Investment Expert Talks About Why 30-40 Crores Is Required For Decent Retirement

Summary

In this insightful financial discussion, a celebrity fund manager shares his investment philosophy, emphasizing the importance of learning from the market's best practices. He discusses his journey from mechanical engineering to financial success, highlighting key strategies such as investing in undervalued stocks and avoiding the common pitfalls of chasing past winners. The conversation delves into market valuation, the significance of profit growth, and the manager's personal financial independence. He also addresses misconceptions about gold as an investment and provides guidance for young investors aiming for financial freedom by the age of 50.

Takeaways

• 💡 Investing in gold may not always be the best strategy as it can be as volatile as the stock market and historically has not provided returns as high as the Nifty index in rupee terms.
• 📈 The speaker emphasizes the importance of investing in undervalued stocks with a strong history of good governance, clean accounting, and a dominant franchise, especially if their profits grow faster than their share prices.
• 📚 The impact of reading and learning from successful investors like the speaker can be transformative for one's financial journey, as it was for the person who started as a mechanical engineer.
• 📊 The speaker's book 'Coffee Can Investing' has sold around 100,000 copies, indicating its influence and popularity in the field of personal finance.
• 🏆 A significant investment success story is highlighted with GMM Foder, a company that saw a 4X return in 12 months due to increased demand for pharmaceuticals during the pandemic.
• 💰 The concept of a 'fire number' is introduced, which represents the amount of money one needs to achieve financial independence and not work for money anymore.
• 🏠 The speaker's experience with property investment in India is shared, noting that rental yield versus home loan rates can indicate overvaluation in the property market.
• 📉 The interviewee discusses the difficulty of timing the market, suggesting that investing in fundamentally strong companies with consistent profit growth is a safer approach.
• 🌐 The importance of global diversification is underscored, with the speaker allocating a portion of investments to the US market to hedge against domestic economic uncertainties.
• 🔢 The interviewee provides a formula for calculating financial independence, taking into account expected retirement age, life expectancy, and inflation-adjusted living expenses.
• 🚀 For those starting late, the concept of 'coffee can investing' is introduced, which involves investing in companies with strong compounding potential in the final years of one's career.

Q & A

What was the return on investment in gold last year according to the discussion?

The transcript mentions that gold gave upwards of 20% returns last year.

What is the speaker's financial independence number, and what does it signify?

The speaker's financial independence number is close to 50 crores, which signifies the amount of money needed to retire comfortably without having to work for money anymore.

What is the speaker's view on investing in gold as a long-term strategy?

The speaker does not favor investing in gold for the long term, citing that it lacks a real-world use or earnings to anchor its valuation and has shown to be as volatile as the stock market with lower returns.

How did the speaker's investment in GMM Foder perform over time?

The speaker's investment in GMM Foder initially did well, with a 20-30% return, and then quadrupled in value within 12 months due to increased demand for pharmaceuticals and their products.

What is the significance of the 'coffee can' investing approach mentioned in the script?

The 'coffee can' investing approach, as described in the speaker's book, is a long-term, buy-and-hold strategy that emphasizes investing in companies with strong fundamentals and a history of good governance.

What was the speaker's first significant investment in the stock market?

The speaker's first significant investment in the stock market was in 2012, when they invested in Templeton Small and Midcap Fund, which doubled their investment in the next couple of years.

How did the speaker identify an opportunity with Bajaj Finance during the COVID-19 pandemic?

The speaker identified an opportunity with Bajaj Finance when the stock dropped 65% due to negative narratives around the company during the COVID-19 pandemic. They believed in the company's financial backing and client base, leading them to triple their position in the stock, which later tripled in value.

What is the speaker's perspective on the correlation between gold and the Indian stock market?

The speaker believes that contrary to popular belief, gold is positively correlated with the Indian stock market and can be more volatile, making it a less attractive investment option for diversification.

What advice does the speaker give for a disciplined approach to saving and investing?

The speaker advises saving one-third of one's take-home pay consistently over a 30-year career and investing in companies that are expected to compound strongly, emphasizing the importance of starting early and playing the long game.

How did the speaker perform during the market downturn in 2020?

The speaker's portfolio was up 55-56% in the large cap portfolio for the year ending March 2021, recognizing the market panic as an opportunity to invest and load up on stocks.

What is the speaker's strategy for allocating investments between different types of companies and geographies?

The speaker suggests allocating 30-40% of investments outside India (such as in the S&P 500), 35-40% in large cap, 20-30% in small cap, and the remaining in mid cap or as a safe harbor like FDs, emphasizing diversification and the importance of not being overly reliant on one type of investment.