CFA charter holder, C.A and B Com graduate — one would think people of such a profile are active stock pickers. It may sound surprising but it’s been close to two decades that Anil Ghelani has not picked a stock for his personal portfolio despite being eminently qualified. Instead, he has put money into mutual funds way back from 2003, the time when he moved into the MF industry.

In an interview with BL Portfolio, Anil, as Head of Passive Investments & Products at DSP Mutual Fund, shares his lessons from investing, reveals the secret ingredients of his personal portfolio, investing framework for entry and exits, and mantra to maintain focus despite information overload. Excerpts:

Q

What are your top 3 investment lessons ever since starting professional life in 1998 ? 

The most important learning from my personal investment journey has been very simple — investing should not be about “Beating the Market” but rather about achieving your goals with a reasonable degree of certainty. Many of us often get preoccupied with the wrong priorities — like struggling to buy a hidden multibagger stock, trying to time the market, increasing returns at all costs or finding the next star fund manager. More often than not, our efforts on each of these three areas are not sustainable in the long term. It will not help to remain anxious about your investment every day and try to make trades or market timing. You can learn from a pilot who is an expert in flying planes. After the initial take-off, the plane is put on “auto-pilot” mode and only oversight and monitoring is done till the landing destination is in sight. So, I would suggest you align your investment strategy to your life’s goals: safety for your family, better life for your children or ageing parents, starting or expanding a business.

Q

When did you first invest in mutual funds? What are the other financial instruments you hold ? 

My very first investment in mutual funds was much after I started earning my own money and investing. A few years after working as an auditor, I decided to make a career pivot and join the asset management industry. After this shift, I started investing in mutual funds. For my current investments, I try to keep it simple — asset allocation and SIPs — no market timing. I have an asset allocation planned for long-term wealth creation, across: Equities (via small-cap mutual funds, large-cap index funds & NPS), Corporate Bonds (via mutual funds & NPS), Real Estate (via a physical house bought with leverage) and Liquid Money (via bank account & arbitrage funds).

Q

A typical investor is often confused while investing and exiting investments. What is the framework that governs your investment entry and exits? 

While investing, I believe you should define your life goals and then make your financial planning to meet those goals. Once that is done, I continue to stick to my systematic allocation and do not take market timing calls as I don’t want to trade. Earlier, I had a medium-term goal to accumulate wealth to buy a house for personal use. The exit decision for it was taken when the timeline of buying the house came up — I did not look at valuation levels but simply exited. This was sometime during 2010, so in hindsight, had I remained invested in equities, I would be able to buy a much bigger house today in 2021 from the same invested capital!! Now my next long-term goal is for my zero salary period or my retirement. So I am sticking to my asset allocation and systematic investing across the four areas I discussed earlier. Even during these past few weeks of increased market volatility, I have not made any changes by exiting from equity or the other way round by moving from cash or bonds into equity.

Q

You have been part of the risk management team at DSP MF, what are the key risk insights that an individual should possess for a smooth investing experience? 

While leading the risk management team we used to cover a very wide area, including investment risk, credit risk, operational risk, third party risk, model risk and reputation risk. For investment risk, I used to focus on portfolio analysis and engagement with the fund managers to ensure that risk positioning in the portfolio was aligned to the fund’s mandate and each of the relevant exposure was deliberate, diversified and scaled. Connecting this to personal investing, we should ensure our investments are made as per a broadly defined asset allocation with a time horizon — in other words, a “deliberate” selection is made for the investment. Markets will fluctuate — this is a fact — hence you need to have good diversification. So as a next step, we should make a “diversified” allocation and invest across liquid and debt funds, active equity funds, ETFs, commodities, global funds, etc. The last part is to ensure each of these is suitably “scaled” so if the time horizon is short, then scale down equity and have more of debt. If you are able to identify tangible goals with broad timelines, knowing very well that there will be turbulence along the way, you should aim to have a deliberate, diversified and suitably scaled investment plan to reach there with a smooth experience.

Q

We live in an age of information overload. How do you switch off from this tsunami of information and stay focused? 

We are living in a world where certain words of a central banker of one country can cause a tsunami, or a tantrum, in capital markets of another country that is seven seas away on a different continent! So in my view, we should never switch off from information flowing across multiple channels, including social media, mainstream news, analyst research, etc. However, it is important that we do not let it become an “overload”, and instead we should harness it in a suitable manner to make it useful. One approach that works well for me is that I have bucketed time periods during the day. Depending on which industry you work in, you can try your own rules by making some specific slot during the day for scanning through social media feeds of a curated list of handles which will give you a good update on local and global happenings, one time slot for engaging with industry colleagues for market intelligence, some time for reading a new book or new research report or industry analysis. Like a good asset allocation in your portfolio, a good time allocation is one of the secrets to suitably harness information and use it to your advantage.

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