Want to improve health of your wallet? Here's help

CNBC-TV18's special show Informed Investor will help Mickey Mehta’s 360 Wellness Center in Mumbai women to maximize their wallet and wealth.

Devang Mehta of Anand Rathi along with Radhika Gupta of Forefront Capital will guide them on how to achieve financial fitness. Mickey Mehta, India’s leading holistic health guru also shares his views on the importance of being mentally and physically fit. Below is the transcript of the interview. Q: We all know retail investors have been absent from markets for a very long time. Is there an argument that you can give our audience here that could convince them that equities are not all evil and monstrous and that there is some money to be made out there for some reason? Devang Mehta: Let me highlight a little bit on the power of equities and what we have seen over a period of last 25-30 years. If an entrepreneur does business he just generally wants RoEs or return on investments of about 18-20% which is realistic. If one invests only in FD the return is around 8%. If you just take a simple average of 20% and 8% it’s around 14%. Only asset class which has given you a fantastic sort of returns which is beating also 14% is equities. It has given you a compounded annual growth rate (CAGR) return of around 17% for the last 30-31 years since the inception of BSE Sensex. I don’t think there is any other asset class which can beat equities if you have a longer term horizon. I am not talking about 30 years, but for a horizon of 3-5 years. Q: For everyone who is not yet convinced about equities are there any other products that they could use to maximize their wealth? Gupta: The ideal thing for people and it is hard Devang mentioned that equities perform over a 3-5 year horizon. Some of you have been invested in equities over a five year horizon and unfortunately over the last five year not seen very much out of it. The best idea for people starting out who want some balance of what Devang said is a portfolio approach. Some amount of debt or fixed income or saved securities, some amount of equities and then some amount of commodities or gold. That balance of the three will yield you something like 14-15% kind of return, but will let you sleep much easier at night, which is something we are all looking for. Q: Over the course of this entire series we have spoken to a lot of investors and the one thing we hear very often is that they don’t participate very readily in equity markets because they say they don’t have the time. I am sure you have heard this argument on and off that they also don’t exercise very regularly because they cannot find the time. Is there something that they could do while they are at work, while they are investing which we hope that they would be doing? Is there something that they could do on the go? Mickey Mehta: Most fundamental thing to life is health and wellness. It ensures growth in every area. It ensures evolution and generation of thought, attitude, word, behaviour in every aspect of life. It changes your perspective towards life and living. It give you immunity, it gives you confidence, it give you self-estimate, makes you an achiever of sorts in every walk of life. I don’t buy this argument when people say I don’t have time, because this is something what you do first thing in the morning all you got to do is pre pone your day just by an hour and life becomes such a smooth sailing affair then. _PAGEBREAK_ Q: I am into a business of chocolate making and also a wedding decorate, what do I do to increase my income since I do not have a fixed income every month and whatever I earn I make it a point to turn it into FD. I am scared to invest my money into equity market because the market is so volatile I am scared of losing all my hard-earned money. Any advice you could give me? Mehta: I would advice you to get the scare out of you that equity is a volatile asset class. It is for sure, but the simple concept in equities is buy low sell high. People are generally becoming fearful when markets come down. That’s the right time to buy because all the ratios that we look at, the price earning ratio or the price to book ratios all these are at attractive levels. At that time start investing in equities. Nobody can time the market, you just have to keep the faith and SIP, which is systemic investment plan. You have to just allocate a part of your disposable savings only into equities. I am not talking about leverage or taking debt for investing in equities, it can be just a part of your savings you make every month. Asset allocation is the key; you have to have something in all assets. Gupta: Specifically on the issue of monthly or regular income because its something you have - I am a business owner myself, people who are retired, it’s a common problem. To take forward what Devang said if you look at mutual funds and given the fact that you do not want to put all your money in equities, but you want to slowly move out of it then there is something called monthly income plan. It is a mutual fund instrument that holds 20-30% equities and 60-70% fixed income. For you it’s a starter into equities. It can be structured so that you can get a monthly or quarterly income. So, the returns are paid out to you monthly, it is something people use very commonly when they retire or when they are business owners, so this is something that you should look at so that you have that kind of regular monthly income. Q: My monthly income is around Rs 50,000 out of which half of the income goes for house hold expenses. The remaining 25,000 is what I can invest. I am confused as to where should I invest? Gupta: The answer is certainly that doesn’t invest everything in one thing, but do not invest in so many things that you cannot keep track of them. Broadly, there is property which is one separate asset class. There are three other things you can invest in; one is equities, the fixed income and gold. A good rule of thumb for someone your age and your situation is about an equal allocation to all three of them is a good starting point. You take 1/3rd of your funds invested in some safe instrument, so it could be debt mutual fund or government FD, 1/3rd into financial gold product and then 1/3rd into an equity product. What equity products you chose and what gold products you chose is a much longer discussion.  As you grow older that allocation should become more conservative. It should be skewed more towards debt, little bit more towards gold. If you are 18 and you are investing you can afford to be a lot more aggressive, but that is the benchmark to start with. _PAGEBREAK_ Q: I was planning to invest in gold. What is the exact time to do that? I want to sell it as soon as possible as I can. Gupta: There is a belief in India that gold is a very a stable investment , ut if you sit down and look at the numbers, gold is not as volatile as equity is but it is volatile. It is not going to guarantee it will make money in 2-3 months. It may have in the past, but that does not necessarily hold. The best way to invest in gold today is to go by the SIP route. If you want to invest Rs 20,000, invest them in 4 tranches of Rs 5,000. That way you smooth out the price changes in gold.  The other good thing now is that you don't need to invest in physical gold bars, you can invest in financial gold. There are gold mutual funds and gold exchange traded funds. Both can be bought on an exchange through a demat account or without a demat account depending upon what you choose for. They make buying gold and selling gold a much easier. They reduce the storage cost, they reduce the making charges and all the things associated with it. Q: What is the right time to invest in stock market? I bought Tata Motors 5 days ago. It has gone down again. Mehta: Selecting equities is a bigger art than science because you have to look at a host of factors. There are two approaches to it. One is a top down approach, another is bottom up approach. The top down approach looks at the world economy, Indian economy, sector and then the stocks, whereas the bottom up approach looks at the stock first. If you are going to identify few sectors and few stocks which give you a good return over a longer period, there are two things to look at it. One is qualitative analysis. You have to look at the corporate governance of the company, you have to look at how the promoters are, what their mindset is, what their business model is, whether it is robust? You have to look at numbers, balance sheet and P&L account. You have to have a portfolio of say 15-20 stocks wherein you have 5-6 sectors or may be 15-18 stocks. 3-5 stocks in each sectors. This will even out your investment over a longer period. Don't ask for multibagger ideas. They have the potential to make you beggar over the long-term also. Ask for portfolio of stocks which could probably do the trick in 2-3 years. Q: How much diversification would be too much diversification? Where does one draw the line? Gupta: If you have a direct stock portfolio typically as Devang said somewhere between 15-25 stocks is a good idea. It’s not just the number of stocks. You have to diversify across sectors. Holding 20 stocks in pharmaceuticals and infrastructure is not a diversified portfolio. It should be diversified across sectors. It should be a little diversified across sizes. You should hold some in the top 10, some in the top 50, a few smaller or midcap names as well. A broadly diversified portfolio, diversified across promoter groups. Holding all of Tata Group stocks or Reliance Group stocks is also not a wise idea. So there are many forms of diversification. If you are confused because stock picking is much more of an art and a science and there is a lot that goes into it and you still want to invest in equities as a first timer the equity mutual fund route is also a very, very good idea. By default you are buying a professionally managed, well regulated portfolio of 20-40 stocks that is managed by a fund manager who is professional in his field. If you are not confident to start picking stocks and doing that analysis on your own, because that is time consuming and everyone has a shortage of time today, the equity mutual fund route is also a good way to at least get your feet wet. Q: I have been investing only in fixed deposits. Many of my friends have invested in SIP. I wanted to know more about it. Whether it’s safe or how should I go about it? Devang Mehta: I would say that you all invest only in fixed deposit. Not investing in equities is a bigger risk than investing. That’s a point I normally take forward, because as FD you earn 8-9% depending upon the interest rate cycle. That is not even beating inflation in current times. If you invest in equities via SIP, maybe a diversified mutual fund which can have diversified equities or a mutual fund wherein it is a combination of debt and equity and you can have an SIP in that. SIP normally averages out your investment. It turns your cycles into sort of different eras. So, investing in equities or investing in debt via SIP is the best route. Don’t invest only in FDs. It is not fetching you any sort of great returns. Gupta: SIP is basically a way to even out your investments in something. You can do a SIP in gold as we talked about. You can do a SIP in equities, you can do a SIP in fixed income, and you can do a SIP in a portfolio that is half equities and half debt. It is just a way to invest a lump sum amount in small portions. You can do a SIP weekly, monthly, quarterly. _PAGEBREAK_ Q: How safe it is to invest in property? Mehta: Property as an asset class has given fantastic returns over a 20-25 year period, but there is no official index as we have BSE Sensex or Nifty to track the equities. We do not have any real barometer for how the real estate has given returns. In smaller rural areas it might have given 1000% returns – we do not know. In Mumbai it may have given 200-300-500% returns. Nobody knows exact amount or quantum. Another thing that one takes into account is whether investor is big, he has a big ticket size to invest in real estate because normally real estate requires big quantum of money. It is an illiquid asset because you do not easily dispose your property when you want to. That is a real sort of a little bit of a problem that one faces while buying into real estate, so one has to be quite prudent while taking such decisions. It can be a part of your portfolio, but not the entire portfolio. Q: I want to know what kind of investment I can do for my 30 month old daughter and what is the best time to do? Gupta: I assuming you want to save constantly for your daughter for her education, marriage various things over a long-term horizon. What I recommend you is start putting a certain amount of money that is comfortable every month into an SIP. You do not need to put it all into equities but you can put it into - since she is young, a 70 equity 30 kind of debt portfolio, so that over the 15 or 5 years she benefits from the growth in the equity market and you have the discipline of doing it month on month. You can start with an amount that’s comfortable today. You can increase the SIP quantum. Mutual funds give the ability to nominate it or do it in your daughter’s name, so that you will have that corpus later on. Q: What is a good way for a retail investor to analyze various news that they are seeing and establish what is the long-term impact of that news for them? Mehta: First of all you have to rely on professional advices if you are investing in equities. If you do not have that time, if you do not have the resources to invest in equities for a longer time period and do not just follow news, don’t just look at the tickers everyday. It is made for traders. So you have to have a clear cut time horizon. You should have a clear cut goal that I want 15% out of equities. If you are getting 15-17% then review it. You should be having a particular timeframe to restructure or review your portfolio. But don’t just go and buy on news because news is for traders but you are an investor so make sure that you have a long-term horizon.