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A Prescription for your Financial Health

Aug 14 | 1:30 PM

Doctors are often at a disadvantage when it comes to financial planning and investment because they have never been taught these skills, and they often rely on others to manage their funds while starting up their practice. However, in order to establish a successful practice and experience upward career growth, doctors must be equally cautious and knowledgeable of all financial strategies so let's explore some interesting strategies with the co-founder of Finshots.

[Music] hi good evening everyone welcome to the first session in the finance for doctors club on netflix uh we hope you're having a good start to the weekend we have uh two uh very very distinguished guests with us today uh srihid and vanu who were batchmates at ima they were both engineers they went to wyoming and after pursuing slightly different career trajectories came together to start a very popular platform called pin shots pin shots uh for for some of you who probably haven't heard of it is a daily news app for everything related to finance they make financial information knowledge news and updates very very simple and this is delivered to you via emails as well as on their app through the notifications and you would have read some of these stories uh in social media shares on facebook whatsapp instagram so srihid and uh uh uh both are both went deep into uh this and fin shots is now uh has over a million downloads it's probably the best rated app on play store and strongly recommend everybody to uh go ahead and give this a shot it will give you a really interesting read uh once a day uh they recently launched a platform called little insurance with the objective of simplifying uh the whole process of purchasing insurance and uh so so that's a brief background on our speakers today and uh uh uh feel feel very happy to welcome them and for rest of the day uh we'll love to hear uh more from both of them so uh welcome guys uh if you could just turn on your video and audio i can't see you yeah is this fine perfect so yeah we have pano in the blue t-shirt and uh in the gray t-shirt and superb guys thank you so much for finding time it would be a very very hectic managing both pin shots and ditto at the same time and truly appreciate your spending time uh doctors are probably not able to find enough time out of their clinical practice to go deep into finance and they say that uh it's the best when your money can work for you uh uh so uh so i'd love to hear some some tips advice common mistakes uh from you i think uh from our discussion so finance is pretty broad uh there's so many things you want to cover in finance and right from loans emis debit cards credit cards insurance mutual funds ipos uh from our understanding uh from our talk uh over the last couple of weeks my sense is that we want to focus on this session around investing it's also the flavor of the season lots of good videos lots of investing happening so over to you thank you for the very kind introduction um so yeah i mean the funny thing about this whole investing thing is that we got into this domain hoping to sort of simplify finance when in fact we hadn't invested a lot i mean when we started this thing you'd think that it's stupid i mean you'd think it would be a dubious enterprise to even consider the fact that somebody would start a startup without actually having invested themselves it's like saying oh you could be a doctor for instance without having gone through the entire drill i mean it sounds bonkers but yet it's possible within this domain it's strange i know it's ridiculous but it's also one of the reason why there's so many stuff happening on the investing domain right people constantly make mistakes people get constantly shoved down wrong advice and it's something that keeps cropping up so when i was sort of preparing for this session uh when i thought you know one thing that i'd probably do is give parallels right and i realized i'm not entirely sure if i'd be qualified enough to give parallels but there's one interesting thing you know whenever you go to a doctor for instance you'll see that the doctor will probably well obviously they'll ask you if you have any symptoms and once you know they take stock of the symptoms that are presenting maybe they recommend a few diagnostic tests and then at the end of it they probably identify the problem very quickly in that they'll probably be i mean in most cases i can give you my example a few weeks back i mean not just just a week back actually my father had a slight pain in the chest and we were talking about this and and and just couple days back you know my my my father had to go to the doctor within a week i think you know he's done some imaging i don't know what that is but but he was pretty accurate in his prognosis he said listen there's a block and then we did the angiogram there's a block and now there's an angioplasty it's like top topped up right probability is on your side when you're talking about doctors unfortunately people apply the same principle with investing is better they think that listen if i go through the fundamentals just like i did with my profession now it's not just limited to doctors it could be you know it could be physicists right it could be any other profession right engineers for instance i go through the fundamentals and i'm going to be in a place where i consistently make money right by investing and so on and so forth unfortunately that premise is entirely dubious because probability is not on our side it's one of the reasons why i can be an authority without actually having done any investing and another man who's probably done 20 years of investing be the same kind of authority because both of us stand on the same footing believe it or not it's because you can never know for sure what happens when you invest money in a stock i mean think about the two companies that we are running we are running a startup i'm running a startup can you for certain tell me how your startup is going to look one year down the line it's it's almost impossible to say that and that's true for us as well right and that gets me to the fundamental law of investing per se in that if all of the people that are watching today and there are about 145 people as i can see if you've ever had the preconception that you can somehow consistently make money by investing and applying a certain set of principles then you're probably wrong right it's not certain it's not an endeavor where probability is on your side having said that however you can optimize your chances and what do i mean by that i'll give you an example for instance now now there are sort of a few set guidelines as i talked about right there you know if you go to a prudent financial advisor he'll probably give you two or three tips right he'll tell you oh never time the market he'll tell you oh never hold all your eggs in you know one basket like diversify right hold your ex in multiple baskets then he'll also probably tell you something like yeah you you have to ins you know you have to invest consistently it doesn't matter whether there's a bear run whether the bull run doesn't matter you have to invest consistently and they're right in most cases these principles work best if you want to conservatively build wealth if you apply these principles for the next 20 years i can assure you that you probably have grown your wealth at about let's say 8 to 10 but if you really want to make money in the market you have to do everything that's antithetical to the principles that i established so let's walk through the principles right let's walk through one principle at a time and hopefully give you a sense of what i'm alluding to here now the first principle that people tell you when investing is to never invest in a small pool of companies invest in a large pool they'll invest perhaps in nifty 50 companies those are the 50 companies that you constantly see plastered around all business and you know finance news channels right you're talking about the enforcers the tatas etc right so invest there invest in that basket of 50 stocks and you'll probably do well in the long run but i'll give you an example that probably flies counter i mean it's entirely counter-intuitive right to this thesis at least the people that have made money if there's one thing that you can see and i'm talking about exponential levels of wealth i'm not talking about growing your wealth at nine ten percent i'm talking about compounding it at twenty five thirty percent in some cases right over a period of let's say 10 15 years right they've all done so on the back of picking a small pool of stocks a small select pool of stocks and they've invested considerable sums of money and they've made their wealth on those stocks alone because those turn out to be winners if in if this is complicated to envision in say the investing domain the market you can just look at what you know the vcs do with startups now when they invest in startups you can constantly see that they pick about you know 50 60 companies in their portfolio one or two will outperform right they'll be the ones that sort of give them the outsized returns everything else will probably not even return their capital back and this is the same principle that applies with stocks as well there'll be one or two stocks that will outperform so well like that don't even have to worry about everything else in all the other stocks in your portfolio now just to just to sort of maybe you know because you were talking about ipo is the flavor of the town i just sort of maybe hark back to an example that i love to offer the zomato ipo now when zomato ipod and i'm pretty sure even doctors will be aware of of sort of the hype surrounding this because it was on the first late stage internet startups to sort of um go go public so i'm pretty sure you've probably known all of this if you've seen the kind of numbers that people were talking about right before zomat everybody said the same things they said zomato is over value right at 100 rupees a share you you don't even know how zomato could ever ever justify the valuation right i mean it almost seemed as if for a company that's loss making you're attributing a multi-billion dollar valuation it just seemed bonkers now the theorists right the people that will stop sort of trying to value zomato the way you know practitioners would financial practitioners what they do is they take the company they see if uh let's say look the company right now zomato has let's say a 50 market share in the online food delivery segment and then you try and see okay fine 10 years down the line how will the market grow how will the market share of nomad to pan out and perhaps i can use this information to model what the stock price would look like 10 years down the line if you did all of this you would arrive at a conservative value of let's say 40 50 rupees and i'm not raising this off of my own valuation i'm raising this offer evaluation done by very renowned professor called ashwood unfortunately as i mean as fortunately as some would have it you saw zomato listed at 120 rupees so not only was the valuation wrong it was wrong by what a hundred percent substantially wrong right now the question is why is this the case and is there any merit to both sides of the argument imagine going back to 2005 for instance and trying to value say facebook you're looking at facebook's audience they're just growing right they're coming out of their shed and you're saying okay you know what facebook has the potential to connect all billion people and so i could have a billion people on my platform and i could possibly show them ads as they monetize in other ways etc now these are things you could have reasonably come up in the period 2005 to 2010 but what you could not have come up with is facebook went on to invest in instagram i mean obviously by instagram they also bought whatsapp now back in 2005 if somebody had done a valuation and tried to seek mclub can i pick this mod like i said diagnostic test try and see if there's any way i could potentially predict the outcome right how the stock may perform it would have been an exercise in futility because facebook didn't grow that amazon for instance we all use amazon we all know amazon is an e-commerce company but amazon makes most of its money from its cloud business it's aws servers i mean for those probably uninitiated what they help people like our startups right online for us right instead of us having to buy computers etc and hosting it ourselves they host it for us and they lease this infrastructure and that's how they make money now the question is what then can you actually tell about stocks if you can't tell how they will sort of probably look 10 years down the line and you don't know then what point is there in valuing well in my considered opinion at least very little you can only value companies like itc and probably get a good number because itc is in the smoking business i mean in the business of producing cigarettes right everything else right their hotel business their fmcg business have fallen flat on its face so almost all of their growth is probably coming from the smokers market as the smokers market keeps growing more people will probably keep buying itc cigarettes and they'll probably make more money off of it that is if the government doesn't tax the proceeds now this is a company that's standing on a very firm foundation and whenever you are on a firm foundation no matter what you do with investing you could invest in itc you could invest in hul you're probably only going to get fd growth rates in some cases yes you will see a company break out of its shell and doing something so extraordinary but in most cases you are not going to see those outsized returns where do you see those outright returns you bet on things that nobody has even thought of so effectively investing is not investing and many people take offense to this statement but i truly believe that it's a punt you're basically taking a gamble on a company and it's vision and its founders hoping that they'll do something so extraordinary that they'll deliver those outside gains if you don't want to look at internet startups you could go look at internet startups from the 90s infosys when it actually went public a lot of people were talking about how this was not a great company in itself because the foundation of the infrastructure website the information technology revolution hadn't been laid yet it happened in the 2000s and afterwards you know you saw influences etc but the true millionaires they made their millions during that period you know the 1990s to the 2005's that's when it was not apparent what influences was going to be so when you are sort of applying the usual principles of investing that is don't time the market that's another one they say listen if you are investing always make sure you do an sip a systematic investment plan make sure you invest your corpus equally or evenly or whatever you could say that but basically you are doing it over a period of a month a quarter maybe half yearly but you're doing it consistently over a period of let's say three years four years whatever right and and people say that's a good thing because if you think the market is at the bottom today it could be at the top like you could say right now if he said i don't know what it's at probably 14 15 k but you could probably go invest in nifty today and say oh you know what it's at the top i'm going to wait for it to come to the bottom and it may never come to that bottom it may go to twenty thousand then come back probably come back fifteen years later and at which point you know you're out of the business all together but if you see who's actually making the money it's people who time the market if during covet when nifty went to you know 8 000 and by nifty i mean when the market dropped and when all of the stocks sort of suffered this categories collapse the people that made money were the people that bought it on the low back in march april the people that bought it in august september made some money the people that bought in february march will probably make more money because the market tanks from here not a lot of breathing room right so so when you're saying don't time the market what you're essentially saying is don't do it if you want to consistently grow wealth at a modest pace if you want to exponentially grow well do the exact opposite now put money in small basket of stocks put money you know make sure that you put all of your money at a time when you feel the market is at a bottom right it's it's probably you know it's and you think that everybody's fearful now everybody's selling that's that's when you invest in the market and then finally you you sort of throw away all the other principles that you know about investing about how to predict growth etc we've been in this business for three years and consistently every single day probably written on on finance and stocks etc and i can tell you with some certainty i have no clue what's happening in them i i i can't tell you i i couldn't tell you even if you forced me some people do my friends force me they beg me you know it's almost as if i'm holding a secret from them that they can't have and they're talking about how i know the secret but i refuse to give it to them in fact it reminds me of this chap when in school who was convinced that i had access to uh to the leaked new question paper you know it was math exam and he was convinced that i had the question paper and he begged me and finally he would broke up the friendship because he thought that i had access to the paper i didn't have access to the paper and i don't know what the market is going to do and you you would not believe me the kind of things that people will do just to get that one tip and thinking that i know but i don't know like i said probability is not on my side this profession does not yield to authority there are mutual fund managers right now who are managing thousands of crores who've not beaten the market in 15 years can you imagine a medical practitioner a doctor having experienced 30 years in the profession with grind and not being able to diagnose a common goal i mean that's that's that's investing that's not sort of investing for you it's impossible for you know everybody is almost on the same platform and so to see to authority when somebody comes to you and says oh you know what i'm going to tell you how to consistently make wealth trust me he's lying to you he has no idea as well or she has anything i i get your point in the general import of what you're saying which is saying you know all these principles don't work largely and and if you think that investment is investment then you're wrong it's it's more speculation than investment but yeah but isn't that again you know isn't there a counter-intuitive point there uh because it's so hard to read uh isn't it better to actually invest in the index uh or uh hasn't haven't the sensex or nifty over the last 15 years 20 years and i i know you you you're taking a shorter time frame but if you look at our 10 year 15 year time frame uh doesn't the broader picture give you that safety agree 100 in fact that's what i was going to get at in that if you asked me what i would have recommended to people right i would have told them don't be stupid you know don't be greedy and don't don't don't try and grow your wealth exponentially because there's another fundamental principle that nobody talks about it's that the only way to grow wealth is to conserve wealth i mean if you're spending all your savings you can't grow your money you know i mean if it's it's pretty simple in that if you're losing substantial portions of your capital by gambling in this case speculating on this small amount of stocks speculating on timing the market hoping that now it's at the bottom i'll catch it right at that moment and and then you know it'll grow so much that i'll make money then that'll probably not work in at least like nine out of ten times nine out of ten times it's probably not going to work but that one time it will work and that's what i was alluding to but i would probably have most people do the other things don't time them just invest in an index because that will also and especially for doctors it makes the most sense because you're already vlogging a lot you're already starting out with significant sizable capital i mean i would assume at least after some years of experience i think we should look on what doctors think about this right so sort of wrap that point up 100 agree right prudent advice most people can grow their wealth at 12 13 and it might seem like small 12 13 but when you're talking about 10 15 years i mean you're talking about considerable amounts of wealth if you're already starting out with a large base if you're saving let's say one two lakhs right and then probably investing you can't even begin to fathom the kind of money you will have ten years later it's probably going to last your lifetime in your children's lifetime as well and if you're lucky maybe your grandchildren's life but but my point is i wish more people did this but they don't it's like they can't they can't hold themselves back you know even doctors who probably are you know stressed out of work they're probably doing so many things all at once once they get this this one it's almost like uh eating your first packet of lace you know one you eat and then they're right about that aspect you know you eat one chip you can't stop at that one chip you know so once you get to the market it's like you can't almost help themselves and so i was hoping to give them an idea that the only way to exponentially grow well is to risk your capital you have to risk everything right you have to you know it's almost like building your career you risk significant parts of you know your personal time your probably family as well in the hopes that you can actually build a career for yourself and and there's no such thing as risk-free gains right so so hopefully i've been able to sort of communicate that point and yeah i'd be more than willing to take questions i mean if we think about our uh audience here and if we broadly divide them into two different uh categories of investors so there would be probably people who are more uh who have a higher risk appetite uh uh for various reasons or maybe because they come from a good background or uh maybe because uh they have less responsibilities and have more capital to uh spare on risky and diverse and then maybe there are there's a second cohort which wants uh slightly better than empty results um so so what's your advice to these two sets of people so there is a set of people who want a consist uh not a consistent but but but a good chance of getting a uh 30 year on year or three years and that is essentially your you know mid 20s early 30s kind of people right um and then there is this chunk of people who want a consistent just above fd or just above ppf uh you know 12 13 14 uh for consistently for 10 years 15 years what how should their approach be in terms of picking stocks or dividing their uh wealth uh in my opinion i think the the best way so sort of you know i mean especially even for younger people right they can just capitalize like like you said you know they'd probably be able to set aside 50 of their savings and then bet on big stock and like i said the only avenues for you to sort of make that 30 return and in three years there's no way i mean you have to be able to willing to say you know what i'll probably lose 30 40 percent of my capital in my endeavor i'd probably say right now if you're looking at that goes with the turf right so you can't expect to make 30 without having the insight that you'll probably end up losing uh 50 or more of your base capital correct now i mean the way i see it right i mean there are a few companies that for instance offer you that kind of potential i can give you one example which people have been talking about how it's over valued all the time and it's a brand that most people would know it's jockey page industries right now if you see page industries growth over the past 10 years right every year you can pick articles that keep telling you the same things they're like page industries it's it's very expensive right i'm seeing i'm paying you know whatever let's let's say two thousand rupees for a stock that's giving me let's say just um 20 rupees right in earning potential whatever right in terms of earning per share now if you if you sort of look at the kind of conversation that's happening around these stocks right these are usually very expensive stocks i mean you look at all of the fmcg companies you look at hul you get all of these now if you want to build wealth you have to sort of pick us you know portfolio of let's say four or five stocks max very very concentrated portfolio five six stocks where you believe that oh listen this this can go both ways right i'll have the potential like even jockey for instance right there is this idea this this is called as uh the demographic dividend right which says that basically all of the you know the kids of today the young hunks and and sort of ladies of today will probably go up to become the hard-working men and women women of tomorrow and they'll sort of uh power the growth story of india right um and if you sort of look at that narrative you'll see that all of these people will probably want to aspire to wear for a lack of a better word a jockey underwear right i mean so so the thesis is built on this idea that jockey has you know it has enormous potential because a lot of people still don't use jockey underwear and people will use it it's the same with let's say zamato as well right you could say oh you know what zomatic in the food delivery business but there's so much more they could do they already have the logistics sorted out so maybe they could get into delivery maybe they could get into hyper local delivery where we are talking about delivery from your next door kirana store etc and maybe they'll be the ones to succeed because romato wasn't the first to market it's just that they were one of the better ones to actually market their products and so in many ways i think if you are a young young individual who's trying to build wealth right now i would say pick four or five stocks now watch stocks obviously i can't tell you right you'll have to pick those stocks and hope that they actually pay dividends for you but if you're slightly more conservative even slightly more conservative i would simply i mean this is the easiest thing to do you don't have to think about it it is one thing that i can say with great degree of certainty that humanity has progress i mean look at the kind of things that we're doing in the medical domain i mean look look at i mean when my grandmother had the same problem that my father had it was bypass surgery there was there's no angiogram there's no angioplasty maybe there was it just wasn't accessible to people like us but when you look at the progress humanity has made right it almost always gives you a sense of hope that humanity will outperform and i'm using this example because if you look at nifty 50 what are you actually talking about right um yeah you're sort of talking about uh a pool of companies right the 50 or 60 odd companies that will power the growth story of india and if you know to be honest i think there's one thing that i'm fairly certain of it's that the indian companies right with the indian population will continue to do well and they will continue to do that so if you're simply picking the nifty basket you know 50 stocks and you're consistently doing it over a period of let's say monthly right you save let's say one lakh and even even if you're apportioning say 60 000 70 000 that's what usually most financial advisors would recommend if you're saving that kind of money in nifty i can assure you in the next 10 years i'm pretty sure that you will still make a lot of money it probably won't be the 30 but you'll probably be closer to the 10 15 in all likelihood if if in the next week sorry in the next decade um you sort of want to exit at the right point at least you know so i mean that's what i would say for older people i would sort of probably change the mix a bit i would i wouldn't ask you to properly go 50 equity and i'd probably say you know what you're better off not putting all of your hard earned savings into equity because the markets move a lot and they could go back to 7000 like i said they could have in value and then they could grow twice and this can happen over a period of one or two years can be extremely frustrating right it can actually it can actually you know for most people it's very hard to go through this period of volatility the ups and downs can be too much so often times what what you may end up doing is pull your money at the wrong time so i would much rather have the older folks maybe settle for obviously they'll have you know you have your traditional instruments the nps and the fixed deposits also i mean people give a lot of a lot of stick for fixed deposits but they still protect you from inflation in some ways right um maybe debt mutual funds right i mean there are very very good debt mutual funds that invest in bonds it's much much safer to probably grow your wealth at seven eight percent so i'd much rather have them invest a significant portion of their wealth not in equities as is conventional wisdom um into debt yeah uh just yeah run one more point to kind of you know add here right uh so you know my dad kind of you know still keeps uh you know telling me so he kind of you know took a voluntary retirement few years ago and he got like a good corpus right i think some 15 20 lakhs and he is bothered that his money is generating just five and six percent returns in a fixed deposit right now imagine you know he still you know keeps bugging us right he why don't you invest this in stocks or you know grow this money and all of that imagine us putting this money into equities and doing the first wave of it you know the price is tanked right almost like 40 percent right now a person you know a 56 year old man with you know a blood pressure and whatever health conditions right you wouldn't want to see half your wealth disappear at the point in time and it's not like uh you know he would want to go back to his workforce and you know join the job and kind of earn this money once again right so at this age what matters more is you know i would say a bigger piece of mind rather than you growing money right whatever you've earned you kind of put in all the hard work right so at this age you don't want to have this mental tension again right so at least for my parents i've told you we're not going to take a single penny and put it into stocks okay if you need more money or if you do these things we will be here but no we're not kind of you know putting this money any risky assets at all wow that's that's really conservative uh that that's interesting yeah because at this age you know you don't you know you don't want this right you already went through all the you know life struggles and everything yeah yeah makes sense so uh anyway so uh just just bringing this first segment uh to a wrap and before we move on to the second uh point you want to touch upon uh so uh essentially uh investment is very risky and uh it's far far more speculative than we uh think about it and uh whenever you go into it i think you go in with that uh understanding that it's it's it's a bit of a punt all the time because there are just so many factors affecting it uh there's probably no good way to predict it we all talk about wipro catching wipro in the 80s and converting one rupee into 10 crores or something like that right that's the kind of wipro game in that 30 year period but who would have met on vipro in the 80s uh yeah probably i mean only right so uh just just to add that one bit there i think there was this one guy who did it because i think no he was not repro he was in forces and he only invested in enforcers um because the the person that you know was dealing with the ipo i think it was an investment banker so basically what happens is if you want you know your company to go public you have to hope that people subscribe to the issue that they buy all the stock that's on offer and so there was considerable pessimism that that might not happen with infosys so i remember this one gentleman narrating a story where one of his relatives only put in money because they believed that it wasn't going to be fully subscribed right otherwise the ipo gets cancelled quickly cover up on the other major 2-3 core principles around investing yeah i mean uh uh i hope people can see this um yeah uh richard can you move it to the next slide please i think we've already spoken about this yeah i mean i was just sort of you know talking about this uh you know you're timing the market and in march 2020 if you had sort of predicted that this was going to happen it's almost impossible to sort of say you know that this was going to happen even if it did happen let's say at 10 000 you try to sort of come in you could have said oh it could go to six thousand because that was the narrative back then and we were following the you know sort of the conversation the chatter around around nifty and that was what people were saying and so yeah that's that's the slide of you know you know we can we can move on to the next slide i think i covered this already uh yeah i mean it's the same thing it crashes further you know that's what people were expecting uh i mean they were not expecting it and it did crash and it could have crashed further but it didn't it sort of found a support level which is to say that the stock sort of started perform outperforming from there in that now it's at 15 000 right i mean almost at that level um so so yeah i mean yeah that's what happened uh we can we can move on to the next slide yeah now it's at sixteen thousand five hundred i i didn't even know it across 16 um it's sort of you know i mean that's what you say about the market right um yeah you can go to the next slide yeah next slide uh investing in smes now this is another thing that i probably wanted to touch because there is this idea with a small group of people that you know again this is about catching stocks on the low right maybe trying to find that uh that that one stock where not a lot of people are talking about it and then hoping that it will actually outperform um and you'll see that especially with smes right i mean these are small and medium enterprises i mean if you're not aware they can also go public right you can also buy these stocks and you'll see that there are companies from this cohort that have done exceptionally well because the small companies trying to big the you know become the next big massive companies that we know today and and a lot of people want to get in on the sme action but in my cons again because we've sort of worked in the sme ipo space where we consistently wrote about sme ipos the one thing that i can say for sure is most companies are are not even in the business of sort of you know i mean they're not even in the business of making money for their shareholders they're in the business of sort of taking money from shareholders most of these companies are rotten to the core um you you're probably going to risk you know most of your money if you're investing in a sme ipos so anytime somebody comes up with a proposal and this happens a lot in you know places like andhrabad for instance where there's a thriving culture of investing in such companies and in my experience at least i've only known people losing money in the sma domain right another thing you wanted to cover was the final insurance that i probably want to talk about is what we do right now which is insurance now i think with insurance obviously most i would presume that most people here at least listening to this conversation are covered medically you know um but i think the one thing that you know have people end up doing is mixing investments and insurance in that they think that if i have a an lic product that offers me decent returns and also gives me some protection that will be a win-win but in fact in most cases at least that's a lose-lose proposition you are not getting a good investment product and you're not even getting a good insurance product because of good insurance product and i'm talking about life insurance maybe ensuring your own life um you know if you're a young chap at least you know if you're sort of maybe in the 30s 35s even 40s for that matter most people would want to protect their family right in their absence and i think i think i think we all would do a certain degree agree that life is very fragile and so when you are sort of making that choice it's very tempting to go for the investment come insurance option but like i said most products lic products in general and or even other products like ulips etc they don't offer you the benefit of insurance because even if you are let's say paying let's say one lakh a year right in premiums you only get about 10 lakhs in protection now my only question is i don't want you to think about this just ask yourself this is your life worth the measly 10 lakhs and ask yourself if that is going to support your family in your absence if you are making 20 24 lakhs and annum and you're probably spending 15 lakhs today you're going to double that in the next seven years you know you're probably spending 30 lakhs that would be your natural progression of expenses so in most cases you will need substantially more protection and you're not going to get it from a life insurance product that is sold as an investment income insurance product and even on the insurance bit i'm pretty sure that if you've ever had a tryst with an lic agent or even a yuli page they probably have shown you a sheet and that sheet will have something like this it will have neatly outlined excel you know cells where you will have one lakh one lakh one lakh one lakh one lakh and at the end it will probably go like at twelve percent and they be like oh listen all this money right at the end the fundamental mistake problem with that chart is that that one lakh is not one lakh they say they are going to invest one lakh but they are not going to invest one eight percent goes to the agent immediately and the company's administrator so you are starting off with 92 000 not one line on top of that there is the mortality charge there is which is usually they obviously want to provide you life insurance as well that's not going to come free they'll have to spend money there's the administrative charge there is the partial withdrawal charge there are all other kinds of charges and at the end of it when they're actually investing or one lakh they're not investing one lakh they're probably investing close to 85 000 and every year it keeps decreasing this corpus and in some cases it increases but in most cases it doesn't so if you are mixing investment and insurance together my humble suggestion is don't you are not going to get a good investment product and you're not going to get an insurance product because obviously you can't protect your life with 10 lakhs at least so the best thing to do is separate them too and another thing that you probably have to be privy about especially with the insurance and the investment thing is that this money back policy you know there are a lot of even if it's pure life insurance let's suppose you're paying 20 000 in premiums every year and you get a cover of one crore i'm giving a simple example right so if you die they give one crore and by the end of 65 right just a reference age if you don't die you're not going to get anything basically you're covered until 65 you die your family gets one crow and after 65 the policy lapses and you get nothing now this arrangement to a lot of people will seem very dubious because if i told you listen you have to pay 20 000 every year for the next 40 years and you're not getting anything you know in return at the end of that 40th year you would think that that's a lose-lose proposition once again but that's not true at all insurance companies can't give you money out of thin air if they're saying money back they're probably giving you money that you paid them they're never going to give you free money think about it what avenue does an insurance company have to make money they can't invest in their own business i mean they can't sort of you know they can't make money grow on trees they also have to deploy it in places where you deploy they'll also buy government securities which is basically lending to the government they'll also probably invest in stocks that you invest the only difference is when you invest one lakh you'll invest the full one line when they do it they're only investing let's say 80 90 000. so in most cases when people say oh i'm going to give you money back at the end of the day they're giving you your money back and you could probably grow that money much much in much better fashion like i said by just investing in nifty or even fixed deposit if you calculate this right you calculate the number for instance and see when people give you money back and you see okay 40 years may have my thousand rupees is not going to be the same as you know the thousand rupees from 40 years in the future right so if you sort of discount for all of this and you calculate you'll see that the net rate of return on your money right that they're giving you back is probably four or five percent max you can get it you know you can get very more principle you're touching upon i think the underlying principle is time value of money and one of the first concepts we learn in the finance class and we've all heard of that story where the flight ticket to bombay used to cost 30 rupees uh and it all started or the train ticket was a few anna's or something like that uh you know 30 years on it's a completely different world uh somebody giving your principal back is completely meaningless uh yeah and i think this this applies to not just um insurance policies but also uh some some interesting different asset classes like club memberships um yeah you could end up investing in a premium club uh the membership would come at six lakh rupees seven lakh rupees or something uh and essentially the premise is that uh the club will buy back the membership up to 30 years which is you know which is which is the amount they would recover in seven years on an fd or 10 years on an fd they put your money in fd they'll sit on the interest for 40 years right so i think the the fundamental principle at least in the second part of what you said the first part was very interesting uh on saying you know a product cannot be a good insurance product and investment product at the same time and uh the second part was saying do not underestimate uh the importance of time and how money will grow uh or or put another way the opportunity cost of your capital um uh by by blocking that three lakh rupees in an lic policy you could not buy three rupees of a pro and versus zomato uh just one last thing if you if you want to go from being a nobody to a millionaire then yeah crypto is your option right but you could go from nobody to really ever invested in crypto no no i think you know you know the funny thing because we run a newsletter that's very popular and obviously we reach a lot of audience you will not believe the amount of people that want to sort of run crypto ads which or let's say a crypto spot and they're willing to pay loading the sums of money mainly because we would have turned profitable by now had we taken money even from two of those companies yeah you can see you can see hot star everything is uh all of them yeah yeah no no it's it's sort of i mean the kind of money that we're talking about is ridiculous i mean for a startup like ours that's very enticing money and if you if you sort of you know come to us and say okay you know what you know do the do the crypto thing it would be a fundamental betrayal of principle because in my opinion at least none of us invest in crypto because we don't know crypto crypto is like uh you know it's like it's like i mean i give this example where i probably believe in a couple of guards and vanu believes in his own set of gods and you probably do the same and everybody believes in a different god and everybody seems to think that god is better than the other god and and crypto nobody knows who this god is and what what this god will do or where they come from or how sales they'll probably how it will pan out in the future right i mean if you ask what what's even even bitcoin experts and ask them to give a very concise explanation of why bitcoin should be valuable and there are some very compelling explanations yeah i mean they'll tell you it could be you know eventually if enough people adopt it it could become a store of value in that it could replace gold it could replace your currency it could be a medium of exchange as well we wouldn't have to use rupees is usually obviously and it's controlled by the government so we'd have a decentralized future of utopia of sorts but then you could argue the same example and say okay in a decentralized world you should not have any central authority i mean the indian government and the reserve bank of india in its on its own volition at least will not let let's say crypto replace the rupee it would supplement it right but it won't let it replace it so you have to circumvent the entire system and then if you ask okay but supplementing also has some value right i mean even if it is used as an alternative medium of exchange it has some value then you could say okay fine but it's not the same value as before so it's a little less we don't know what that is but it's a little less so when you add all of these complexities and you ask yourself what should crypto be evaluated the only answer that you can honestly give yourself is that i don't know you you have no idea what crypto you're just playing on the volatility that's all yeah yeah you're just hoping that happens right and and um plan a separate session on crypto because it's a very interesting topic uh and most people definitely lean uh conservatively on it right now including me you know all of us are probably very scared of it but going back to the first point we discussed and saying if you want to uh you know really crack out then you'll have to be contrarian and look at trends uh in the future and people like uh elon musk can now messy uh accepting some uh joining bonus uh in cryptos uh i think these things are gradually sort of bringing them slightly mainstream uh we will have a separate session and people who are interested can join in uh on that uh and you should probably have a debate on it uh we should get someone uh maybe the founder of fuzzy rex or or [Music] uh you know the the investing thing um you know there's a uh we've we've spoken that it's all it's it's fairly speculative and risky or not but uh if if uh if i have to analyze a stock um and you guys do this a lot uh you know what are the top three top four things that i read because reading balance sheets and pnls are very difficult and i'm not saying that you can get away without reading it but let's take a simple example that you know go to money control choose a stock uh and you will get some basic information in a jiffy um but there will be a lot of information so if i am an investor and i don't want to drive completely blind uh is there something uh on and i'm not talking about picking uh you know a stock which will turn gold 20 years later because there's nothing on the balance sheet to tell you that i'm talking about an itc versus uh hul conversation uh or uh and just talking about the financial aspect so not the consumer aspect not the market et cetera but what are these three four things which you read uh when you when you read a stock yeah i mean with most i think uh there are a few things right i mean okay so to put it simply when when you're sort of saying that i can analyze the stock the way i see it is you can analyze the stock in a bit to not make sure the most you know fatuous blunders at least you know i think that's that's where you could potentially start and then you could build from there so the first thing that you obviously try and do is with more stocks at least if you're picking a stock that's had a sequence of let's say shady news articles that you find online i mean this is a simple thing that you could do i could say you know d1 housing fraud or d1 housing in trouble or whatever like that and then you could see what article sort of comes up now you know 2016 2017 d1 housing was you know very very famous stock this is this is jumping right this is good and for sort of people who probably don't know d1 housing it's a it's a it's an nbfc company a non-banking financial corporation that was primarily blowing out home loans right and they made a lot of money right this talk was on a roll and at some point in time many people were talking about the future growth potential of the one housing except there was one thing from the past the directors were involved in a bit of a shady enterprise at one point in time we sort of gave you the hint impression that things could probably go wrong at some point in time at some point in time you don't know precisely what's going to happen but it could happen so the first thing that you could probably do is simply google something like this right just go on google and maybe like you know instead of going to money control etcetera because you're not going to get any information fraud or you know corrupt or something like that right stock name plus something and immediately you'll see a hit of articles and i think it would be a generally accepted principle to not invest in a stock where there are too many left so that's the first easier thing that you can do the second thing that you could do is pick businesses where the foundation is largely stable now for instance when you're talking about something like a you know an internet startup right anything could happen anytime and like i said there you can't gauge much you're not going to get anything substantial out of it but if you're looking at something like an itc you will see two trends one is the total number of smokers of traditional cigarettes is on the dough is on the down right even though india has a very young population right now who may get into smoking eventually it's probably on the awareness etcetera and all of that another is taxes yeah so taxes are in the up right so you see that government is extracting as much money from smokers because they can pay very sticky customers right so so you'll see that that's on the up and so you you look at things like those and you you can build a mental model of where itc could potentially be heading in the future even with infosys for instance look at the kind of projects that they take on usually right it's usually these you know the big money makers the banking projects etc a simple search of their you know order book just just enforces order book or enforces deal pipelines right we'll give you enough information to say that you know what the future qualitatively and quantitatively i won't say anything because it's very hard for you to find time to actually pass through these numbers and derive anything meaningful but just on the top of your head you could do some things like these to roughly gauge the future potential of a company and make sure that you're not putting your money in a rotten egg right so so i think i think these two or three principles will come in handy in general okay so i was saying uh is a dividend paying stock uh a company which has a history of paying say quarterly or annual dividends uh definitely better than a non-dividend paying stock what's the difference essentially no i i think that fundamentally right theoretically there's no difference right because a company that's paying out dividend is essentially taking out money from its coffers and paying it out to you essentially stating that listen i have no better use for this month ideally if you want to focus on growth alone you would want a company that's not paying out dividends because they're saying listen there are avenues for me to grow this money if i give it to you the only thing that's going to happen is the government will tax it okay i'll be taxed on my end and you will get some money and you will probably go and do something with it but there are companies out there that will tell you like itc for instance they have so many cash on their coffers like what will ipc do now the kind of money that they're making right it's it's like they've only so many things that they can experiment with and you'll see that as they keep paying more dividends right itc stock actually goes on the down mainly because people then realize that there is no growth potential now if you ask yourself why is this stock not valued at the profits it made last year or the cash flows it's been generating for the past 10 years it's because it's valued much higher it's because this growth potential is saying that i can keep money and i can do something with it so if you are valuing growth if you really want to grow wealth right ideally i wouldn't say dividend paying stock is a good option because you would want to stay invested in a company where they believe they can deploy this wealth this corpus in a place that will actually be better better better utilized i suppose right so i wouldn't personally have opportunities so they could be expanding into different geographies buying companies uh entering into new work streams etc so as a thumb rule and not making this as a golden rule but as a thumb rule a company which is doing well uh in terms of revenue growth profit growth but not paying dividends uh thinks that uh it can use the profits it is generating and invest it back into the business um and give you even better returns uh visa via company which is accepted yeah which is making profits but giving it out uh probably things that uh it it cannot give you as me as good return before it once yeah yeah yeah under fair enough i think that that's perfect uh make sense just just uh from my side uh a final question on uh mutual funds and uh you know over the last uh uh last uh five seven years the the whole mutual fund association also has been very aggressive uh and and done a lot of work on positioning themselves as mutual funds and uh do you think that uh for a for a professional class like doctors where uh probably uh that uh that financial background was never built into the curriculum uh and where post uh post education you've been so busy that you really can't track everything on a day to day basis do you think that mutual funds actually are a great answer uh uh for uh safe uh relatively safe so we're looking at a thirteen 40 percent uh consistent return yeah no 100 but you know even even in terms of mutual funds i would i would like i said you could sort of uh you know go and select mutual funds that probably you know i mean one way people do is they look at past returns and then they sort of use that as a barometer to see how the company could perform it works well for companies in some cases but for mutual friends it i mean it largely tells you nothing and i mean past performances i mean as they say in the disclaimer is not indicative of future results so i think the ones yeah yeah yeah no they say it very fast because obviously they don't want you paying attention to that but i think the one thing i i wish that amphi and all of the other people who've been pushing mutual funds would have done is actually push the benefits of index funds right so i'll maybe break it down for the audience now there are two kinds of funds right one is the active fund and the passive fund now the active fund is where the fund manager the person that manages the money makes a bet he says that listen unlike you unsophisticated investors i know precisely where to invest i'm going to take your money and i'm going to deploy it and i'm going to take my fees and still give you 12 13 believe me because i have a track record this is what an active fund manager would say i'm a passive fund manager right i mean in most cases it's passively run there's nothing it's mostly operational we'll say something like this listen i'm not betting on my own skill set instead i'm going to do what you know the general market scenario does right so general market scenario as it right now if i ask you a question of let's say how is the market doing the only way i could give a very precise answer is to look at all of the stocks see their relative weights which is to see how relevant they are for measuring let's say india incorporate its performance right the company's performance um and then you sort of you know you try and see if i can make any sense of it right see if these stocks how how the entire universe of let's say five thousand six thousand stocks are performing on a day-to-day basis the other option is to probably go let's say okay you know what i'm not going to do the 5000 stock let me take the top 50 stocks right from different domains that give me a flavor of india right essentially what india incorporated is doing india corporate does it the indian industrial enterprise head services sector all the top companies from different domains what are they doing and then you go look at it and say oh you know what these 50 companies give a very good representation and that's what nifty 50 is there a basket of 50 companies that's generally supposed to give you a flavor of what the indian market is done what the indian market does and in the case of passively managed funds in these kind of funds the fund manager all he does is take your money or all she does is take your money and they're going to put it in these basket of stocks and they're going to make sure that it's appropriately weighted which is to say that okay if if you know let's say infosys has to have two percent weight i'm going to make sure that that is always a two percent that it's not three four percent because emphasis value can grow right so they keep doing that right they keep shuffling and generally right this is a much better accepted way to go about things instead of going for actively managed funds right where you're trying to find that one fund manager because with every fund manager that has delivered let's say 15 20 return there are about three or five to probably not done with you in fact if you sort of look at the uh you know uh performance of these large capcom the big companies right the big mutual funds which which usually invest in these big companies you will see that most fund managers have not been able to beat nifty right so effectively what that means is the 50 stocks the random selected portfolio of stocks the 50 stocks that nifty select has actually outperformed these sophisticated fund managers so my suggestion when looking at mutual funds is if you really want to invest in mutual funds you will probably be better off not picking a mutual fund that you believe will give you out because then that's as similar as picking a stock because there are about i think 12 000 mutual funds i guess if i'm not wrong i mean i could be wrong right it could be exaggerating but but there are some ridiculous number of mutual funds so how are you going to know which ones are going to perform it's very hard to know that so your best so best you can do is uh sort of you know look in the rearview mirror and say that you know this fund has performed well over the last three years and then joined that fund and its best is behind you already uh yeah so that would happen there's this idea called a survivorship bias right which is which creeps in because i mean the way the way it works is i i maybe i can give you a different example so so back in the day i think this was in world war ii they were trying to 45 airplanes right they were trying to find because you know airplanes were being shot consistently by by by land artillery machines etc and they were trying to see which parts we should fortify now the only problem with fortifying an airplane is if you fortify every single part reinforce every single part it becomes too bulky and it becomes difficult to maneuver so you have to sort of pick only those areas right which which effectively you believe will be best protected and so when they analyze right keha mala you know let me take a portfolio of you know planes that have arrived and see where i should be reinforcing and they saw that most bullets were hitting on the wings right they're like okay fine you know what we should we should you know reinforce the wings because we can see a lot of bullet holes but the problem with this idea is that think about it the ones that don't return are probably the ones that you should really be concerned about the planes that get hit in the middle right where there are no bullet holes when they suffered a bullet world they probably went down they died they never even showed up and with mutual funds as well it's the same problem in that you'll see a lot of mutual funds that don't even show up today because they've died they've been merged or they didn't perform etcetera so the only ones that you see today right you're like oh all funds are performing well because the underperforming funds have already been pulled out they've died or they've probably been merged so this is another thing that most people don't think of it's that yeah man you know i go on zero da i go on let's say coin and i see all these mutual funds everything is performing well i'm like no that's probably because most of the underperforming ones have already gone out the window right so that's another thing that people have to remember before we wrap up uh i think uh would love to hear uh which are two industries uh which you would punt on so not stocks per se because uh as we've been discussing it's way too speculative at a stock level um and if there was a way to know which stock is going to work we'd all be pretty rich uh but at an industry level i think it's still you could still make a you know half educated guess um so which are sectors and you know uh let's keep tech separate uh uh and i love to hear your point of view on tech separately but other than tech which are sectors which uh generally in your informed opinion uh your bullish on and therefore we can go back and whenever we come across ipos or active active scripts in those sectors we can look at them a little more positively yeah i think you can go first and then i'll probably you know i'd probably say something yeah i think i'll bet more on the financial services right as in as of the entire you know sector as a whole right uh including your banks or uh you know your credit card companies insurance companies because i mean the penetration of all of these products is still i would say pretty less in the country so right now with regeneration and with a lot of other things right you'll see a much bigger penetration coming in for these products yeah so i think one sector i would bet is on banking financial services and you know insurance sector yeah no i mean i would have probably said the same but i think you know i was asked this question recently as well and i couldn't come up with a good answer but the one thing that i could think of is probably the auto sector now the auto sector has had a horrible time in the past three four years at least i mean if you look at all of the things that have gone in favor of sort of the auto sector at least you'll see that everything's worked against it right first there was the economic slowdown right or you know there was there was a general i mean that was the first indicator even before we sort of started seeing economic growth dip like economic activity you saw the slowdown in the auto sector manifest itself this is 2019. uh 2020 2021 also were terrible times because of it etc lockdowns and now there's a semiconductor shortage right i mean more often than not you know you see you see companies that are trying to sort of uh make sure that they fulfill audits but they can't because they don't have the equipment etc so if i had to bet on one sector that would probably you know i mean yeah it's betting i don't know it'll actually work out but i see that auto sector has a good chance it's because it's been beaten down so bad i'm like look some time right there must be some light at the end of the tunnel and that tunnel is probably nearby you know i feel like i'm not not everybody i nobody that i know is probably bullish or not effective but i i sense that there's an opportunity there uh so so yeah that's probably what i'd call it awesome so we have we have two points of view one is a flavor flavor of the season and one is a contrarian yeah awesome guys uh thank you so much it was great having you uh love hearing your thoughts uh analogies uh and insights hope hope we can do more of these sessions uh time committing uh and and touch upon some of these things and could probably go into a little more depth topic-wise um this was the first in the series so we wanted to touch upon a few things and not make it too specific and too deep uh we do hope uh everyone enjoyed this and um all of you please feel free to share feedback to us at uh support netflix dot app

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dr. Shrehith Karkera

Shrehith Karkera

MBA, IIM-A | Co-founder, Finshots & Ditto Insurance

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dr. Bhanu Harish Gurram

Dr. Bhanu Harish Gurram

MBA, IIM-A | Co-founder, Finshots & Ditto Insurance

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Shrehith Karkera

MBA, IIM-A | Co-founder, Finshots & Ditto Ins...

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Dr. Bhanu Harish Gurram

MBA, IIM-A | Co-founder, Finshots & Ditto Ins...

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