There has been a raging debate about active versus passive funds for many years.John Bogle, the father of index investing, has popularized the concept of passive funds. His idea was simple – most active funds underperform the index in the USA after costs (including taxes) and therefore one should invest in low-cost funds that mimic holdings of an index.These passive funds are also traded on stock exchanges and are known as exchange-traded funds (ETFs).The concept has…
To create wealth from investments, you need to let your investments compound.To let compounding work and create exponential gains, you must stay in the game for a long period of time.To stay in the game for long, you must not panic and withdraw during market downturns.To ensure you do not panic during market crashes, you need to set the right expectations for your investments.To set the right expectations, you must determine your risk appetite first.To determine your…
How to differentiate if you are getting genuine investment advice or being sold products that benefit the advisor more than you?Many of our clients come to us after dealing with traditional wealth management setups. At the time of taking over their portfolios under our advisory, we do a portfolio audit to understand their current portfolio structure and what changes need to be done to align the investments with their risk profile and market conditions. What we…
In the recent market correction, I observed many finfluencers and mutual fund distributors cajoling their over-concerned audience & customers by giving them reasons regarding why the markets will bounce back soon and why they should think of the long term and not worry too much.And this is when the markets didn’t even correct much – just around 10%. In the past, markets have corrected by more than 50%, a usual occurrence every decade. I am…
Everyone loves a rising market. The longer, the better—what everyone wishes for. This creates the wealth effect, which leads to higher consumption and spending and thus contributes to GDP growth, which feeds into higher stock prices. Under all the glitz and glory, something is becoming unfavorable.There is a bad in every good thing and a good in every bad thing. Like the circle of life, good times are followed by bad times, and bad times…
This is probably one of the best podcasts out there on personal finance & investment topics.This beautifully explains why debt/loans can cause a lethal blow to your finances. A lot of wealth & lives have been destroyed because overconfidence led people to take on more loans than they should have.As loans increase, you narrow the range of outcomes you can endure in life.If you are someone who believes that taking a loan cannot be a…
If you seek excitement from your investment portfolio, you are doing it wrong.One of my clients recently asked “Why don’t we invest in hot themes like AI, defense, and other growth stocks? Why only value-focused portfolios?”I asked, “Why do you think we should invest in these hot themes?” He said “I feel we are missing out”Classic – Fear of missing out :)I told him that his investment portfolio is already generating excellent returns close to…
The Secret to Long-Term Investment Success: Focusing on Risk, Not Just ReturnsWhen building an investment portfolio, many focus solely on maximizing returns. But here’s the truth: risk is more important than returns in achieving long-term success.Why? Because risk is something you can control, while returns are unpredictable. Unfortunately, many investors tend to chase high returns in a bull market and panic about risk in a bear market. But seasoned investors, like Warren Buffett, take the opposite approach:“Be…