/ Interviews By SM

Arun Kumar on His Financial Influences and Personal Investment Strategy

We're pleased to feature fellow Chennaiite Arun Kumar in the first installment of Interviews by SM, which will be chronicling anecdotes, tips, and financial insights from some our favorite personalities and public intellectuals in the world of personal finance. Arun is the wordsmith behind The Eighty Twenty Investor, an investment and personal finance blog replete with information, explanations and tips. It's an extremely informative source for investors looking to understand the philosophical and theoretical underpinnings of the financial world.


Hi Arun, welcome! Tell us a bit about yourself.

Hi, I am Arun and I run a personal finance blog by the name of Eighty Twenty Investor. I work for a wealth management firm based out of Chennai and luckily, as a part of my job, I get to help people out with their investments.

While I claim to be no expert, thanks to the access to brilliant fund managers, super intelligent colleagues, great blogs, amazing books and the leeway to actually put a lot of these ideas in practice, I have been fortunate enough to become slightly less dumb in investing.

Having made a fairly large number of mistakes myself, and having observed mistakes in a lot of others, I thought sharing my learnings and mistakes via a blog could be of some help to people who are starting out on their investment journey or are bogged down by the complexity of investing.

At the end of the day, if I end up making a small difference to at least one person in improving their investment experience, I consider my job done :)

What experiences formed the basis of your relationship with money? How did your family and other early influences guide you to think about it?

I hail from a middle class background and my parents are government employees. Just like most of the earlier generation, they were phenomenal savers. They spent less, saved regularly, invested in a long term asset (real estate) and gave it time to compound.

Most of the discipline in terms of saving regularly was actually forced as they had taken a huge loan for buying our house. But that being said, it has worked phenomenally well for them and they have clearly demonstrated the impact of giving time to an asset class with decent return potential.

While I am totally in agreement with their concept of long term investing, unlike them, I am personally averse to taking a loan and buying a home as a part of my long term investment strategy. While buying a home to live in is definitely on the aspirational list, I still see it as more of a consumption item rather than an investment. Somehow the freedom and peace of sleep that a loan-free life gives me is worth more than a sexy house at this juncture. Instead, I prefer building my long term investment portfolio through regular investments in equities.

When and why did you start saving?

I started saving 6 years back and the simple reason was that I finally had a salary that ensured that I had some leftover money after my monthly expenses.

Who are your biggest financial influence - both positive and negative?

My biggest financial influencers are Howard Marks (for his brilliant perspectives on risk and cycles), Michael Mauboussin (for helping me appreciate the contribution of luck and skill in investing), Nassim Taleb (for helping me intuitively understand probabilities and the concept of alternate histories), John C Bogle (for his concept of simplicity and impact of cost on long term returns), Sankaran Naren (for an Indian perspective of contrarian investing and asset allocation), Sanjay Bakshi (for introducing me to the world of mental models and behavioral finance) and Morgan Housel (for being my inspiration to write)

I am generally wary of macro forecasters and people who try to predict the markets. I belong to the “I can’t predict but will prepare” camp.

What are you saving for?

I hope to be financially free (which I define as 20 times my yearly spending) by the time I am around 45 years. At 32, there is still a long way to go but nevertheless hope is always a good thing.

How do you allocate your portfolio?

I have three buckets:

Emergency Bucket: Liquid fund, with around 2-3 months of my spending.

Short Term Bucket: Debt funds or Arbitrage Funds or Equity Savings Funds - if there is something large coming up in the next 5 years

Long Term Bucket: 100% equities (predominantly stocks)

How do you rebalance your portfolio?

As of now, I don’t. At this juncture, since I am still in the early stage of my career, my savings contribution has a far larger impact than my portfolio returns. So I prefer to keep it simple and be 100% equity invested in my Long Term bucket till my portfolio reaches a reasonable size (say at least 5 times of my annual spend). Post achieving this, I might want to use an asset allocation strategy of, say, 70% equities and 30% debt.

What are two things that you don't mind splurging on?

Good food and great books

What do you think people spend way too much money on?

Weddings and Online Shopping

How do you pick your mutual funds? What fund(s) are you feeling good about/impressed by right now?

I usually prefer fund managers who have a long term consistent track record and have gone through different market cycles navigating both the good and bad phases of the equity market.

Currently, given the higher valuations, I think auto-equity-exposure adjusting products such as dynamic equity allocation funds make a good investment proposition especially for first time investors.

Any tips for our readers?

The most important determinant of your future returns is your investment behavior (read as your ability to stick with your investment strategy during periods of market declines).

So, pick an investment strategy that you can stay put in, and always have a rough action plan ready just in case the market declines. Also try and automate your investing process to a large extent and reduce the number of investment decisions that you have to make.

Arun thinks you should automate your investing process as much as you can, and so do we! So cast aside your Exit Load and Capital Gains spreadsheets, and let SimpleMoney do the work for you. Our bots are workaholics and they enjoy complicated calculations (and short walks on the beach). Track your mutual funds and equities automatically at SimpleMoney.