline. Second is market timing. Third is
19:05which product to buy, which product to sell. And fourth is luck. As per various empirical data and its
19:12time-tested data on different markets with deep level of research which has happened, 90% plus success
19:19comes if your discipline is right. And discipline comes from nothing but a very boring time-tested
19:28approach of asset allocation. What's my fundamental balance sheet saying? I can go towards growth
19:36or preservation. Within growth also, public markets, private markets, international markets,
19:42venture debt, high yield debt, within preservation, fixed income, gold. Now, these are some of the
19:49things which are very fundamental which every investor should actually do a deep dive. It's called
19:55as financial planning in our exercise which helps you to arrive what is your asset allocation. So, that is
20:02one part of it. First of all, to arrive at what should be your strategic asset allocation. More important
20:07is the discipline part of it. How do I stick to this? How do I avoid the noise? How do I stop watching
20:15masala news, tips in the markets? I go to a get together. Everyone is saying I lost this much money
20:20or I made this much money in this particular stock. Next day you want to just chase that stock.
20:26So, I'm saying just avoid doing this. Just focus on your intrinsic structure, what you have created
20:32for your wealth. It's like living a healthy life. There's a higher probability if you have a
20:37disciplined approach, you walk every day, you play some sport, you do yoga, meditation. Over a period
20:42of time, there's a higher probability you'll be able to succeed in your endeavors of fitness goals,
20:47health goals. Similarly, even in markets, there's a higher probability of your succeeding if you have
20:53a very disciplined approach around your asset allocation. That's a very beautiful way to present it.
20:58One thing, it's like we investors, we love to make predictions. Like even if something goes wrong,
21:07we would be like, I don't want to stop. And you have such an extensive experience in financial markets.
21:15I'm pretty sure you also must have come across many such people. So, what was your reaction during those
21:22times? So, there are investors who wants to tell the world that they're heroes or superstars. I'll share
21:30with you my own journey when I started in 95. I was working in a financial services firm. There was a
21:39broken desk or dealing room in our office. My friend used to be a part of that and I used to get excited
21:46whenever I used to go to his room to have a cup of tea. Slowly, slowly, I started looking at couple
21:53of stocks and he also started recommending me. Aharshita, I used to do some trading in two or
22:00three stocks which I thought I have mastered in. I used to buy in over every now and then. The days I
22:07used to make profits, I used to tell the entire world. Maybe sometimes throw a party. The day I used to
22:14not make money. I used to be quiet. Never tell even my brother, my parents, my best friends.
22:20That's something which happens. So, stock market is like this. You make some success. You want to
22:25tom-tom about it, boast about it. You lose. You just remain quiet. Over a period of time,
22:31trading is a zero-sum game. So, one should just stay away from it. Like future and options, there is some
22:36data which came. 90% plus investors lost their money and SEBI has actually become quite vigilant about it.
22:41They are bringing norms that should discourage people to do F&O trading also. So, institutions
22:48can actually take advantage because they have certain methods, philosophies, technology where
22:53they are able to take advantage but individual investors are not equipped to do this. So, I would
22:59say stay away from this trading-oriented approaches. Focus on more long-term fundamentals and take advantage
23:07advantage through a very disciplined approach. And volatility, it could be a bad word but it could
23:14be your best friend also. If you can understand the volatility, the kind of returns which you can make
23:20from the volatility, it's huge. I can give you simple examples. Let's say this glass of water,
23:26if it costs me 10 rupees and let's say if I drink 10 glasses every day, maybe my budget is 100 rupees.
23:32But if it becomes 5 rupees, maybe I can have 12 glasses. But if it becomes 20 rupees, maybe I'll have
23:38seven glasses. Now, same is the case with each and every asset class. If it becomes expensive,
23:45consumeless or vice versa. So, equity market before COVID happened, in Jan of 2020, it was 20% overvalued.
23:56So, if your model says 20% expensive, up 20% come consume. So, if your policy-wise, 50% equity,
24:0350% bonds, maybe against 50% you consume 40%. In COVID market fell by 30%. Let's say your 40%
24:10also fell by 30% and it has become, let's say, about 27%. But then markets have become cheaper
24:17by 10%. So, against 50, now you should consume 55. So, you have to come from 27 to 55. If you can
24:25actually do this, it's not easy. It's very, very difficult. But if you just believe in the power
24:31of mathematics, boring models, you can make tons of money. And every three, four years, there are
24:38two, three such opportunities which comes either on the expensive side or the undervalued zone side.
24:43And if you can just run your mathematics very well, you will make huge amount of profit from the markets
24:48and you would love volatility. And beyond mathematics and as you said, boring methodologies,
24:56what is the impact of algo trading? It's like the new buzzword for D Street and of course,
25:01the Wall Street as well. Right. So, algo trading also, if there is a sophisticated investor
25:07who has designed the algo very well and who is basically going as per that algo with the right
25:13kind of a technology and right kind of fundamentals built into that algo, this is an opportunity.
25:18You can create good returns out of it. So, the biggest thing is you have to have a discipline.
25:25How much of my money is going to go into physical assets, financial assets? Even financial assets,
25:30how much should go towards preservation? How much should go towards growth?
25:33Physical assets also, how much should go towards gold? How much towards property? What kind of a property?
25:39Similarly, in financial assets also, growth, how much in public markets? How much in private markets?
25:45What's my investment policy towards public markets? How much towards index funds? How much towards
25:51active managers? How much towards algo related managers? So, this is something which
25:56it's actually a science. And if you can just convert this whole art of investment into science,
26:03the probability of success jumps up many, many fold, which means over a period of time,
26:09you will be able to get your desired returns with a far lower volatility, which is what the desired state is.
26:15Like I'm coming from Gurgon to Saket. Now, if estimated time is let's say 50 minutes, but if I can come by metro,
26:24which shows volatility could be plus minus 5 minutes. But if I have to come by a public transport or let's
26:31say a car, maybe the variation could be 20 minutes. So, if I can bring this variation lower, then I need to just
26:38utilize my time very, very well. Maybe I'll just start 50 minutes before from my office to reach over here.
26:45So, that happens even in the stock market side. So, if I may ask, at what age did you start investing?
26:50So, I started working in 1995. In 1995, I did my first investment. Your first stock? No, I bought a mutual fund. Okay.
26:59Mutual fund. Mutual fund and then I mentioned there was some bit of an excitement which my trading friend
27:05used to do it. That I did it for a couple of years, but in 1998, I gave a full stock to it. I haven't
27:10invested in even a single stock. After that, other than one stock which has come to me because it's an
27:16unlisted stock. So, it's in my DMET and second stock is my company stock. Otherwise, everything is through
27:21funds. Mutual funds or PMS or AIFs. So, coming back to small caps. Once the darlings of D Street,
27:29now they are facing heightened skepticism. So, unlike large caps, small caps do provide prospects for
27:35higher returns. And I heard some investors saying that what will be growth in large caps in short term?
27:42Because they are already well-established businesses and the market is always looking for the
27:46next big thing. And small caps, when you invest there, you can find exponential growth,
27:52multi-bagger growth. But of course, there's a big, big risk involved in it. So, as a new investor
28:00or the Gen Z investor who are entering in the market, what is your advice? Because they have a limited
28:08salary, b even they have the desire for healthy returns. So, how can they build a strong yet a safe
28:16portfolio for them? Any strategy or something? So, I would say one, systematic investments
28:22is one of the better things. So, someone who has just started working is able to save let's say 10,000,
28:2820,000, 50,000 per month. Go for a systematic investment with a minimum 5 years view, ideally 10
28:35years plus view. Second, don't go and buy the stocks directly. Go through our certain managers. So, mutual funds
28:43gives you an advantage of even 500 rupees per month. So, go through a mutual fund route. Third,
28:51allocate your money across maybe a large cap manager, multi-cap manager and a median small cap manager.
28:57And so, yes, as you mentioned, small caps has the potential to give you higher returns, but with a
29:04far more volatility, which is what is being witnessed these days also. But over a long term period, if you
29:11are doing systematic investment and getting that rupee cost averaging, in a 10 years period, you can
29:15compound your money at a healthy double digit returns compounded. And compounding is one of the
29:22most beautiful wonders of the world. So, if you can compound your money at 15% per annum, every 5 years
29:27you double. 10 years, you make it 4 times. 20 years, you make it 16 times. 40 years, you can make it 256 times.
29:3550 years. And 50 years, you can make it 1000 plus times. So, if your 1 lakh rupees can become 1000 times,
29:45which is 10 crore rupees over a period of 50 years, it's a huge compounding which you have done it over
29:52a period of time. While inflation will be somewhere about 20 crores or 20 times, you have made 1000 times.
29:59So, you have made 980 times real rate of return on your portfolio. So, what it requires is a disciplined
30:06approach, a long term approach, a consistent approach. A lot of people, they lose patience in
30:11the market. And the ones who lose patience, they do not make good returns. So, market rewards those
30:19people who have inherently patient people. They have the resilience to go through different kind of time
30:26phases. They still keep on investing. So, my recommendation is anyone who started SIPs,
30:32let's say one year back and today you see a downside, don't stop it. In fact, increase it if possible.
30:40Increase it possible because you're getting better value for money today because market has directed a lot.
30:46So, talking about the perspectives of investors, is there any difference between how a retail investor
30:54or a common investor views the market versus how a big investor like HNI or maybe UHNI views the market?
31:01So, I would say one, there is a difference in the experience if someone has seen. So, let's say
31:08in 30 years, I have seen 4-5 cycles. There are some investors who have seen 2 cycles. There are
31:13some investors who have seen even 7-8 cycles of the market. Now, every cycle teaches you something.
31:18Every cycle. But if there is a young investor who has not seen a downside, let's say they just started
31:24investing 2 years back and they only saw up and up. There is a far more learning in a down cycle.
31:31How you behave actually determines what will be your outcome. So, today, first-time investors,
31:39they are becoming jittery. Someone who is a long-term investor and has different cycles,
31:45they are far more comfortable. In fact, I must share with you, you all heard about Great Depression
31:51of 1929 in the US. There is a normal saying. The younger you are, the higher you should have in
31:59a growth portfolio or an equity-oriented portfolio. And the older you are, you are more towards fixed
32:04deposits kind of a thing. So, in 1929, when the Great Depression happened, people in their 20s,
32:10they sold off everything in the equity markets and moved into cash. People who were in their 40s,
32:16who saw a couple of cycles of the market, they did not do anything. They just stayed put over there.
32:23While people who were in the 60s, who have seen more cycles, they sold off everything else and moved
32:29everything into stocks. And they got the huge advantage of that. So, that is something which is
32:36also happening. People who have seen cycles, today, they are happier with this volatility in the market
32:42and fall in the market and they want to buy more. While first-time investors, they are jittery,
32:47a lot of anxiety. They want to get out, but they may be getting an advice not to get out,
32:53but they are not investing more. So, since we are in a bear cycle right now,
33:02the most awaited question, I would say, have we reached the bottom or is there more pain coming
33:08ahead for the D-street? This is the most difficult question to answer. Most difficult question to
33:13answer and I would say markets are smarter than everyone else. Everyone else. We may feel we can
33:21predict the markets, but we are not competent enough to predict the markets. If there are millions of
33:26people who are bullish on the markets, there are other million who are bearish on the market.
33:31Someone is selling, someone is buying. That is what is happening in the market. So, I would say,
33:37as I mentioned beginning of the show, there are two kinds of people. One who knows that they don't know.
33:43Second, who do not know that they don't know. It's wiser to be in the first category. Realize you don't
33:52know and just have faith in your mathematics, in your discipline, approach of asset allocation and be
33:59guided by that. There is a far, far higher probability that you will succeed in that endeavor.
34:05But if you do not know that you do not know and you are trying to time the markets,
34:11it could be a very risky proposition. Certain times you will succeed, certain times you will fail.
34:17It's a zero-sum game. The only person who makes money is a broker over there. Investors, few make
34:24money, few at the cost of other investors. So, don't try to time the market. Don't try to preempt
34:29what is going to happen. Just accept that you don't know and you will be far wiser, far better off in
34:37that whole approach. That's a very nice lesson for Gen Z's who are entering the market. Try to be boring
34:56whenever you are investing. So, since we are now running out of questions, I would say you have
35:03provided such a big picture around the stock market. Is there any common stock market myth
35:10that you still remember?
35:11So, there is a presentation on myths in my 30 years of career. So, I said 10 myths which I can
35:19address and answer in a manner that even a 10-year-old can understand it very, very well.
35:28So, there are a lot of myths around investments. But one of the myths is, as you mentioned,
35:32can I make 50% returns on the market? Can I double my money in the next two years' time?
35:36The probability is far, far lower. Again, there could be a certain stock which you could have
35:42doubled in two years. But look at the overall portfolio, overall wealth of yours. That's not
35:49possible. And a lot of investors six months back, they were asking us, if you can double our money
35:54in two years, we would be happy to give you the money. Now, we can't accept this kind of money because,
36:00as I mentioned, we do not know about the markets. We can only follow a process-driven approach and
36:07improve the probability of success. So, the myth is, can I get superlative returns year after year
36:16on my entire portfolio? The answer is no. A few things you can, but over a short-term period of time.
36:23Over a long-term period of time, you have to keep pace with inflation and create four to five percent
36:30real rate of return. I am telling you, this is something which is what has happened with Warren Buffet.
36:38Warren Buffet is one of the most sophisticated investors across the globe. He started his first
36:44investment at the age of 11. Today, he is 94 years of age. He is the sixth richest person in the world.
36:53So, most of his returns, 99 percent of the returns have happened after he turned 50. So, he has got the
37:01advantage of compounding. Last 30 years, his compounding rate of return is closer to 10 percent
37:10in dollar terms. So, if inflation is 2-3 percent, he has compounded at 7-8 percent over
37:17inflation over there, which is a real rate of return. In INR terms, Rupee 3 percent toota hai against
37:25dollar in last 30 years. So, 13 percent compounded returns. Now, 13 percent compounded returns has made him
37:33sixth richest person in the world over last many years. So, if you can consistently compound your money
37:41over a long term period of time, rather than trying to hit a sixer in one year and then getting out on zero
37:50in the next year or creating a huge negative over a period of time, that will not help you to create
37:56wealth. Consistently, long term, if you can compound it at low double digit, you will create a fortune.
38:03You will actually leave the next generation far richer than what you inherited it.
38:11And there is a very nice book which I will recommend each and every
38:16youngster to read it. The wealthiest, the richest city of Babylon. Now, compounding is the eighth mantra
38:24of the world. But if you read it, you say it's the first mantra of the world. If you can just compound it,
38:29and a lot of Indians are getting into that phase where our investment portfolios are increasing.
38:34If we can compound it at a right rate of return, I think that some years will come back in India.
38:43And that is something which is the purpose for which we are working, educating people
38:47how they can compound their wealth consistently in a very boring manner over a long term period of time
38:55so that we can get the pride of our nation.
38:59That's such a good statement to hear because there's so much negative sentiments in the market.
39:05And okay, finally, investors have something good to hear.
39:10What about new asset classes entering like Bitcoin, Ethereum, cryptocurrencies? Any opinion?
39:17So, I would say there is alternate asset classes which are increasing. Alternate asset classes are
39:24the ones which are slightly different than the traditional asset classes. Traditional are bonds,
39:29equities. Alternates could be unlisted space, commodities, bitcoins, art, wine. These are the
39:38alternate asset classes which are increasing. Globally, as per the world wealth report or as per the UBS
39:46survey, alternates have grown up in HNI's portfolios. They behave slightly differently than the
39:53traditional asset classes. I would say even Indians will need to add towards alternate asset classes.
40:00There is some movement which has happened in the unlisted space. There's a lot of talk which has
40:04happened on the Bitcoin or cryptocurrencies but less of action. Maybe regulators need to give their
40:11blessings to it. Maybe there has to be a deeper research over there. Today, it looks slightly
40:19shallow. It looks shallow because there is a lack of depth of data. But yes, performance in last 10
40:25years has been good. With Trump coming in, there is also a hype which has been created over there.
40:33Frankly, I am not competent to comment too much on this because I do not have the depth of the data.
40:39And as I mentioned, I am a very, very science-oriented person. I like to get into the depth of the data,
40:45analyze it, and then come up with any recommendations. So today, I will not have any recommendation even if
40:51you want to invest some money which you do not mind losing. It doesn't impact you. Do it in a systematic
40:59manner in some of these exchange-traded funds which gives you a diversified portfolio
41:05in a systematic manner because this asset class is hugely volatile. So you need to have diversification
41:11in mind. You need to have a systematic approach in mind and going through a passive index approach
41:16may be a prudent approach over there. But with the money which even if you lose, it should not
41:22make you lose your sleep. So I guess we are done with the questions here. Do you have any questions for me?
41:30What's your asset allocation? Oh my god. Cut.
41:35Okay, so two years back, I started with a small cap mutual fund only. And to balance out the risk,
41:43I bought an index fund. Now it's just going, trying to be patient enough. And I will try to be,
41:51try to consume more boring information going ahead. So my first investment was this blue chip fund.
41:57Oh. Franklin blue chip. I invested 10,000 rupees in that. I haven't sold it. I will not sell it.
42:02Today it's 15 lakhs worth. Okay. So 10,000 has become 15 lakhs over what, 30 years? Wow.
42:10Now, that's why I wish I would have a lot of money. If I invested, let's say,
42:16crore of rupees at that pendant time. Today, I could comfortably retire and enjoy a life on an island also.
42:26So, I think that's it from my end. Thank you so much for giving your time. I'm sure our viewers
42:31have got a pretty extensive picture of capital markets here. Thank you so much for coming to the show.
42:36Thank you, Harshita. Thank you so much. Thank you.