In this week's episode of Interviews by SM, we are pleased to feature Gurgaon-based blogger and investment professional, Anoop Vijaykumar. Anoop is one of our favourite voices in the Indian personal finance blogosphere. His analysis pieces, guides and philosophical frameworks live at The Calm Investor.
Anoop: It all started when, as a kid, I was enrolled in a special school for the gifted. It was run by a kind professor who had the ability to read and influence minds… Oh wait, that’s the story of the X-Men.
Actually, like a lot of engineers, I started off far from investing, as a software programmer back in 2000. After a few years in the US, I came back to India to do my MBA, after which I became a management consultant advising companies on strategy and operations. I subsequently worked in industry roles leading strategy for multiple business units. My consulting engagements and strategy roles required me to analyze industry value chains and prospects of companies in those industries. That’s when I got curious about the linkage (or lack thereof) between business and stock price performance. I started reading about investing and was hooked.
I found writing about a topic helped me improve my own understanding and so The Calm Investor became an on-going public account of my investment-related thinking as it evolved.
Thinking About Money
Money is only a means to an end, but choosing the ends carefully is important: growing up in a middle-class South Indian family, that was my parents' philosophy towards money, and I have inherited that attitude from them. This approach involves differentiating between the value of immediate gratification of, say, a shiny new device, and the option of choosing between paying 10% extra rent on an apartment that will cut down my commute by 50%.
It has also helped me place more value on experiences than possessions because we humans quickly adjust to more matierla comfort (like a bigger car) and don't derive as much pleasure from it. But the memory of a vacation with friends and family lingers for years afterwards.
If I could change one thing by going back in time, I'd slap some sense into my newly-employed self and start saving, and more importantly investing much earlier. I only really started recognising the impact of saving and compounding when I had to figure out a way to pay for B-school. Since then, I've realised the importance of putting my money to work for me by picking the right asset classes.
Other than the usual suspects (Buffett, Munger et al), I've found Morgan Housel of Collab Fund, Patrick O'Shaughnessy of O'Shaughnessy Asset Management and Meb Faber to be influential in my thinking about investing philosophies and the role of money.
On the flip side, I fervently do not want to be like every person who suffers from "lifestyle creep" i.e. spending bonuses or income increases on buying a fancy car on EMI, taking personal loans to buy flat-screen TVs or feeling a need to buy a fancy upmarket address.
I'm investing to be financially independent, which to me means being in a place where money becomes irrelevant in the choices that I make with my time.
In the asset classes available to retail investors like me, I favour equities for the long-term, so that's where the bulk of my portfolio is. The remaining is in mutual funds investing in markets outside India, and which would be expensive to get access to as an Indian investor. They are part of my strategy to get exposure to other markets. Overall, funds that keep expense ratios low, have low turnover in their portfolios, and that invest in not more than 20 stocks impress me. The Parag Parikh Long Term Equity Fund is one such that I hold in my portfolio.
At any given time, the percentage of my equity portfolio in cash depends on market (and stock) valuations.
I review my portfolio roughly every quarter to refresh my hypotheses for the companies I own, to sell stocks where the fundamentals have worsened significantly and to buy more of the ones that have improved or stayed strong.
Two things that I don't mind splurging on are travel and Books. The first because of the experiences, and the second because what better way is there to learn than from the experiences of others?
I think people spend way too much money on chasing the appearance of wealth. This includes poeple who are on the quest to buy the "right" luxury car when they don't really care or know about cars, or those who always buy the latest version of the iPhone even there's no incremental benefit... You get the drift.
Investing is not rocket science and it boils down to some core principles, which if followed will help you build long-term wealth:
- Time in the market is way more important than timing the market. So, get started as early as you can, and make investing a habit.
- Focus on developing your process, which involves spending the time and effort to identify your own investments or finding a trustworthy investment manager who can work on your behalf.
- Successful investing is only 15% about picking the right stocks/funds; 85% is about managing your own emotions and behavioral biases.
Best of Luck.
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