3 years ago, a family office in Europe hired a trader from a highly reputed bank in India to manage their family wealth after a significant liquidity event from selling the business. The corpus size was around $100 million. The family had a choice to hire a trader or a wealth manager for this role. They decided to hire the trader after hearing from him about lofty outcomes and a lower salary ask. The trader, being…
Bitcoin has corrected by more than 45% from its peak. I have been asked many times about my views on investing in cryptocurrencies. And every time I have re-evaluated, but came to the same conclusion that I do not recommend investing in cryptocurrencies. And my reason is very simple – I do not know anyone who knows how to value cryptos. If you cannot value any asset class, you cannot understand the risk involved, and…
When the world is flooded with cheap money, many believe that asset classes such as equities, Gold, and real estate are expensive, but very few realize that debt is also very expensive and thus highly risky. Let me explain with a simple example. In a normal situation (no excesses on either side), a 10-year bond is available in the market with 6% coupon rate and a face value of 100. But when there is excess…
I am getting 16% returns on my portfolio.One of my friends said that. What is wrong with this simple statement?This statement is fundamentally wrong in many aspects.One, you got 16% returns till now. You are not guaranteed to receive 16% returns continuously. This statement gives the impression of assurance that similar returns can be expected in the future, which is far from the truth.In many cases, this 16% also hides some key facts. One being that…
What could be wrong in a portfolio managed by well-known wealth management companies? I met a client last month. Two top wealth management companies managed his portfolio. He was happy with the returns. He showed me the portfolio. And here it all came crashing.Below is what was wrong with the portfolio and the possible reasons:1. Asset Allocation: 75% in equity and 25% in Debt. No allocation to Gold. An advisor who understands macroeconomics would have…
Gold has rallied 50% in the last year and at a CAGR of 29% in the last 3 years.Many clients asked if it is still a good time to buy Gold. And my answer is a strong Yes.In my opinion, Gold is a mega investment theme for the next decade.Before I share my reasons for the same, I’d like to tell a little backstory.We started allocating to Gold funds in all our clients’ portfolios from…
One of my friends recently invested 100% in equity, targeting annualized returns of 18-20% over 10 years. Is it possible?I told him straightaway that the possibility of achieving these returns is extremely low when you are investing in an expensive market. Past data indicate that any investment made in expensive markets (PE > 22x) has generated low single-digit returns at best over the next 10 years. Even if you invest in small/mid-caps, the probability falls further…
I met a promoter of an established large wealth management company recently and asked him about his thoughts on the fee-based advisory model. He was frank enough to tell me that he sees a sharp dip in his company’s revenue if they move to an advisory model. For managing a single portfolio size of INR 100 Cr, he gets commission in the range of INR 1-1.5 Cr per annum without the client exactly knowing about it. Whereas,…