Is investing in Gold a Good Option for Akshaya Tritiya?

Akshaya Tritiya is almost here with the festival falling on 18th April this year. This festival is considered, a very auspicious one. The name itself suggests that it is the third lunar day (Tritiya) of the Hindu calendar, indicating unending prosperity (Akshaya). Tradition has it that this very auspicious day is for auspicious beginnings like marriages, housewarmings, and purchase of property or gold. In fact, the purchase of gold is what Akshaya Tritiya has become synonymous with over the last few years thanks to smart marketing by gold merchants and jewellery brands.

Indians, especially women, are traditionally attracted to gold and invest in it. It is actually not necessary to buy gold only on Akshaya Tritiya. You could choose to buy anything new as a good symbolic start. An interesting aspect though, is that while women seem to have the knack of putting money away when it comes to investment, they mostly, only think of picking up gold ornaments. This probably could be a mindset issue that has been handed down across generations.

Gold As An Investment
While investment in gold is seen as a good bet by many, it is not so. Unless the gold is purchased for occasions like marriage, it is an unproductive asset. The gold is for consumption and not investment. Yes, there is the possibility that in times of crisis, you could turn to your gold assets. But, this is true with Mutual Funds (MF) too, which many people do not know. The money invested in gold is unproductive as it does not really help in any economic growth, unlike equity shares or Mutual Fundss. The purpose of gold in the Indian context is as a safety measure, a social necessity and for personal use.

If you invest a certain amount in gold, the gold remains the same, even after many years. Yes, the gold value may appreciate quite a bit, but it does not multiply like money can; especially if you make some informed, wise investments. A real investment should be one that generates wealth and aids in economic activity and keeps creating more wealth. So, in effect, if people are willing to give it serious thought, there indeed are better options to invest in, than gold. No doubt, there are social occasions when you need to purchase gold, and those are exempted.

What Are Your Options
So, this Akshaya Tritiya, what are the options available to make an auspicious start that generates wealth for a few years to come? Look at investments in MFs, for one. It is quite possible to build a carefully chosen investment portfolio with the help of a trusted and reliable investment advisor. When people who have an in-depth understanding of the whole ecosystem use their insight to help you figure out which MFs to invest in, you can succeed in generating wealth.

It is not always necessary to start big in Mutual Fundss, you could always choose to go with small amounts per month, known as systematic investment plans (SIP). Across a period, you may find that you are getting good returns and there is no fear of lock-in. A few may even provide good short-term returns. Most mutual funds can also be liquidated quickly.

So, perhaps, this Akshaya Tritiya is the right time to ring in the change and think beyond gold!

Think Mutual Funds!

SENSEX risk and reward.


If someone is rich (filthy rich), chances are that all of their riches came from Equity Investing. Either they own one or many businesses or have invested in some companies and have stayed on with it. Generally people shy away from Equity investing due to the fear of loss to their capital. This fear is due to either their own experience or through other people’s sharing of losing experience in the markets.

It is true that a lot of retail investors lose money is stocks; the reason is not the markets. It is because of the approach. Most of the times, it is because of the fear of losing, even before approaching the asset, that attracts the losses. Many a times a person does not know the reason for investing in a stock. Just because someone close to them have told them about the stock, they go ahead and park their hard earned money and when the stock goes down, which invariably happens, the reasoning will be, “it has to happen, when I have invested, how can it go up. Always it happens.”

Holding gets exited after suffering a lot of pain due to losses. Then, they shy away from the markets when it goes up again. The same fear makes them wait for more and more confirmation. Again when media begins to talk and they begin to hear from their friends and near ones about their big gains through some stocks. They venture again, when there is news about big gains already made, left over gains are lesser and signs of weakness have already set it. Which, most of the times is not known to the fearing investor. After getting in the markets begin to slide, again the story repeats.

The other reason for losing is “GREED”, just because there is a great opportunity to make money in the markets, people want to take high risk & get all that is possible from it. One transaction would have given a good profit, while they would have made only small money. The experience of profit will make them take the decision to invest all the money they have and sometimes even borrowed money. The motive is to make big or very big gains in few transactions. After investing, even a small negative move will shake their belief, not because the stock they invested lost heavily, it is because their exposure is so heavy. Once the mind balance gets lost, everything that follows will be against their wishes.

In reality, stock markets are, one more asset class like Gold, FD, Real estate etc., it has the advantage of giving the highest returns, while not always in short periods. Stay invested for a longer period, the returns will for sure be very high. Due to volatility in the price moves there is risk in this asset, for that matter any asset has a risk quotient in it. Only that it is a little more in Stocks and that is the reason the returns are also high.

Some data on what is the risk in the markets and how it can be taken at our advantage:

In shorter durations the risk of loss can be as high as 50%, while at the same time if the period of being invested increases, the risk goes in the opposite side, it gets reduced.

The chart below shows that if we stayed invested for 7 years, the chances of our capital getting negative is zero. That is, if a person invests 10 lakhs in the SENSEX stocks and stays invested for 7 years, the chances of his 10 lakhs getting negative is zero.

7th Year Zero risk

Similarly, staying invested for 10 years and above gives an average return of 12% per annum. There is an 80% chance of achieving this.

10 year rolling

SENSEX goes through changes once in 6 months, most of the times 2 of the index stocks get replaced with a new stock. If such a low turnaround index can give 12% without any effort, a little extra effort to churn and manage the portfolio, the chances of better returns is higher. Another advantage with Equity investing is that, long term capital gains are not taxed.

Equity is the only asset which has the highest return possibility along with liquidity, take advantage of this asset class. Any individuals investment portfolio should contain some percentage of Equity exposure in it, so that the overall returns can beat inflation.

Stock markets ready for its next euphoric rally


Expectations….expectations. Expectations, towards the end of a Government term which did not have the confidence to decide on any plans that will allow the economy to grow. Expectation on the team that was coming to power, which was aggressive. Expectation on Narendra Modi, who was presumed to be a strong decision maker, as the next Prime Minister. Expectation that, the new government will clear all the infra projects awaiting clearance, which will drive the economy into a robust growth phase.  Indian economy staged a pretty strong recovery and went on to give a robust growth.

Favourable RBI policies, supported by Raghuram Rajan’s strong commitment to revive the Indian economy with his bold decisions on the interest front along with the cleaning up the banking system. His decision to impose curbs on Gold consumption, bring transparency into the Real Estate markets.

Almost all the external factors supported the expected growth. Crude Oil prices crashed, never to see the high’s that it went through. Favourable monsoon, good automobile sales followed by growth in profits of companies in competence. 2014 was a wonderful year for investors as the SENSEX surged more than 40%.

This expectation fizzled out earlier than it was to, things changed. As markets grew leaps and bounds, businesses did not see growth in sales. People began to complain that, “only the stock markets are moving up, money flow is not seen yet. No visible developments in the economy.”  Soon, it was followed by the historical crash of the Chinese markets. Volkswagen case and normal to flat growth from the businesses, markets turned down, went into a tailspin throughout 2015.

After the March quarter results, there are glimpses of change visible. One of the most important factors in the results announced so far is that, sales growth has been still at a slower pace, while profits are showing good growth numbers. Such number growth is possible only if operations are controlled. On one side it is a negative, as controlling operational expenses cannot give continuous growth, it can become counterproductive.

While, on the other side, there are green shoots visible, if the companies who have managed to bring down their expenses, continue to maintain the same tightness on their expenditure and along with that when the sales numbers improve, the profit margins are going to be phenomenal. And that would mean a euphoric rally in stock prices.

As many analysts say on the media, “we are in a cusp of a great bull market” the future looks very attractive for India. It is time to give more exposure to Equity investments. For those who have missed the 2014 rally, now there is an even bigger price move waiting to happen. Those who have maintained a wait and watch on their stock investments, now it is the right time to begin investing. One can even think of adding to their existing investments. Those of you who had stopped their SIP’s or had moved to the debt markets for safety of capital can now think of venturing into the Equities segment to have very good gains.

If things pan out well, we might witness a rally in stock prices, which we had not seen so far in the Indian Stock market history. The next 5 years are going to be a boon to all those investors who venture into the markets.

Take advantage of the markets next move; at the early stage itself, waiting for more confirmation will only result in lost opportunities.

Portfolio performance April 2016


When a person invests his earnings be it in any asset class, either Real Estate, Fixed Deposits, Gold, Mutual Funds or Stocks, the one single minded approach here would be to beat the benchmark or how is my investment doing against its peers?

Whatever be the condition, all of us want to be the best, the same holds good with investments too. We should be making the best returns when compared to others. If we find that our investments are giving double the returns against other assets, there is full of joy. If we find that we are marginally above the benchmark, say the SENSEX is 10% and we are 11%, still we are happy, because we are outperforming.

Suppose we find that we are negative to the benchmark, say the SENSEX is 10% and we are 9%. There is worry and it is good too, because, this is the condition where thinking process comes to play. Should I hold on or shift my investments? In most of the situations where there is below average growth in investments, people have missed to observe and take action of this condition, where, the investment is under-performing and they have not taken action.

To help our clients know how their investments are performing against the SENSEX or NIFTY, we have begun an initiative to report the performance of our portfolio against that of NIFTY every fortnight, with details about what is right and wrong. It will be of help to our investors to know if the money is safe and give confidence about the future.

From the time that we have been tracking the performance of our portfolio since December 2012, our portfolio has managed to have 61% profits against the NIFTY returns of 33%. We had an advantage as our portfolio consisted of strong growth stocks. As we come to the shorter periods, in the last 1 year, our portfolio was positive with a near 1% profit where the SENSEX had lost 5.63%.

Whereas on the last 6 months and 3 months period, we are trailing the benchmark, the reason behind the underperformance is that, most of the stocks in our portfolio were exited following the market weakness in December and January 2016. After the sell out that our markets had, which was overdone following the Global slowdown, our exposure in the markets were down to less than 15%. Cash was moved to debt funds to protect the account from any further weakness.

On a normal process, stocks move in and out based on their fundamental strength, now that our portfolio has exited almost all its holdings, it will take a couple of quarters to load stocks to it, from the sectors that show renewed strength.

Till the September results are out, markets are likely to be range bound while adding a couple of stronger stocks, that show strength on their earnings.