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₹93,000 Crore Wealth Manager Explains How to Build Wealth | ₹10 Crore Roadmap ft. Feroze Azeez — Transcript

by Moneytalks by Groww · 11,671 words · 1,136 segments · language en · Watch on YouTube

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0:00Listen to your parents on everything except investments.
0:02I met my client yesterday. He had 96 crores.
0:05I said, let's set a target of 200 crores in 2030.
0:07The 76 scheme has made us minced meat.
0:10And I'm saying this like a fool on TV.
0:12If it's more than 8 funds, you won't be able to beat Nifty.
0:15If the return of the last 3 years of Nifty is less than 6 or 7%, then stack up your money.
0:19That is why at 22,600, I borrowed 30 crores in investments.
0:23The story of 10 crores to 100, 100 to 1000 is different.
0:27For this podcast, I keep 10 crores limited.
0:47Hi Feroze, welcome to Money Talks.
0:49So today we will talk about a lot of things.
0:52We will understand a lot of the nuances of finance, which are very important for personal finance.
0:57But before I start, first of all, I want to ask you that you left a stable physics teacher's job, which was almost 2 lakhs per month, and started wealth management.
1:09Which was 9,000 per month.
1:11So what was the reason behind this?
1:13And why did you take this decision?
1:16Neha, I think of course we will talk a lot.
1:19I hope it's interesting for people.
1:20I myself am so boring that I don't know why I am listening.
1:23But I am sure you will make the conversation far more interesting than I will.
1:27Actually I was a math teacher.
1:29Physics was the separate subject.
1:33Necessity is the mother of invention.
1:35So what I did was, My father had a financial instability.
1:40So he was very rich.
1:41From having two cars to being very poor that we didn't have money to eat.
1:45So whenever life has huge volatility, like you are seeing in the current market,
1:50it makes you stronger.
1:51It makes you stronger.
1:52And you have to earn.
1:54In the early part, many people need to earn.
1:58Children.
1:59Right?
2:00So that was one of the best things which happened to me in life.
2:02Now I manage the money of HNI.
2:04I see that there is a silver spoon in the children.
2:06So their development is different.
2:08Their strength to face the world is different.
2:11So with the grace of God, I got Vipta.
2:13I got Vipta.
2:14So it was a necessity.
2:15If you earn, you will study.
2:17If you earn, the family will run.
2:19So that's why I took the job of a math teacher.
2:22Because my friend's father was a trustee of that college.
2:25So I got the job.
2:27So first I taught for free.
2:29Then I got an ad posted for free.
2:31It said that if I teach for free, put an ad for free.
2:33There is a newspaper called Star of Mysore.
2:35He told me that this kid is insisting that I should put an ad.
2:37So he told me to teach for free.
2:38I will give the ad for free.
2:39So I said, okay, I will start for free.
2:41Then it was the era of the landline.
2:43I received so many calls to my home.
2:45Because it was free math teaching.
2:48So my mother was worried.
2:49Hey there are so many phones on the landline.
2:51So I said I have put a free ad in the Star of Mysore.
2:53So I will make teach for free for a few days.
2:55then people will think that if I am eligible, I will earn.
2:58So it started in 2001.
2:59In 2004, I left Mysore to do my MBA.
3:03So I used to earn 1 to 1.25 lakh.
3:05It wasn't 2 lakhs.
3:07It was a good time money.
3:09It was very big. Especially for a person who didn't have 50 rupees.
3:13I am not talking about pocket money.
3:15My family didn't have Rs.50 My father used to go with me every day to borrow 50 rupees so that we can have dinner.
3:22That was my situation in 2001.
3:24So that happened.
3:26My dad was very smart.
3:27If I ask for 10,000, no one will give.
3:29If I ask for 50, my friends will give generously so that I can feed my family.
3:33That's the kind of effort my dad put in during those bad times.
3:39So after that, I moved to wealth management.
3:42Like your company's name is Groww.
3:48Growth is very important for a person to live.
3:52No matter how rich a person is, but if he is stagnant, he gets sad.
3:57Growth is very important. The situation is not important.
4:00The growth of the situation is very important.
4:02So I asked the teacher. I was the most beloved teacher in Mysore.
4:05If you have studied engineering in Mysore, then you must know this name.
4:09His name is Shree Chand. Now he has settled down in Naichal.
4:12He used to earn 4 lakhs himself.
4:14So I asked, Sir, how much did you earn? He said 4 lakhs.
4:17At that time?
4:18I was earning a lakh.
4:21I was of 20-30. So I didn't enjoy the growth of 30-40 years.
4:27So I asked the interviewer of ABN AMRO.
4:31I asked him, he said, let's earn 1 million dollars.
4:34A good private banker.
4:36At that time it was an amount of 5 crores.
4:37I said I am earning 12 lakhs a year today.
4:40That is 5 crores.
4:41How much is there in it?
4:43That's why I said, it doesn't matter where you start.
4:47You in this world get what you deserve.
4:49So I will work hard. So I will earn more than the best teacher.
4:53So that's why I moved to Bangalore.
4:55I left the comfort of Mysore.
4:57So my house rent for the sharing room was 4000 rupees.
5:00My expense was 22-25 thousand rupees.
5:04It was a salary of 9300 rupees.
5:05So I had a very dear friend who is in the US now.
5:08I said to him, I may need 2-3 lakhs.
5:10Because my salary is less than the expenses.
5:13So he said, I will back you. Don't worry.
5:15So then I moved to Mumbai. Sorry, Bangalore.
5:18And worked there in ABN AMRO for 6-7 years.
5:21And at that time, for how many years did you work as a teacher?
5:253-4 years.
5:27After that, did you think that it was right?
5:29It was very difficult. I was young.
5:32Many children showed up in the evening colleges.
5:35So if I talk to a girl, she would start calling me sir.
5:38So it was very difficult for me to find a girlfriend in Mysore.
5:41Because they used to look at me from a different perspective.
5:44That's how it started.
5:45Now, because you also come from a family where you do savings and not spend.
5:52Because we have seen that usually in our Indian households, this system happens.
5:56Parents say, don't spend. Save money. Save money.
5:59But somewhere, in order to save money, they even think 10 times to buy a Rs.100 thing.
6:05Whether to buy or not.
6:06Isn't it?
6:08But our generation, the current generation, thinks that we don't have to do savings.
6:14We have to buy shoes worth Rs.10,000.
6:17We have to buy a phone worth Rs.100,000.
6:19So now if you look at it, it is not that in order to save money, you are not able to fulfill your desires.
6:25Or whatever your needs are.
6:27Traveling or experiencing things, which you were not able to do.
6:30So what can be the right way to balance this?
6:34Your generation, like you said, wants to spend.
6:38Look, you need clarity in spending.
6:41Look, spending is not a bad thing.
6:44By spending, if you get an aspiration, you feel like working hard.
6:50Spending has a big impact on your professional life.
6:55I have seen that people who are not spending, they are not able to move forward in their profession.
7:02Because their desires have become less.
7:04So if you are getting a kick from buying an iPhone,
7:08and you are only spending from that kick, but your professional hard work is not increasing, then there is no balance.
7:14If you feel like spending, then it is wrong not to do it.
7:19I was very fond of cars because I didn't have a car.
7:23So the passion that I got from that, that I will buy any car in India, I will keep it in my car parking.
7:31I thought so when I had to walk 11 kilometers to see my niece's birth.
7:3610 kilometers.
7:38When I lived in Mysore, there was no money for the bus.
7:40So you get a chance to reflect.
7:43If you walk 10 kilometers in the sun for 1.5-2 hours, you are also early.
7:47That was my first niece.
7:49But she is in the hospital.
7:50There is no money for the bus.
7:51Then I said I have to buy cars.
7:54It is not just a purchase.
7:55When you do such aspirations in poverty, then it translates into hard work.
7:59If you are fond of spending, then you will have to work hard.
8:02You will have to work hard for your money.
8:04If you can do this, then you have the right to spend.
8:08And not today's expenses.
8:10If you can spend something today and you are spending it today, you must think about the future.
8:15You have to say that I will buy this beach facing house in Alibaug.
8:19By the way, first hallucinate the expenses.
8:21What do you call it?
8:23Manifest it.
8:26So what I am saying is, if your hard work increases your desires, then your desires are very good.
8:32Do not just increase your expenses.
8:34For balance, you have to work hard for your money too.
8:37How to work hard for money?
8:39You want to spend but you love FD.
8:43This is not a correlation.
8:44You want to spend but you don't want your money to be expensive.
8:48Keep 80% in your equity.
8:51Right?
8:51That is what balance is.
8:53Expenses plus hard work in profession.
8:56Expenses plus equity allocation in portfolio must tally.
9:01And Abul, this is the thing that how can we use our money in the right way and fulfill our needs.
9:10But if we talk about mutual funds, then a lot of beginners or mutual fund investors panic a little.
9:17Whenever in life Or there is a setback in the market.
9:21So there are three types of people.
9:23Either they stop mutual funds.
9:24They stop their SIP.
9:26Either they double the SIP.
9:29Or there are three types of people who do nothing.
9:33So in such a situation, when the market is down or there has been a big setback in your life.
9:38So what is the best strategy?
9:40Look at this.
9:42First of all, I will say one thing.
9:44I have heard a lot of experts.
9:46They ask retailers to stop SIP.
9:49Not at all.
9:50We will have to give credit for this first.
9:52Data says that there is no one as smart as Indian retail now.
9:56HNI is doing more stupidity.
9:58Retail is doing less stupidity.
10:00I will show you inflows.
10:02Last year was the worst year.
10:03It was the worst year in sentiment.
10:05Trump woke up.
10:06He said do Liberation Day of 7th April.
10:08Then we were recovering from it.
10:10Before Independence Day, he said take a tariff of 25%.
10:13One or two days before Independence, again a tariff of 25 percent.
10:16Then we got out of it.
10:17Iran war happened.
10:18Nirmala ma'am increased HTT.
10:21What could have happened?
10:22Everything went wrong.
10:23Last April.
10:24SIP inflow was of 26,000.
10:27This April.
10:28SIP inflow is of 31,000.
10:33If this is not sensible.
10:34I will not encourage retail for this.
10:37Even then I will cry.
10:38What does retail do?
10:39SIP stops.
10:41Then when will I give credit to Indian retail?
10:44When will I give credit to Indian media?
10:46When will I give credit to SEBI?
10:48Do you know the budget of investor education this year by SEBI?
10:511500 crores.
10:54Investor has been educated.
10:56Indian social media has also done it.
10:58Electronic media is going on right now.
11:00So first point I am trying to make is
11:02Indian retail requires a kudos.
11:04Now I will go 10 years back.
11:0610 years back.
11:07April 2016.
11:09Shall I tell you the number of SIP?
11:113200 crores.
11:13April 2016.
11:16Right.
11:17Till now 10 times.
11:19Now I say HNI.
11:21HNI is doing a lot of stupid things.
11:23Because now I have 13000 families.
11:25I hold their hand.
11:28When it falls.
11:29Then I do webinar.
11:31I did 4 webinars.
11:32Thousands of people came.
11:34He said, sir, everything gets cheap.
11:37So Indian retail is one of the smartest race.
11:41And if somebody tells me that all this came after covid.
11:44Children.
11:46Please.
11:46After covid I saw a lot.
11:49After covid I saw Ukraine war.
11:51I saw 18000 nifty 15000.
11:53Again 18000.
11:55Again 15000.
11:56I saw all this.
11:57I saw US rate cycle.
11:59I saw India's rate cycle.
12:0115-20% fell 3-4 times.
12:04I admit that 30-40% did not fall.
12:06So this is one thing which I want to clarify.
12:08Because I am clarifying this in anger.
12:10Because I am tired of listening to experts on TV brushing Indian retail aside..
12:15And that's wrong.
12:16It's not absolutely non-mathematical.
12:19You know what HNI did.
12:22It was the year of covid.
12:23They had come before covid.
12:24So there was investment in covid.
12:27Take out the year of covid.
12:29SIP came in that year.
12:31FY21.
12:33SIP's number came in FY21.
12:3526000 crores.
12:3796000 crores was the total net flow.
12:40In Indian mutual fund industry.
12:42SIP came in 1.5 lakh crore.
12:45So the year in which HNI sold NIFTY of 10500.
12:50They sold PMS, AIF and mutual fund.
12:54Retail bought the most.
12:56In which year?
12:57FY21.
12:58Take out the average NIFTY level.
13:00It was 10,732 that year.
13:03Anand Rathi was the only wealth management outfit.
13:05Where clients were not allowed to withdraw.
13:08And 100 crore was purchased.
13:10So that's one thing.
13:11Which I am very confident about. Indian retail today than ever.
13:15Because they have learnt it.
13:17As per SEBI's investor education program.
13:20Now coming to what you should do.
13:24You should celebrate.
13:27Why should you celebrate the volatility?
13:29In 2024.
13:31In September.
13:33I think the peak of NIFTY was 22nd September.
13:3626,200.
13:38After that you can take out any mutual fund scheme.
13:42There are many schemes.
13:43I was reading an article of one scheme.
13:44It was a good article.
13:45That a lump sum investor has a minus 5% return.
13:49A SIP person has a plus 7% return.
13:53Who does lump sum?
13:55Rich man.
13:57Right.
13:58Who does SIP?
13:59The one who is young.
14:00The chance of being rich will come at the age of 50.
14:03Right.
14:05So the return of the same scheme of the rich man is minus 5.
14:10A poor man or a young man is incidentally poor.
14:13Right.
14:14Neha will be poorer than my client.
14:16Not because she chose the date of birth.
14:18God has decided your date of birth.
14:20My client is rich.
14:22Because it was the date of birth of 1960.
14:25So it's not your mistake.
14:26So you will also be rich.
14:28More than my clients.
14:29But your return for today's 1.5 years will be more in the same scheme of HNI investor.
14:36So you have to celebrate.
14:38That the rich is becoming poor.
14:40And the poor is becoming rich.
14:41This will converge at some point.
14:42Neha will be richer than so many other HNIs.
14:46So that's why volatility is good for Indian retail.
14:48And Indian retail is the most sensible lot.
14:52In the world today.
14:53And people have not acknowledged it enough.
14:55And I feel pained about it.
14:56As we are talking about retail investors.
14:58So many people are doing aimless investing.
15:02Everyone knows that they have to do mutual funds.
15:04They have to do SIP.
15:06Even if it's just 100 per month.
15:08But somewhere or the other there is an aim.
15:11A financial goal.
15:12Which maybe an HNI investor.
15:13Or a professional investor.
15:17That they have a goal.
15:18That in the next 5-10 years.
15:19Maybe I have to buy this.
15:20I have to do this.
15:22Maybe my children's education.
15:23Or travel abroad.
15:25So this aimless investing.
15:27How can we fix this in retail investors?
15:30Especially for beginners.
15:32We thought a lot about this.
15:34Even my boss thought a lot about this.
15:36Rakesh Rawal.
15:36He is my guru.
15:38He is the CEO of Anand Rathi Wealth Ltd.
15:41Since 19 years.
15:43What we understood is that in a person’s life cycle,
15:47in the beginning—say, like Neha, you’re married, Neha?
15:50No
15:51If you’re not married then obviously you don’t have kids either, so you don’t really have responsibilities.
15:55So whatever goal I tell you—“ you need to buy a car 10 years from now”—there’s no responsibility attached to it.
16:03In those 10 years, so much will happen that your aspiration for that car itself will change.
16:07You’ll buy a different car, or something else will distract you.
16:10So in that initial phase, identifying a goal is very difficult,
16:15and getting emotionally connected to it is difficult.
16:20Then comes the mid phase, where you can frame goals really well.
16:25And then there’s the other phase—where there’s so much random money that the “goal money” is like:
16:29I have to educate my kids, I have to buy two cars…
16:33those goals are all done.
16:35If I put it modestly, most of my clients won’t even be able to spend the money.
16:41If someone goes and eats at the Taj Hotel every day, lives there, books a suite,
16:45even books the suite next door for friends to come over and still can’t manage to spend their money
16:50then what goal am I supposed to give them?
16:52For them, the goal is a number target.
16:56If you don’t have an emotional target, it doesn’t mean you can’t have a target.
17:00You can have a number target.
17:02Like, I met one of my clients yesterday.
17:04They had 96 crores.
17:05I said, “Let’s set a target of 200 crores by 2030,”.
17:09And then we’ll see how much money you bring in, how much the portfolio delivers.
17:13How much will Mr. Trump help?
17:15How much will Mr. Modi help?
17:16How much will the economy help?
17:18If you build your assumptions around that, then it’s a number target.
17:20So in the initial phase, you can have a number target.
17:23In the middle phase, when you have responsibilities,
17:26you can have some emotional targets so that you stay disciplined.
17:30After you’ve got infructuous money—by infructuous I mean random money where you’re like,
17:35“I don’t even know what I’m going to spend it on”—then I can’t really create an emotional goal.
17:38So I make number goals for every client.
17:41Like I have a number goal.
17:42So don’t worry—if you don’t have responsibilities, you won’t have an emotional goal.
17:46Neha has to calculate when she will reach one crore.
17:49If you haven’t already reached one crore, then you have to solve that math.
17:54For the first one crore, your profession will help you.
17:58If you think the market is going to help you reach your first one crore, remove that illusion from your mind.
18:06For the first one crore, your profession will do the hard work.
18:10I’ve studied this a lot.
18:11A lot of people reached one crore, and they reached it because they were working hard in their profession.
18:16Then after one crore, they never reached ten crores in their life.
18:20I studied this—because I have that much data.
18:22And then I was looking: they reached one crore… did they reach ten crores, and if not, why not?
18:28There were two reasons.
18:29After you reach one crore, getting to ten crores is actually very simple—if you do nothing.
18:35If you just compound your money at 16–17%, you’ll get there in 15 years.
18:40And yet there are so many people who reached one crore and then retired without ever reaching ten crores—and some even passed away.
18:47So I studied it, and there were two reasons.
18:49One reason was that friends would say, “Hey, why don’t you do this?”
18:53There’s a company in Taiwan, right, doing really well—TSMC has more weight than India—so buy that.
18:58Why not buy Bitcoin?
18:59Why not trade derivatives?
19:01So a lot of people had different, new FOMO reasons—fear of missing out—and after crossing one crore they fell to 50 lakhs.
19:09And once someone drops from one crore to 50 or 30 lakhs, their courage breaks to come back.
19:15If your courage breaks, this life of yours is basically written off.
19:18So you have to work hard and reach one crore through your profession.
19:21After one crore, you have to tie a knot in your mind that you won’t do anything fancy.
19:27Through compounding, you’ll reach 10 crores.
19:31That’s what I studied across my whole life.
19:34The story from 10 crores to 100, and 100 to 1,000 is different—but for this podcast I’ll keep it limited to 10.
19:41So I personally think: don’t worry about FOMO—you can reach one crore.
19:49Just make sure your profession gets you to the first one crore; compounding gets you to the next 10 crores.
19:54Don’t fall into this trap that you can chase anything and generate returns.
20:02It’s only after prices have already gone up that your heart tells you, “Buy silver.” Silver was $38 a year ago.
20:10How many people came on TV and encouraged everyone to buy silver.
20:15Meanwhile, India’s biggest silver producer hedged 60% of its production and said,
20:23“It won’t go above 38—hedge it.”
20:25It’s a listed company; you can Google it.
20:27And now someone told you at 80—everyone’s saying 120—people piled into ETFs and now they’re sitting on losses.
20:35So don’t go for the FOMO trade.
20:38So this trend these days—where even someone earning a 40–50 thousand salary wants to get double returns
20:47maybe it means they’re not working on their skills.
20:49They’re not focused on earning more in their profession,
20:52but they’re thinking about returns right from their first job.
20:55So is that actually right, or do you think they’re taking on too much stress?
21:00So in my view, it’s fine to take a little extra stress.
21:04The biggest problem with today’s generation is that they don’t want to take any stress at all.
21:08They get depressed very quickly, right?
21:10Stress keeps you alive and kicking—it’s okay.
21:14Just don’t take too much stress either.
21:16Don’t become so helpless.
21:17Push yourself—stretch yourself a bit—so you feel a little stress.
21:22That’s my first piece of feedback,
21:23because I’ve hired— I have an army of about 450 colleagues whom we call account managers.
21:31Their average age is around 23–24, and their behavior is very different.
21:35Then my relationship managers have an average age of about 40.
21:39So behaviorally, there’s a clear difference: these guys get stressed very easily.
21:43So I’m saying, if your viewers are Gen Z, they should practice handling stress and not keep looking for a solution all the time.
21:52So coming back, I’d say if you earn ₹50,000 and your expenses are ₹30,000,
21:58and you can save ₹20,000, then invest that ₹20,000.
22:04Keep investing, and a time will come when your spending starts to drop.
22:11Because once you invest your money, you can’t just go out partying—there’s no money left in the account.
22:19Friends call you, and you won’t be able to go.
22:20So your savings rate is a self-fulfilling prophecy.
22:24So I’m making a very important point again, based on a study: the more you do SIPs, the easier saving becomes.
22:31Do you understand?
22:32Because if there’s no money left in your account, you’ll think,
22:33“How can I go out—there’s no money in the account.”
22:35SIPs help you increase your savings, and that in turn helps you save even more.
22:40It’s a self-fulfilling prophecy.
22:42So take some stress.
22:43It’s okay.
22:43There are a lot of people who already have wealth—say they’ve saved 50 lakhs or even a crore.
22:48But I’m seeing that, somewhere along the way, they’re not really tracking their money.
22:53So how important is it to track your wealth, and why is it important?
22:57I mean, if the money is just lying there, that’s fine
23:00but then why take so much stress about tracking it, about what’s happening with it?
23:04Correct.
23:05So, what you said earlier
23:07when you mentioned in the previous question that people expect 30–40%
23:12that was really important, and I didn’t even answer it.
23:15First, understand this: anyone who tells you “30–40%,” you need to ask them a couple of questions.
23:20I was in a meeting—doing an event in Bangalore.
23:25About 200 people were seated.
23:26The session ended, I came downstairs, and this guy walked up to me, angry.
23:32I said, “Sir, why are you so upset?”
23:33He goes, “Man, you’re talking about 14–15% returns.
23:36I make 30–35%.”
23:38So I said, “Sir, if you’d told me that earlier, I’d have put you up on the stage.
23:42If I could just hear it from you, I could help 13,000 families.
23:46Even my company manages 1 lakh crore.
23:49If you can give me the formula for 30%, I should be sitting in the audience.”
23:52But I will definitely ask you two questions—and 10–20 other people were listening too.
23:56Because the gentleman was so worked up, he said very smoothly, “30–35, I have been earning for 10–15 years.”
24:04“What are you talking about 14–15%? I should basically be the one on stage.”
24:09So I asked him, “Sir, what was your net worth earlier?”
24:13Then I said, “Ten years ago, you must have some idea what your net worth was.”
24:15He said, “Around eight or nine crores.”
24:18So I asked, “In these ten years, did you spend more than you earned, or did you save?”
24:23He said, “I saved comfortably—my business did really well.
24:27On average I saved about 70–80 lakhs every year.”
24:30Second data point.
24:31Third data point: I asked him, “Sir, what’s your net worth today? Can you tell me?”
24:35He was very transparent, thankfully.
24:38He said, “34–35 crores.”
24:40Now, in English you had said, “I’m earning 30–35.” You’ve given me three data points.
24:46So I opened an Excel sheet—or I took out my calculator; you know,
24:48if you rotate it like this it becomes a scientific calculator.
24:50As an engineer, if I use a scientific calculator, I said,
24:52“Sir, the ‘knowledge’ you shared in English—30–35,
24:57even if I take 30—what should your net worth be today if that English statement was actually true?
25:03You’ll have to guess.”
25:05He said, “Okay, I’d be at 40.” I said, “Sir, guess bigger.” “50.” “60.”
25:11“70.” “80.” I kept making him guess.
25:13I didn’t let him off.
25:14I said, “You insulted me with such a wrong statement
25:17I’m not going to let you go until you reach the number you should have been at.”
25:22If making money in English is so easy,
25:24making money in math is just opening an Excel sheet and telling you:
25:27he should have been at 138 crores, and he’s at 35 crores.
25:31Then I worked backwards and told him, “Sir, your return is only 6–7%.
25:34If you’d just given the money to the Government of India, you would’ve made more than this.
25:38And you’re sitting 35 crores below that and still lecturing me in English.”
25:42So yes, people can make money in English—because there’s no audit.
25:47Open an Excel sheet and ask anyone the same question: if someone says “40%,” they should be arrested.
25:53Because if one crore grows at 40% for 20 years, it becomes a thousand crores—more than a thousand.
26:04So fine, take my one crore today and after 20 years give my son a thousand crores.
26:10After you said that, what did he say?
26:12A “do-it-yourself” strategy is where people invest on their own.
26:16So if someone doesn’t have enough money to hire an advisor, or they’re a beginner,
26:23how can they make this a foolproof strategy if they’re doing it themselves?
26:28I can’t explain a foolproof strategy in three minutes.
26:32But one thing I will definitely tell you:
26:34when we started the business, we took a pledge
26:38look, in my company we have around 160 people, and they do very few things.
26:44But I have 165 people who do nothing but research.
26:48So how do I take this research to the person doing a SIP of a thousand rupees?
26:52That’s why I’ve been on TV since 2013—because I can’t manage them personally.
26:56I can promote it, so I put my Anand Rathi model portfolio on TV so that anyone who wants to can follow it.
27:02Because I won’t be able to manage HNIs either—I have 13,000 families.
27:06So one thing I can tell you is, step one: if you want to do it yourself, don’t do anything fancy.
27:14Second step: don’t do FOMO.
27:18If something has shown great returns in the past, your heart will start racing and you’ll say,
27:24“Let me just buy this.” If the past performance looks good, don’t buy it.
27:29Third, if you want to pull out my Anand Rathi model portfolio and copy it for free, by all means do it.
27:37People used to laugh at me—“Bro, you’re a private banker.
27:40Why are you going on TV and giving advice for a thousand rupees in these retail shows?”
27:44Go ahead and say, “Have dinner.”
27:46I give investment advice so people can reach the lakhs.
27:50That’s why I’ve spent the last 13–14 years doing thousands of retail shows.
27:56Now, if you followed the Anand Rathi model portfolio, of course it sounds very pompous when you say,
28:02“You’ve beaten the Nifty by 198% since 1 June 2013.
28:06You’ve beaten the NSE 500 by 133%.” If you’ve followed it blindly, then just do mutual funds.
28:16If you don’t have much money and you’re a retail investor today, don’t do anything beyond that.
28:21And I personally have only mutual funds, Anand Rathi stock, and one other stock
28:25and if you hear my IRR, you won’t be able to sit on the sofa; you’ll fall over.
28:29And I’ve done a bit of derivatives because that’s my expertise.
28:33Now say someone has savings of 30 thousand and
28:35they're thinking that for me, reaching a corpus of 10 crores is probably impossible.
28:41But we know that by using maths and the power of compounding, you can achieve this.
28:47So first tell us: how achievable is it, and how can you do it?
28:53You can make it possible very easily.
28:55One is the behavioral aspect.
28:56On the behavioral side, you’ll have to do one thing: as your income grows, increase your investments too.
29:03That’s very tough, right?
29:04Saying it is easy for me.
29:05It was difficult for me as well.
29:07If you’re starting with 30,000, then in India your “blanket” expands
29:11because there are plenty of earning opportunities—so you need to do a 10% step-up every year.
29:16Next year make it 33,000, then 36,300, then add another 3,600—like this, keep stepping up by 10%.
29:24That’s the behavioral aspect.
29:26Second: choose mutual funds in a way that you keep all your money in equity—if you have a 5–10 year horizon.
29:32If you want to reach 10 crore, keep the entire amount in equity.
29:35Don’t panic at all.
29:36Equity goes down and then comes back up—but when it goes up, it doesn’t stay down.
29:42So it’s a repairable risk.
29:45There’s a war going on with Iran—it will get repaired.
29:48It’ll recover within a year, in two years, in six months—Mr. Trump will decide that.
29:54So the first thing I’m trying to tell you is: if you have 30,000,
29:58that’s a very good amount—step it up, and put all of it into equity.
30:02These are the two pieces of advice—behavioral advice.
30:04Now, suppose India’s economy grows at 11%.
30:10The Nifty—over the last 11 years—has almost always mirrored India’s nominal GDP.
30:19That’s one important data point.
30:21So if India’s nominal GDP for the next 10 years is 10%, the Nifty should give you around 10–11%.
30:28And if you choose your mutual funds properly—not based on past performance,
30:33which DIY investors usually do—you can earn 13–14%, even 15%, in the base case.
30:41If in the base case you end up making 15, let’s assume 13%
30:44because from a compliance standpoint, let’s keep it at 13%.
30:48Nifty gave 10, your mutual fund gave 3 more, so you made 13.
30:53If God’s grace is there and you make 15, then with step-ups you’ll reach 10 crores in about 17–18 years.
31:00And if by God’s grace you get a bonus at some point—through your hard work
31:03then first start with: “Okay, I’ll reach it in 22 years.”
31:08If India and my portfolio give me 15%, I’ll reach it in 18 years.
31:12If during those 18 years I get a bonus early on and I top up my investments, then it comes down to 16.
31:18That’s how I backward-calculated it.
31:20And if you can, through hard work, shrink this time from 22 years to 12, you’ll outpace most of your colleagues.
31:28And like we discussed earlier as well, retail investors are getting higher returns compared to HNI investors.
31:38So if we look at it—whether you should invest a lump sum or do an SIP—what could be a foolproof strategy?
31:47See, if you want to invest a lump sum, there’s one thing you must check: what has the past performance been like.
31:54I’m giving you a formula.
31:55It’s very simple—so simple that people don’t even believe it.
31:56They think, “Something so simple can’t possibly work.”
31:59If the Nifty’s compounded return over the last three years is 15%, then you should not invest a lump sum.
32:05If the Nifty’s return over the last three years is lower than debt, then you should beg, borrow, steal—and put it in.
32:14If it’s somewhere in between, then it depends on your risk appetite.
32:18I’m telling you a very simple formula.
32:20Suppose you suddenly have 20 lakhs.
32:22And she’s saying, “I was doing an SIP of 30,000.
32:24I worked so hard and I got a 10-lakh bonus—20-lakh bonus.
32:29Now with this 20 lakhs, should I invest it in one shot, or should I stagger this as well?”
32:33When this question comes up, you only need to look at one data point:
32:35if the Nifty’s return over the last three years is below 6% or below 7%, just invest a lump sum.
32:41It could be 20 lakhs, it could even temporarily drop to 15.
32:45But automatically, if it goes to 15 lakhs, it will come back to 20 lakhs.
32:50Don’t worry.
32:51If people are scaring you, stop reading newspapers—it will go back up.
32:54It went to 22,200, 22,331 on 30th March, right?
33:01At that time people had mentally fixed 20,000 as the level.
33:03The ones who try to scare you, they scare you at 20,000.
33:06So put in your lump-sum money: if your rear-view mirror—Nifty compounded over the last three years—is under 7%,
33:12there’s no reason to stagger your investment.
33:14And that’s exactly the case today.
33:17That’s why at 22,600 I borrowed 30 crores and invested.
33:22But when the market goes down, retail investors usually panic, which is the wrong reaction.
33:28That’s not the right way to handle it.
33:29But if we talk about your investors, how do they behave?
33:33What’s their response?
33:34When you invest more money, are they supportive of it, or do they also get a little scared?
33:40No, they stay supportive—provided the wealth manager isn’t selling them big, unrealistic dreams.
33:47In our company there’s a rule: first make the person understand risk properly.
33:52If you bring them in after explaining risk, they’ll stay; they won’t be scared.
33:57Now suppose you’re my client and your dad is my HNI client.
34:02If I meet him, the first thing I’ll say is, “Sir, please understand—every year the market falls by about 15%.
34:07Here’s the data.
34:08Look at it: over 26 years, it has fallen at least 14–15% every single year.”
34:12So before you write the cheque, look at the data.
34:15Then if it drops 15%, don’t call me and ask, “Why did it fall?”
34:19The market will behave the way it behaves.
34:21Your dad will listen to you—you’ll listen to your dad—but the market isn’t going to listen to your dad.
34:25The market doesn’t care whether you invested or not; it falls by around 15% every year.
34:31You don’t need to panic and call me for a survey asking, “Why did it fall?”
34:34What difference does it make why it fell?
34:35You already knew it could.
34:36That’s why my 13,500 families are trained to look at risk very differently.
34:42If you just write the cheque and then it drops by 6000,
34:45the client panics and pulls out—because in their head it was supposed to reach two lakhs.
34:50So if you keep risk in mind before you write the cheque, the person doesn’t get a shock.
34:56And if they don’t get shocked, they don’t do something irrational.
34:59And again I’ll say this: when people say retail investors are stopping SIPs—AMCs today,
35:06but even AMFI is looking at the data the wrong way.
35:08I’ve told my friends who are senior folks in AMCs: SIP closures should be tracked at the PAN level.
35:18Suppose Neha stopped two SIPs—say she stopped one SIP in HDFC and one in ICICI
35:27and Neha started three SIPs in other good schemes.
35:32You actually started one extra SIP, right?
35:35But AMFI counts it as: she stopped two.
35:39You should look at it at the PAN level.
35:41There are 6 crore PANs.
35:42Out of those, how many people actually reduced their SIP amount?
35:46If 5 crore people had reduced their SIP amount, that number would definitely show up.
35:51There are about 6 crore 30 lakh people—say, out of that, around 4 crore people are doing SIPs.
35:55I don’t know the exact number.
35:56Every month, if you told me out of these 40 million
35:59how many people reduced their SIP, how many increased their SIP, and how many new SIPs started,
36:04at the level of individual PANs, then that’s credible data for someone to write a newspaper article.
36:09Otherwise, people look at this data and say SIPs are stopping.
36:12SIPs are not stopping.
36:14You can’t look at it at the scheme level.
36:15You have to look at it at the human level.
36:18This is one thing I’m highlighting—something I’ve never highlighted in the media before.
36:21I’m highlighting this to you, and this is one of the most important points, right?
36:25If you want to look at data, then look at it correctly.
36:27The SIP data has to be looked at at the level of individual people, not at the scheme level.
36:33And similarly, we often categorize risk as low or high, which is very subjective.
36:38But if we talk about an intelligent investor, how can they calculate their portfolio risk using advanced metrics?
36:46Look, first of all, I’m honestly tired of repeating this again and again:
36:51don’t measure risk in English terms like “high, low, medium.”
36:53I’ve managed treasuries—if I go there and say risk is high, low, or medium, I’ll lose my job.
37:00There are three numerical measures of risk.
37:03I can explain all three to you.
37:05If you’re serious, understand this: risk is the only thing you actually manage.
37:09Returns are not in our control.
37:12Right?
37:13How much risk will I take?
37:14Even my dad can’t influence me on that, right?
37:18I’ll have an individual risk appetite that I can measure.
37:22So risk is the most important variable, not return.
37:26That’s why—if you’ve studied finance textbooks, you probably just finished your studies
37:30open a textbook and look at one thing: it will say “expected return,”
37:35it won’t say “expected risk.”
37:37It will say “risk management” and “expected return.”
37:41Nobody says “expected risk,” and has anyone ever written “return management” anywhere?
37:45Look at any finance book.
37:47There’s a message in it for you and for me:
37:49you can hope for returns, you can wish for them, you can pray for them—that’s why it’s called expected return.
37:55Nobody says expected risk.
37:57Risk is managed; return is expected.
37:59If a DIY investor really internalizes this, they’ll get a lot of clarity.
38:05I’m first explaining why your question is so important.
38:09Now coming to how do you measure risk?
38:12If you want to measure risk, you should look at who has won the Nobel Prize in finance—that’s a good first step.
38:19Why should I decide which risk measure I’ll use?
38:22There are giants who’ve received the Nobel Prize.
38:25Based on three principles—three Nobel Prize–winning principles—I’ve managed my own money.
38:30That’s why I was saying you’ll fall off your chair if I say IRR; Feroz gets absolutely no credit for that.
38:35I took those three Nobel Prizes out of the books and applied them to my own money.
38:39And now I’m trying to implement them fully for my clients’ money as well.
38:44So there’s one of the best theories—what we call Modern Portfolio Theory.
38:48The Capital Asset Pricing Model.
38:50The Markowitz Efficient Frontier.
38:52These are basically the same thing, just known by three or four different names.
38:55It was developed by Harry Markowitz, and then William Sharpe joined in.
39:00He said that beta is a good measure of risk, so we show our clients that, look, beta is very simple.
39:10Unfortunately, the terms are used like it's the Greek alphabet.
39:13If it were the Indian, Hindi alphabet, we wouldn’t feel so intimidated.
39:17The moment people hear “beta,” they get scared.
39:19Right.
39:19Nothing to be scared of at all.
39:21Beta is 0.5.
39:23If that’s the answer you get in an Excel sheet—you can calculate it.
39:27If your advisor says, “Your beta is 0.5,”
39:31say he tells Neha’s dad then what that implies is, first your dad will ask, “Beta with respect to what?”
39:38Is it with Nifty, or the NSE 500?
39:41So I’ll say, “Sir, it’s with respect to the NSE Nifty 50.”
39:45And that means that on your behalf, I’ve taken half the risk compared to the Nifty.
39:520.5 means half the risk.
39:542 means double the risk.
39:56So if someone tells you a beta, you should ask: beta measured against what?
40:01It’s a relative risk measure, like a teacher would explain.
40:05A relative measure is very easy to figure out, right?
40:08I want to take less risk than the Nifty.
40:11If our company’s objective is to take 0.6 risk,
40:16then taking 0.6 risk means I have to make money while taking 40% less risk than the Nifty.
40:21So the beta is 0.6.
40:23So beta is a great risk measure.
40:25I won’t confuse beginners by bringing in two other good risk measures that apply in different contexts.
40:30Beta is a great risk measure.
40:31If you’re doing wealth management—and in India, 99% of HNIs don’t even have their beta.
40:39Whenever I meet a new client, they say, “Risk is very important.”
40:42I say, “Sir, you must have your beta then.” I’m ready with a pen to write it down.
40:45They say, “No, I don’t have it.”
40:46So you yourself are saying risk is important, and you haven’t even measured beta.
40:50Then they say, “My guy is doing my wealth management
40:52he’s been with my competitor for 20 years.”
40:54So if you respect risk, you should know your beta.
40:57If you don’t respect risk, fine.
40:59If you don't like risk, but you’re ready to take all kinds of random risk, yet you don’t even have your beta.
41:03Ninety-nine percent of Indian HNIs don’t know their beta number.
41:07It’s shocking.
41:08In my view, real wealth management hasn’t even started in India.
41:12So is it possible for us to calculate this beta ourselves?
41:15It’s very simple.
41:18You don’t need Feroz, you don’t need Anand Rathi, you don’t need a wealth manager.
41:21You just have to tell your wealth manager: give me my daily portfolio value, or give it to me month by month.
41:27They would have sent it anyway.
41:28HNIs do get it.
41:30So for however many past months you have, put the dates into an Excel sheet and enter your portfolio value.
41:38Whatever frequency you can get—daily, weekly, monthly.
41:42Then you can download the Nifty for those same dates from the NSE website.
41:47Now you have three columns in your Excel sheet: the date, your portfolio value, and the Nifty value.
41:55If you want to compare with the Nifty, you need to select these two columns—portfolio and Nifty—for the past one year.
42:00If you can get five years’ data, then you’ll get a five-year beta.
42:04Over five years you may not have daily data; you might have monthly data.
42:08So how many months are there in five years?
42:10Sixty months.
42:11That means you’ll have 60 values for your portfolio and 60 values for the Nifty, written in two separate columns.
42:20You just need to select both of them.
42:21You can also take one year’s data.
42:22In one year, if you can get around 250 working days, then that’s excellent, right.
42:28So you select both of these, and there’s a formula called SLOPE.
42:32In Excel it’s not called beta—its pet name is SLOPE.
42:35The moment you use SLOPE, your beta versus the Nifty will come out.
42:38Can you explain it quickly?
42:40Yes, absolutely I can.
42:41Look, for that I’ll have to give you an example.
42:45Suppose I’m going to Bangalore today to meet you.
42:49Say I’m going by car instead of by flight—I have to reach Bangalore—then how do we look at these three risks?
42:56What do these three mean?
42:58Whether I’ll reach Bangalore or not.
43:00Fine, let’s go by flight.
43:03So if I’m flying, there are three different ways of measuring risk.
43:07What’s the probability that I’ll reach Bangalore on time?
43:12The flight is at 3:35—will I make it or not?
43:14That’s my first question.
43:16That will be measured by standard deviation: will it be 10 minutes late, how much delay can happen.
43:23If I look at the full data
43:25like how much this flight was delayed over the last 20 days
43:28take the average and see how much it can deviate, I’ll use standard deviation for that.
43:36Got it?
43:37Second is beta, like we discussed—how much turbulence there will be on the way.
43:42I might reach on time, but in the flight there can be clear air turbulence, CAT, where it suddenly drops.
43:51CAT can happen too—though it’s very rare.
43:53All that you see in a flight, beta will measure that.
43:58Okay, beta will tell you how bumpy the ride was.
44:01Standard deviation will tell you what are the chances that my arrival time deviates from what I’m expecting.
44:07Both are measuring different kinds of risk.
44:09Will I reach my 7 o’clock meeting in Bangalore on time—if I want to measure that, that’s standard deviation.
44:17On the way, will I be able to get some sleep—that depends on beta, how bumpy the ride is, right?
44:24The third risk: if there’s a crash, will I survive or not?
44:28That is value at risk.
44:30So this is called VaR, this is called beta, and this is called standard deviation.
44:35Now, value at risk is: if something like COVID happens again, or even twice as bad, will I survive or not?
44:42It’s important to know that, right?
44:44To measure that, neither beta nor standard deviation can measure it.
44:48Who measures it?
44:49Value at risk measures it.
44:51Like during COVID, we ran a model for the overall portfolio:
44:56the Nifty fell 26%, my clients’ model portfolio fell about 9.3–9.5; some clients fell 12, some clients fell 7.
45:06So this measures value at risk.
45:07It can also happen that the Nifty falls 26% and my portfolio drops 50%—then clients get scared and sell everything, right?
45:18So these three risk measures are extremely important in treasury,
45:22but in wealth management, I met a 60-year-old with a thousand-crore portfolio who has four advisors.
45:29We’re not among them.
45:30And he says, “What is value at risk?”
45:32I said, “Sir, value at risk is written in the textbooks.
45:35If you won’t use it—and you have a thousand crores—then who will?”
45:39I keep wondering, who was finance even made for?
45:42The poor don’t want to use it, the rich don’t want to use it—so will only Elon Musk use it or what?
45:46On social media people talk about 30–40% returns, which, if you really look at it, is unrealistic—it’s not possible.
45:53So how much alpha can a professionally managed active fund actually generate over its benchmark index?
46:01Look at the chances—chances are actually very easy to measure.
46:05There are different categories, so we measured the probability category-wise.
46:09How do you measure the chance?
46:10Your question is in English.
46:12If I don’t want any personal bias in this, then I have to look only at the data.
46:19So what do I do?
46:20If I have to answer this mathematically, first I list the categories.
46:23In 2018, SEBI created very clear categories.
46:27First I see how many schemes there are in each category,
46:29and then I see if you’re asking for a one-year period, or you’re asking for a three-year rolling period,
46:34then I ask, “Ma’am, over three years, you’re asking that in every single year you want the fund manager to outperform.”
46:40From 2018 onward, I’ll look at all the schemes and check: say in large cap
46:47let’s assume HDFC, meaning in large cap there are 40 funds.
46:52Then I go back if in 2018 there were 30 funds,
46:54and if you, Neha, had invested for five years,
46:59then how many times did how many schemes generate excess returns?
47:04About 45% of large-cap funds, on a three-year basis—this data I’ve already done;
47:08I haven’t done the five-year one unfortunately
47:10have the lowest probability in the large-cap category of beating the Nifty or their corresponding benchmark.
47:19Now a second question comes up:
47:21when they do beat, about one-third of people are beating; the highest number of beaters are in multi-cap.
47:26About two-thirds manage to beat.
47:28So if you’re looking for excess return, multi-cap has a higher probability of beating the benchmark.
47:36Okay, then Neha should ask me the next question:
47:40when a fund beats the benchmark, by how much does it beat it?
47:44Would you call it “beating” if it outperforms by half a percent?
47:47You’d also call it “beating” if it outperforms by 10%.
47:51But if your scheme beats by 10%, then you’ve really hit the jackpot.
47:56If it beats by half a percent, that’s a very different outcome.
47:58So the next question Neha needs to ask me is:
48:01one, what’s the probability of beating; and
48:04two, if you do beat, what is the average outperformance you can expect?
48:09So both these measures favor multi-cap the most across all the 11–12 categories we track.
48:17And when we talk about global markets— the US, Korea, and Taiwan are doing really well.
48:22But if we talk about Indian mutual funds, a lot of them have stopped taking fresh inflows.
48:28So at a time like this, if someone wants to invest in global markets,
48:31how can they do it, and what strategy should they follow?
48:35The question you just asked reminded me of one of my teachers.
48:37Sorry, I’ll digress.
48:40Okay—when I said something, he tapped me on the head.
48:44His name was NRP—N.R. Purush Ram.
48:47He used to teach me derivatives.
48:48He passed away about a year, year and a half ago.
48:51So I asked him, “Sir, why did you tap me?”
48:55I was asking a question, the way you’re asking me right now.
48:57And in that, I had used the present continuous.
49:01He said, “In investing, you can never use the present continuous.
49:05Whenever you’re discussing a variable, you can’t use the present continuous.”
49:10You have to either say it has performed well, or it will perform well.
49:15Even you said, “Taiwan is performing very well.”
49:19Taiwan’s market isn’t an FD, right? FDs can be extrapolated because they’re constants.
49:25Taiwan has performed very well.
49:27Why is this so important?
49:29Because it’s written in finance that if you’re talking about a variable, you cannot use the present continuous.
49:36I drilled this into my head.
49:37That’s why I didn’t buy silver at $120.
49:42Everyone was saying, “Silver is performing very well, it’ll go to 10 lakhs.”
49:45I even had an argument on TV—this guy says,
49:48“Write it down, silver will definitely hit 10 lakhs,” because he was extrapolating.
49:53So coming back—what’s happened in global markets is: why has Taiwan done so well?
50:01It’s a self-fulfilling prophecy.
50:03Even in India, the money that comes in from FIIs comes on the basis of an index.
50:09That’s called the MSCI Emerging Market Index.
50:12MSCI is the most widely followed index for FII passive funds.
50:18I’ll tell you about four funds—billions of dollars track that emerging market index.
50:23Investors from the US invest, investors from Singapore invest, investors from Hong Kong invest.
50:26What do they follow?
50:28…the Emerging Market Index.
50:29It includes Taiwan, Korea, India, China—these are the emerging markets.
50:35Now what happens is: how is the weight decided in this index?
50:40It’s decided based on performance.
50:43It’s decided based on free float.
50:46India’s global market cap, relative to the entire world, was 4.7%.
50:53Now that has shrunk to 3.
50:57First it went from 4.7 to 4.5, then to 4, and then FIIs sold even more.
51:04Whenever an index weight goes down, FIIs are forced to sell.
51:09When they sell, performance falls further, which reduces the weight even more.
51:14And when the weight drops again, they have to sell more, which hurts performance again.
51:18This is called the vicious cycle of a weightage unwind.
51:23India’s weight kept going down, and Taiwan’s weight kept going up.
51:27In Taiwan, there’s TSMC—the semiconductor manufacturing company
51:31its weight is almost around 14, while India’s entire country weight has now come down to 13.
51:38So if you understand, the US has just done a deal…
51:44Apple gave a U.S. company—Intel—the mandate to manufacture chips.
51:49In a single day, that stock shot up.
51:52If Mr. Trump felt, “Look, I’m far too dependent on Taiwan.
51:55It’s only 50 kilometers from China—or 100, 200 kilometers away.
51:59If chip production stops there, saying I will make chips here.”
52:04So whenever something happens in Taiwan—if that company’s value falls—then it’s like those wind‑up toys, you know?
52:09The ones we played with as kids: you tighten the key, and the toy keeps moving forward.
52:13That toy is already wound up and running.
52:15whether that happens in 3, or months, or who knows, maybe after I’m gone—I don’t know.
52:19I’m just highlighting to your viewers why performance leads to more performance, and
52:25underperformance leads to more underperformance,
52:27until you can catch the moment the cycle turns.
52:31Will the cycle reverse for India?
52:33It’s like writing on the wall, that I don't know when which is why today I’m very confident.
52:38Why would I borrow and invest?
52:40I would borrow and invest.
52:41When India’s engine starts running, the upcycle will come.
52:45And in the same way, FIIs are moving out.
52:47Maybe they feel they’re not getting the right valuations here,
52:51or that AI development isn’t happening
52:53so in a situation like this, is this the right time for us to shift to global markets?
52:59Look, the thing is, this English terminology ends up creating a whole narrative.
53:04Let’s look at FII ownership, okay?
53:07FIIs have sold only about 3% of their holdings.
53:10Neha, if you take out 3% from your portfolio and I say,
53:14“Neha has run away from the market,” would that sound right to you?
53:19FIIs are hearing this and probably laughing.
53:22People are saying they’ve pulled out all their money.
53:23Where have they pulled out everything, brother?
53:2536% of Nifty’s free float is with FIIs; 22% of the NSE small-cap index free float is with FIIs.
53:35Nifty was at 42% in 2019—remember that number.
53:41People create narratives.
53:42Of course FIIs have pulled out money.
53:45They haven’t gone lock, stock, and barrel—God forbid that ever happens.
53:49Otherwise I’d have to shut my business down—and FIIs haven’t sold their entire ownership.
53:53Today, FIIs own 36% of Nifty’s free float; it was 42% in 2019, now it’s 36%.
54:05In the small-cap index it was 22% then, and it’s 22% even today.
54:10And people say FIIs have lost faith in India.
54:13If someone loses faith, what do they sell?
54:15They sell large caps—do they sell small caps too?
54:18But small caps haven’t been sold.
54:19The numbers say it—check it yourself, I’m not quoting wrong data.
54:23In the NSE Smallcap 250, FII free-float ownership was 22% then, and it’s still 22% today.
54:29So without looking at this, going on TV and preaching isn’t right,
54:33because people like us have a fiduciary responsibility not to add unnecessary spice to it.
54:38If you do even a little bit of public speaking,
54:44you have a fiduciary responsibility to be very mindful and to
54:47check whether your perception is actually different from reality.
54:52I’ve made that mistake in the past, and I’m still apologizing for it—and I’ll tell you exactly what I’m apologizing for.
54:57I kept saying on TV from 2013 to 2021 that I misled my retail-investor followers.
55:06I used to say, “Don’t keep too many schemes.
55:08If you keep more than eight or seven schemes, you’ll never be able to beat the Nifty.”
55:13You must have heard me say that—like every expert says.
55:16So I also went along with it.
55:18I thought it must be right if experts and my seniors were saying it.
55:21Then in 2022 I started a service at Anand Rathi.
55:26In my view it was a very good service.
55:27I said, before taking on any new client, first check whether they actually need me or not.
55:34Because when a doctor is a good doctor, how many such check-ups did we do?
55:38I checked 12,000 portfolios—people who weren’t dealing with us, or whose money was lying outside, not with our clients.
55:44Before taking them on, I said, “Before you take them, look at it
55:47don’t kill your conscience and take them.
55:48If they’re doing well, then for their own good, let them stay where they are.
55:51Don’t think about business.” So I started this service in August 2022.
55:56Then we kept checking.
55:57How did we check?
55:59If Neha’s dad wants to become my client, I won’t take him on right away.
56:02First I’ll check whether you actually need me or not.
56:05So I’ll tell him, “Sir, please share your entire mutual fund transaction history with me.”
56:11Since 2013, my Anand Rathi mutual fund model portfolio has been running, and I’ve created an NAV for it.
56:19Hypothetically, I’ll assume that if all your transactions had been done through Anand Rathi,
56:24whenever you invested money, you gave me the full transaction to execute
56:31What’s your dad’s name?
56:32Kalyan Singh.
56:33Yes Mr. Kalyan Singh.
56:35If all the transactions had been done through this, would he be richer today or poorer?
56:40If, by coming to Anand Rathi, by doing all his transactions at Anand Rathi, he would have ended up poorer,
56:45then I’d say, “Mr. Singh, your advisor is doing an excellent job.
56:49He’s done better than I could, so stay right there.”
56:52So when I did this checking, you know what I found?
56:55It was a huge revelation:
56:57out of these 12,000 families, about 87% of people,
57:01it would have been better for them if they were with us.
57:06For that 87%, I can confidently say, “Come to me, sir.
57:08You’re doing worse than your current distributor or DIY—going direct.
57:13You think you’re saving money, but even after paying me commission, you would be richer.” How can you deny that?
57:19I’d still make my living, and you’d end up with more food on your plate.
57:23So that’s the 87%.
57:25Then the remaining 12–13% people—I told them, “Sir, you’re doing really well.
57:30Your distributor is doing a good job.”
57:30Then we looked at who those people were who were beating us by design, not just by luck.
57:38There was one guy who beat me just by buying a single small-cap fund—so I’d say that was by chance.
57:44I can’t put thousands and tens of thousands of crores of my clients’ money into it all at once, right?
57:50So out of that remaining 13%, about seven to eight percent were people who beat us really well.
57:56I have no answer for them.
57:58They beat us brilliantly.
58:00I studied them and thought, man, these guys have become my teachers.
58:05They may be my clients, but they’ve become my teachers.
58:08This gave me great research material—what exactly did they do?
58:12And there was one special thing about them.
58:13Do you know what their average number of schemes was?
58:1628.
58:19And they’ve not only beaten the Nifty—they’ve beaten me very convincingly too.
58:24Their average number of schemes was 28.
58:26I’ll show you one portfolio—I'll remove the name and show it to you.
58:28Any of your viewers can ask my PR team for that portfolio; I’ll show it.
58:32Someone with 76 schemes turned us into minced meat.
58:37Seventy-six schemes, and I’m on TV like an idiot saying,
58:40“If you have more than eight, you won’t beat the Nifty.
58:44If you have more than ten, you won’t beat the Nifty.”
58:46I’m not saying you need 76 to beat the Nifty.
58:50But saying that is completely non-statistical, and even today a lot of experts say,
58:54“If you buy more than 10 schemes, you won’t be able to beat the Nifty.”
58:58Forget beating the Nifty—I can give you portfolios with 28 schemes.
59:02I’ll give you a thousand portfolios.
59:03Out of 12,000, I’ll show you a thousand portfolios that had 28 schemes and still beat it.
59:09That year, we took our model portfolio from eight schemes to fourteen schemes.
59:14Today my model portfolio has 14 schemes.
59:16Earlier I used to cry a lot—I wouldn’t even allow a ninth scheme to be added.
59:20So that’s what I’m saying: please don’t worry if you have a higher number of schemes, and if you use Groww.
59:26Groww lets you buy as many schemes as you want with a click of a button, and that’s a great service.
59:32So over-diversification is not an issue.
59:35What you still have to check is whether you’re beating the Nifty or not.
59:40If you aren’t, then you need to change your strategy.
59:42You have lakhs of clients on Groww and you’re the largest distributor, that’s the truth.
59:49I’m not saying this because I’m on Groww,
59:51and I have immense respect for the people who started Groww 10 years ago
59:55and congratulations on completing 10 years.
59:58If you show them whether you’re beating the Nifty or not—those who are beating it can party peacefully.
1:00:04Those who aren’t need to listen more about strategy, listen to this podcast more.
1:00:09No one needs to panic.
1:00:11The point being made is: over-diversification is not the reason you’re underperforming.
1:00:16And now that we’re talking about mutual funds
1:00:20according to you, what are your top three favorite mutual funds, and why?
1:00:26Look, the “why” has a very long story.
1:00:28I’ll just give you the output:
1:00:29DSP Large & Mid Cap, Kotak Emerging Equity, HDFC Small Cap Fund
1:00:36these three are from different categories.
1:00:38In multi-cap, you can take Canara Robeco Multi Cap.
1:00:41In flexi-cap, take HDFC Flexi Cap.
1:00:45In focused funds, take Invesco Focused.
1:00:48Now, these are the overlapping schemes from that 14-scheme model portfolio I’m talking about.
1:00:53If you’re listening—this is on you now—please do your homework, that’s the first thing.
1:00:58And if you want to buy, try to buy the full set.
1:01:01Because out of these, if I’ve named four, I’m bound to be wrong on one or two.
1:01:06If you end up buying only those two,
1:01:07then if they turn out to be the best two you’ll bless me, and if they’re the other two you’ll curse me.
1:01:13So if you’re buying, buy all six,
1:01:15because even if you sit Einstein down and tell him to pick 14 schemes, three will turn out wrong.
1:01:19What matters is how the overall portfolio performs.
1:01:22So that’s the disclaimer: buy all six.
1:01:24How do we do this?
1:01:25We do a lot of research.
1:01:27Whatever we know, we learn from people who beat us.
1:01:30We come from a company with a very low ego.
1:01:33Our seniors have told us: don’t be proud of your brain—learn from whoever is better than you.
1:01:39Mr. Rathi says the same, and my boss—70 years old—Rakesh Rawal also says the same.
1:01:44So those 8% of people, who are beating us, we’ve learned so much from them, and we thank them.
1:01:50Thankfully we don’t pay them royalties, otherwise my revenue would drop.
1:01:53We’ve been given a target of 1,400 crores, and it’s a listed company.
1:01:57And what’s your allocation strategy for investors—how much do you put in equity, how much in commodities?
1:02:04We don’t focus too much on the means; we focus on the ends.
1:02:08Let me tell you what my target is:
1:02:11first, earn 15% compounded; second, take a beta of 0.6;
1:02:15and third—and the most important metric—is what’s called risk-adjusted return, Jensen’s Alpha.
1:02:21You should research this.
1:02:22Warren Buffett’s favorite measure is Jensen’s Alpha.
1:02:29What it says is: the return you should get—like an FD return—you should get that anyway.
1:02:36That’s your right.
1:02:38If you take risk, you should get a little more.
1:02:41Say you should get 10.
1:02:43If you took half the risk of the Nifty—half the risk of the Nifty—then you could’ve put half in the Nifty and half in an FD.
1:02:50That portfolio would’ve generated some return.
1:02:53Suppose that portfolio’s return was 9%, but you got 12%, then your Jensen’s Alpha is 3.
1:03:02So coming back to how I allocate Anand Rathi clients’ money and my own money:
1:03:07exactly the way I tell my top clients
1:03:10first, you should aim for 15 to 15.5% return, 0.6 beta, and a Jensen’s Alpha of 5 to 6%.
1:03:17Indian HNIs are running most of their portfolios at a negative Jensen’s Alpha—because nobody measures it.
1:03:22And nobody finds out until the very last day of their life.
1:03:26Now, to achieve this, you need to put 65% in mutual funds, 35% in structured products,
1:03:31and periodically—learning from the U.S. guys—use a small amount of leverage, around 20%.
1:03:40So this is the 65–35 portfolio, and the 20—minus 20 means you don’t keep money in debt.
1:03:45If you need it occasionally, you borrow.
1:03:47Like I was saying, you can borrow 20%.
1:03:50And does this strategy stay the same throughout, or do you keep changing it?
1:03:55Since I take only 0.6 risk, the need to change is lower.
1:03:59If I were running a double-risk portfolio—two beta,
1:04:02like you can run in treasuries, I do run it too on a small portfolio,
1:04:07then over there you have to change your strategy very actively.
1:04:10Look, if you’re taking such low risk—lower than 99% of HNIs—then I’m very satisfied at this level of risk.
1:04:15People say, increase risk.
1:04:17I say, increasing risk doesn’t increase returns.
1:04:20William Sharpe said that, and for stating such a basic thing he got a Nobel Prize.
1:04:25So coming back—do I change a lot?
1:04:29I would change if necessary.
1:04:31Since I’m operating a 0.6 beta portfolio, it has more stability and doesn’t require that much dynamism.
1:04:39If I’m running a two-beta portfolio which I do for a treasury,
1:04:43then when conditions change, you have to change your strategy.
1:04:46The more risk you take, the more dynamism you need.
1:04:50Do you need dynamism in an FD?
1:04:52No.
1:04:52That’s the point I’m making: the more risk you take, the more dynamism.
1:04:56So since I operate—and I’m a devotee of William Sharpe—I operate at a 0.6 beta,
1:05:01because he says that when you drink a third glass,
1:05:04you enjoy the water less than the first glass; in the second it’s less, and in the third it’s even less.
1:05:09If you run a marathon and come back, the pleasure you get from the first glass—you won’t get that in the fourth glass.
1:05:14That’s called the law of diminishing marginal utility.
1:05:19As you keep increasing risk, returns won’t increase.
1:05:21A time will come when increasing risk will actually reduce returns.
1:05:25William Sharpe said this:
1:05:26the law of diminishing marginal utility isn’t just for water or anything—it applies to investing too.
1:05:34That’s why I operate at 0.6, so I don’t need to be that dynamic.
1:05:36Listen to your mom and dad about everything except investments
1:05:40unless Anand Rathi is an HNI client, you shouldn’t take advice from him.
1:05:44Why?
1:05:44Because they’re wired that way; they were brought up in a survival-of-the-fittest mindset.
1:05:49My dad said, “None of my friends have ever invested.
1:05:52You’re leaving your teaching job—I'll disown you.”
1:05:56I said, “It’s not like there’s any inheritance anyway, so go ahead and disown me.”
1:05:59So the point I’m trying to make is: my dad was totally against investing.
1:06:04He used to say, “Man, you don’t need anything beyond real estate and gold.
1:06:09But that’s actually not true.
1:06:11If you calculate the compounded return on the house I live in,
1:06:14where I’ve put in tens of crores—has anyone ever actually calculated the compounded return of real estate?
1:06:20Mr. Singh probably hasn’t done it.
1:06:22Go home today and ask him, “Dad, how much did you buy the house for, and what’s it worth today?”
1:06:27Put it in an Excel sheet and calculate the compounded return.
1:06:30If it comes to 15–16%, I’ll accept it—assuming you’ve lived there for 10–15 years.
1:06:34In India, pick any apartment in Mumbai—over 20 years it hasn’t delivered that.
1:06:38So the point I’m trying to make is: listen to everything your dad and mom say—and I genuinely mean it, okay.
1:06:45There are so many things my parents used to say that made no sense back then,
1:06:49and today I think, oh my God, it made so much sense.
1:06:52When you get advice from a parent in the moment, it can feel like the stupidest thing ever.
1:06:58You know, “ghar ki murgi daal barabar”—you don’t value what’s right at home.
1:07:00I’m only grateful to God that I didn’t listen to him about my career.
1:07:04Even today, every single day, I realize my dad was so right, man—he was so right.
1:07:09So that’s the advice I’m going to give Gen Z.
1:07:13Thank you so much, Feroz, for joining us.
1:07:15The way you shared everything so unfiltered and explained all the nuances
1:07:19I think our viewers and audience will really like it,
1:07:23and a lot of their doubts have been cleared today.
1:07:26So thank you so much for joining us.
1:07:28Yeah, thank you.

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