A while back when I wrote don’t buy a house and invest your EMI in markets, I concluded that only 1 person in 50 would actually do it

I was surprised to find through comments that Nishanth is one of the those guys, I requested Nishanth to share his experience , This post is view from Nishanth for all of us to believe it’s possible to get your goals through equity investing


Over to Nishanth [My tit-bits in Red]

On your investment philosophy, key influences & investing Journey

My investing journey, started at the age of 23[early start], when I started my IT career in 2004. Right from the very first salary I received, I explored various investing options and stumbled upon equity mutual funds. Through a series of articles in Value Research and other websites, I understood the basics of mutual funds and decided to invest in them. I picked 3 of the best funds out then – Reliance Vision, Franklin Indian Prima, and HDFC Equity. I didn’t have the faintest idea regarding asset allocation or diversification at that time; however I had read about the power of compounding. [Keep this with you]

I opened a demat account and decided to foray into direct equity investing. I started investing in stocks based on the recommendations from various stock brokers and websites. I had only a rudimentary idea of the PE ratio and knew nothing else about these stocks. I didn’t read the annual reports, balance sheets, income statements or cash flow statements.

I had no idea of their sales growth, if the companies were profitable, or if they were paying dividends regularly. “Just buy and monitor prices daily” was my motto. Along the way, I invested in more mutual funds. I learnt about risk adjusted return, the Sharpe ratio, Expense ratio, Portfolio Turnover, and the difference between active and passive funds. Somewhere along the way, the concepts of asset allocation and diversification took root in my brain. In 2007, I had a chance to travel abroad for work and took it. Being abroad meant a much larger investible surplus[Stroke of Serendipity], and I was ready to take some risk for the sake of much bigger returns. Majority of my portfolio was in mutual funds like DSPBR Equity, ICICI Dynamic, HDFC Equity, Sundaram Select Midcap etc. and a small portion in higher risk funds like Magnum Global, ICICI Emerging Star and JM Small and Midcap. The last one I selected just for the brilliance of its fund manager (a big mistake!).

Also I invested in mid and small caps like Sintex Industries, 3i InfoTech, Parekh Aluminex, Srei Infrastructure, Elgi Equipments, Micro Tech, Compact Disc and Lakshmi Energy and Foods, all without doing a basic iota of research on my own.

Then the great market crash of 2008 happened. As things started progressing, it became apparent that this was no minor correction and the world was passing through unprecedented times. Still, I continued investing steadily, as all my learning and reading had instilled in me one fundamental wisdom – “Buy when there is blood on the streets” [Persistence and courage are biggest weapons in bear markets]

As I was still abroad, I invested my entire surplus in mutual funds, both passive and active. I didn’t average down my stocks, but I didn’t sell any and continued to hold on. Overall, I was a heavy equities buyer and I didn’t sell a single share or fund during that period. Due to a rather remarkable coincidence, I had to come back in April 2009 and my last SIP was done in March 2009, which we all know by now, marked the start of the recovery.

Due to some family commitments and personal things to be sorted out, I didn’t take a look at my demat account and mutual funds till April 2010[Sit tight]. But it was amazing to me, the extent of the recovery; especially the gains I had made investing in the darkest hours of 2008. One clue about the pace of my returns would be to say that my Index fund (S&P CNX 500) doubled in value. I took a substantial amount of the profits (only profits, as I left the invested capital alone) and bought a plot of land. Thus was I introduced to the murky and puzzling world of Indian real estate. But that’s another story


On real-estate as asset class for investment

I have explained about my equity investing journey above. On the other hand ,To know about real estate is very easy for every Indian. How can it not be ? One of the great enduring myths of the Indian middle class is that an investment in real estate can never go wrong, and that buying or constructing a house is the best investment that you can make. Real estate is the perennial favourite of the Indian investor. But is buying a house at ANY price a wise investment? People are willing to throw money at any substandard flat, in any remote location, without proper roads, electricity or water supply, but just because ‘real estate is safe’.

They are also willing to take loans at inflated prices from banks and willing to spend 10-15 years of their lives as corporate wage slaves. And they call this an investment!

If one is sure that he/she will live in a city for a period of 5-10 years or intends to settle down in that place – for work and/or retirement – then yes, it stands to reason to buy a house or a flat.

Otherwise, a house property acts as a shackle to the individual, forcing him to curtail his career moves and flexibility

Did family approved of your decision ? To put in equity vis-vis safe bet real estate

As explained in the first question , I was instinctively more comfortable with analyzing equities rather than indulging in murky real estate transactions. The choice for me , was very easy , to have a large chunk of my portfolio in equities and a small portion , for diversification purpose in property. Family approved of my decisions once they started gaining significantly from the equity markets J

Did you lose faith in companies / fund managers on your journey ?

I suffered pretty deep losses in some stocks in the 2008-09 crisis , primarily because I had invested in some bad companies without understanding their business models or valuations. But I never overall lost faith in the Indian equity markets and am having decent compounded returns over a decade now , primarily powered by regular investing [discipline] in mutual funds rather than stock picking prowess

Your moment of glory

My greatest point of pride came when I realised that the mutual fund portfolio I had set up for my father earned more returns for him than the entire amount he had spent on my school and college education ( I must confess I studied in a government engineering college and had very little by way of fees to spend)

On young investors starting out to invest their EMI in equity markets

Young Indians have tremendous amount of social pressure to buy a house as soon as they start earning and tremendous negative outlook towards equity markets. For me the case is as follows : If you need a house to live in, you are reasonably certain about the city you want to live in, and your career, plus you can muster up at least 30-40% of the price as down-payment, please go ahead and buy.

Else, rent and invest the surplus in a well-managed mutual fund on an SIP basis.

And please, don’t create arguments like, “…the rent will be equal to the EMI in any case.”

I have rarely heard of anyone paying rent of Rs 40,000 per month for a rental apartment for reasonable living accommodation (I’m talking about an average Indian middle class here). Especially if you are not sure, please invest your surplus in both equity and debt, based on your asset allocation.

Still, if there exists a need for residential property as an investment, then make sure that your income from other sources (salary, dividends, interest income) exceeds any potential EMI payments that you might need to make

Final words of advise

Learn, learn, and learn. Never take anything you hear or read or see anywhere for granted. Do your own research, and then act with conviction.

Every investor, whether he is 18 or 80, must have some exposure to equities, direct or indirect, according to personal risk tolerance and need for income. That is the best way to beat inflation, and not just through buying land or gold.

Make a start. Invest regularly every month or quarter or week, even if you can spare just Rs 500. The power of systematic investing and compounding, combined with patience and discipline, goes a very, very long way.

Never, ever fear bear markets. They are your friends, for it is in the truly devastating bear markets that you will make your true fortunes. Never sell in a bear market, but go into it heavily and buy. Caveat here is to buy only fundamentally sound stocks, funds or the indices themselves.

Always keep some cash on hand, whether to combat a medical emergency, a car crash or a savage bear market. Cash backed up by courage in a crisis is priceless.


Thank you Nishanth for sharing your journey with us – Hopefully this will increase the 1 out 50 ratio that we talked about in beginning

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