My Interview with Wealthy

It’s a little overwhelming to be asked questions. 😉 I’d rather be the one asking the questions.

That said, Wealthy.in interviewed me sometime back about investing, personal finance and what I think about money, in case you are interested.

So lets get straight to the interview…

 

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Wealthy – Hi Dev, How’s life??

I am doing great. Lately, I have been focusing a lot on Stable Investor and therefore, that is what I can call the center of my life right now.

 Update: From a lot, I have now moved on to focusing only on Stable Investor. 🙂

 

Wealthy – What does money mean to you?

At the cost of sounding too text-bookish, I will say that for me, money is simply a means to an end and not an end in itself. Having the maximum possible amount in my bank account at the end of my life is not what I aim for.

Now let me explain it further…

When we work in a company, we simply rent out our ‘time’ to our employers. So by that logic, having enough money should allow one to have the freedom to spend his time in ways that he wants, i.e. having enough money is a means to getting back the ownership of our own ‘time’.

Now I value my time, family and friends much more than money. And having money beyond a point will not let me spend more time with these people or pursue my passion of helping people with their finances (through Stable Investor).

Everyday, I see rich people who are almost always worried about money and complain of not having ‘time’.

That is not what being rich means to me. That is not what having lots of money should result in.

But having said that, it does indeed help to have a decently reasonable amount of money – an amount that will take care of basic needs, help improve quality of life and also take care of few aspirational needs like travelling abroad, etc.; and lets not forget that having money (and more importantly, properly managing it) helps secure our futures too.

Most people work for money. But with proper planning and common-sense, they can turn the tables on money and make it work for them! So basically, money is a game that people need to play. But unfortunately, it’s the game that ends up playing the people!

 

Wealthy – Can you tell us about your growing up?

I was born in a family of advocates and doctors. But I chose a different path and went on to become an engineer. As an engineer, I worked in the oil sector for few years. This was followed by an MBA and a few years stint in the banking sector.

Many readers of my website feel that it was my MBA that got me interested into the field of investing.

But that’s not correct.

There were infact two things that got me interested into investing.

My father used to occasionally bring home business newspapers. He had his money invested in shares of few MNC companies and would check their prices every few months. He told me that by buying shares, one could actually buy pieces (shares) of businesses.

This got me excited. Why? Because it seemed like the best way to buy part-ownerships in companies without having to setup any infrastructure or factories!!

Second thing that got me further interested into investing was the constant flow of dividend cheques arriving in our mailboxes. I just loved the concept of being paid to hold pieces of paper (physical shares). Getting a regular flow of passive income, without going to work for anybody else – seemed quite marvellous to me.

Related Reading: How to Live off Dividend Income in India?

 

Wealthy – What was the first thing you saved for?

I have always been a avid reader. So when I was a kid, I used to save my pocket money for buying comics and yearbooks.

 

Wealthy – You travel to a new place at least once every 6 months. How do you manage that?

Travel is something that I can’t compromise with. Luckily, my wife shares my love for travelling.

To ensure that we always have money available for our trips, we keep a dedicated travel fund. We ensure that atleast 5% of our monthly income always goes into this fund, irrespective of whether we need to travel in near future or not. What this does is that when we have the time and opportunity to travel, we are not held back by fund constraints.

Also if the trip doesn’t cost much, we don’t withdraw from the fund. Instead, we manage the trip through regular income and let the travel fund grow for future travels.

Till now it has worked for me and we have been able to travel to a new place every 6 months.

 

Wealthy – Do your regret any financial decision?

I am only 31 but have been investing for more than 12 years. So I have made my fair share of mistakes in markets. One of my biggest regrets is that I should have invested more in 2008-2009 crisis. But ofcourse, I now have the benefit of hindsight when I say so.

To be honest, it is really tough to be greedy when others are fearful. Though its now much less difficult for me after all these years. But still, only time will tell how I react (buy) in the next market crisis. So keeping my fingers crossed and praying for markets to go down soon.

Another regret is that I should have realised the power of compounding when I started out. I ofcourse knew what it was in theory. But it was only when I was in my mid-20s that I realised the real, life-altering power of this concept. So I lost out on few early years of compounding.

 

Wealthy – Have you had to make any sacrifices in life ever to adhere to a strict investing habit?

Now that is an interesting question. When I save and invest (for future), I obviously have less to spend today.

But I won’t call it as sacrificing. That is because I don’t sacrifice anything that I value. I like spending time with my family. I like travelling. And I like indulging in few luxuries every now and then. Investing has not stopped me from any of it.

Also, I can still go out and buy something expensive (say car) right away. But that is not what I want. I value financial independence more than spending truckloads of money on short-term pleasures. So adhering to my investing habit is not actually a sacrifice for me

And this reminds me of a quote by Buffett’s famous partner Charlie Munger –

Like Warren, I had considerable passion to get rich, not because I wanted Ferraris. I wanted independence. I desperately wanted it.

 

Wealthy – How do you take care of ‘risks’ while investing?

As an investor, I know that I can never eliminate the risk of being wrong. At most what I can do is to diversify enough, so that my one wrong investment decision does not wipe out my entire net-worth.

When it comes to direct equity investing, I prefer accumulating stocks on a regular basis rather than going for big-bang lump-sum investments. In this way, I get time to judge my stock picks. In case, I am not convinced with the business, I can exit the stock. In case I am convinced, I can continue accumulating them till the stock is reasonably valued.

And as Shelby Davis puts it,

We feel a portfolio is like a flower garden. As portfolio managers, our job is to plant a few seeds every  year and weed out a few mature plants. It is not to uproot the garden. We have a portfolio mix where we hope that something will be in bloom all the time, but we do not expect everything to flower at once.

Now direct equity investing is fine when one has the time and intent to make the necessary efforts towards analysing businesses (stocks).

But when it comes to saving for important life goals, I strongly believe in doing goal-based investing through the Mutual Fund route. It helps reduce the risk as well as achieve adequate diversification across various assets classes.

Its not that hard to do either.

Identify the goal you want to save for, estimate the time you have to save for that goal, make a conservative return assumption and an above-average inflation assumption. Try to accurately calculate the amount that has to be invested on a monthly basis.

After that?

Start investing and stick to the plan.

But mind you, sticking to the plan is the hardest part.

To keep investing for decades (assuming one is in 20s-30s) requires discipline and patience. But there is no alternative to that. This is what needs to be done and hence, should be done.

Another risk that needs to be managed is that of liquidity. And I am not talking about a stock or market’s liquidity. I am talking about personal liquidity. If one has enough cash/income to take care of regular expenses, then one can wait years for long-term bets to pay-off.

But if that is not the case, then any unplanned emergency money requirement, can force you to liquidate your stocks/MFs (no matter how correct your buying decision was). In such times, you will be forced to sell even if prices are not acceptable to your (i.e. lower than what you want them to be).

So one needs to make sure that there is enough money that can be accessed quickly in times of need.

 

Wealthy – Dev, what’s your secret to successful investing?

I think it’s still too early to say that I am successful investor. I still have many decades left in front of me.

But I have been investing for more than a decade and every few days, market has something new to teach. So being in markets is about being a life-long learner. Having said that, I would also say that common-sense based investing i.e. sticking with good companies & buying their shares in times of temporary troubles, is what has worked for me.

I follow a core-satellite approach for my direct-stock portfolio. For the core, I try to stick with shares of predictable, well-run businesses. As far as the satellite part is concerned, I buy companies having higher growth potential & trustworthy managements. It is worth saying that I am not trying to find the next multibagger here. All I am trying to do is to simply buy shares in companies that have decent growth potential, lower downside risks, and a management that has proven its worth in past.

It might sound very simple, but it is what actually works when it comes to real long-term investing.

If I can’t find anything attractive enough to buy, I continue holding cash (earning near-about risk-free rate of returns) in anticipation of finding something. It is better any day, to hold cash than to buy an overvalued stock and see it go down. Isn’t it?

Being active in markets is considered glamorous by most. But it’s only glamorous and not profitable. History tells that most of the money in market is made by waiting and not by actively trading. So that is what my own method of investing is based on.

Another important part of investing is not paying too much for the investments. For example, in early 2009, buying any large-cap stock was the ‘most-obvious’ way of making money. But this required one to have the knowledge about overall market valuations. So, if index was trading close to P/E multiples of 12-13 and a large cap stock was available close to its multi year lows, and there was enough evidence that company was not going to go bankrupt in years to come, then it made perfect sense to buy that stock. It is same as waiting to buy clothes, shoes, etc. in annual sales of retailers, where discounts are close to 50%. If a person is ready to buy clothes at a discount, why shouldn’t one buy beautiful assets like stocks in a discount sale??

Having said that, I also make sure that my mutual fund SIPs continue irrespective of market conditions. Even if markets are falling (like they are currently), it only helps my case as I get more units for the same amount I am investing. Since my goals are still years/decades away, a falling market is a blessing in disguise for me. I welcome and embrace it.

 

Wealthy – What advice do you want to give a 20 something person who just get his/her first job?

First is read Stable Investor. 🙂

But jokes apart, the real advice is that if you are 20-something and you think that you are too young to invest, then don’t think so.

You need to become familiar with the real-life applicability of the concept of compounding and get convinced that ‘Compounding Works’. It has worked for our grandfathers, fathers and it will work for us too. Don’t spend years wondering whether compounding works or not. It just does work.

Spend wisely, save some, invest as much as you comfortably can. Focus on this process rather than the outcomes (like doubling your money overnight, etc.)

If you want to invest in stocks directly, be ready to put in the time and effort to find good stocks. It’s not easy. And to be honest, it should not be easy. If it’s easy, then everybody will become rich. Isn’t it?

Successful investing is simple, but not easy.

But if you don’t want to spend your time doing stock research, go for mutual funds. This financial product has done reasonably good in past. Under all probabilities, it will do a good-enough job in future too.

I would also advice that one should not get too much into thinking about money from the very start of life. Money does not think about you as much as you think about it. So don’t miss out spending time on the real joys of life in your race to earn more money. There is no point being the richest person in the graveyard. Isn’t it?

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Thanks to the nice guys at Wealthy for finding me worth interviewing. 🙂 They are working really hard to simplify investing for everyone.

And for those who didn’t catch another one the first time around, I thought I’d share the link to an interview that was done with SafalNiveshak.