‘Return on my portfolio is in excess of 17%’

Not being swayed by market gyrations has helped Sumeet Vaid, CEO, Ffreedom Financial Planners.

His disciplined, buy-and-hold approach has resulted in handsome gains in his portfolio. His suggestion is to first draw up concrete goals before deciding on savings. More on his investment philosophies:

What was your first investment?

I’ve been a career mutual fund guy; so, my first investment was in a diversified mutual fund back in 2000.

Incidentally, that’s also been my best investment. Again in 2000, I had invested in a sectoral equity fund – technology – and that has been my worst investment so far.

What are the lessons you have learnt from your investment experience?

I’ve always propagated that an investment from a long-term perspective really does well. I’m also a strong follower of SIPs in mutual funds, from the early 2000s. The annual return on my portfolio is in excess of 17 per cent, simply because I stayed invested in it every year. It has helped me reach my goals.

What do you look for while deciding on investments?

It’s all about linking investments to goals. So, I go about identifying those goals – my children’s education, retirement. This, in turn, tells me what and where to invest. Based on what time I have, my allocation gets fixed. So, if I have more than five years in mind, about 75 to 80 per cent is in equity. I just follow a simple strategy of buy and hold. If it’s less than three years, there is no equity investment at all.

International investments are the flavour of the season now. Do you invest globally?

No, I don’t believe in them. For one thing, I have no clue on the rupee movement. For another, I don’t understand international markets at all, so it’s too risky.

How about gold?

I don’t buy gold separately as part of my investment. But most of the time, my family – my wife or my mother – anyway buy jewellery. So, that asset allocation automatically happens.

What are some of the common mistakes investors make?

The biggest trouble is articulation of goals. There is a difference between savers and investors. Indians are great at saving money, but they are not good investors. When you set defined goals for a defined time period with defined returns, you become an investor. But Indian investors don’t articulate goals. So do that, decide on asset allocation. Once done, keep reviewing, keep rebalancing, and maintain discipline. There’s no way you will not make money.

How should one evaluate a financial planner?

There are two pillars of life – health and wealth. So, just as for health you should have a doctor, for wealth you need a financial planner.

First of all, you should have a reference. Ask your near and dear ones. Second, go meet the planner and check the credentials.

Does he or she have certifications like a CFP, chartered wealth manager and so on? How long has she been in the business?

Fourth, when you meet, ask for more references. If the planner is not open to providing references, then drop that planner.

He or she should be confident enough to allow old clients to meet new ones.

What role should insurance play?

Saying “invest in insurance” is wrong. You buy insurance. Use it only for protection and nothing else. The products you should have are an adequate term plan, health plan, critical illness plan, and an asset protection plan.

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