Not Just Money. ‘No speculative trick has worked consistently’

“Once you have done your homework well, you should not get perturbed by market volatility. Instead sit tight and be calm,” says I V Subramaniam, Managing Director and CIO, Quantum Advisors, in an exclusive chat with BusinessLine . Edited excerpts.

When did you start investing?

I started investing in 1991. That was also the time when the Harshad Mehta-led boom started. I was in Hyderabad then; equity research was relatively unknown those days and there was no systematic approach to equity investing.

With my limited understanding, I did my research before investing in stocks. Seeing the phenomenal rally in the early 1990s, I first thought it was a big market boom and soon realised that it was a big scam. That is when I sensed the opportunity for genuine professional fund managers who can think long term.

What was your first investment?

My first investment was in the stock of consumer goods giant Hindustan Unilever. I came across an article in a leading business magazine about its parent company Unilever; that was what inspired me to invest in their Indian subsidiary. That has been one of my best investments so far and I continue to hold the stock.

What is your current asset allocation like?

I have invested about half my surplus in equities, largely through the mutual fund route. A chunk of it is in Quantum’s equity schemes. Besides this, I hold some ESOPs too. About 35 per cent of my surplus is parked in debt instruments and debt funds. I have invested about 15 per cent of my surplus in gold ETFs, more as a diversification strategy.

I consider gold as the best hedge against global risks. It may underperform in the short term — one to five-year timeframe — but in the long term, say, over 10-15 years, the yellow metal will deliver returns higher than the currency.

What are the lessons that you have learnt?

First, having seen many boom and bust cycles, I have realised that only long-term investment in equities pays rich dividends. I have not seen any speculative trick that has worked consistently; gains from such trades are typically short-lived.

Second, you need to be patient while investing in equities. There will be price movements which can disturb you.

But once you do your homework well, you should not get perturbed; instead, sit tight and hold your nerve.

So, go for direct equities only if you have the patience. For those who don’t, it may be better to take the mutual fund route. Third, it is not good to borrow to invest in equity. Also, one should take measured exposure to equity in line with the risk appetite.

Why should one invest in equities?

Equities are the best asset class for long-term investors for two reasons. One, they have potential to deliver best in class returns over the long term. Two, they are the most tax-efficient asset class.

What are the three things that one must take note of while investing in equities?

First, understand the business of the company. The one running the business and his track record are equally important. Third, understanding the kind of returns that the business can generate for its investors also plays a vital role in decision-making — valuations play an important role here.

Who are your role models in life?

Besides my parents and grandparents who have taught me values, I have been greatly inspired by Mahatma Gandhi’s way of pursuing goals sincerely.

I admire my colleague Ajit Dayal for his business acumen and the way he deals with situations. He has played a big role in my life. I have great respect for Amitabh Bachchan; admire the way he came up in life from a modest beginning.

In the investment world, I adore Sir John Templeton, Warren Buffett, Charles Munger and Prem Watsa.

What are your favourite books?

Two books that have influenced my life in a big way are A Random walk down Wall street by Burton G Malkiel and Autobiography of a Yogi by Paramahansa Yogananda.

What are your other interests?

Besides reading books, which is my favourite pastime, I also enjoy watching movies and dramas. I like photography — enjoy taking random shots. I also enjoy travelling and exploring nature’s bounty.

Which are your favourite travel destinations?

Courtallam, a town in South India and famous for its numerous falls, is my all-time favourite. I make it a point to visit this place every year, given that it is close to my native place. I enjoy making a trip to Goa and Almora (Uttarakhand). Europe is my favourite overseas destination.

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