GREAT INVESTING WISDOM / 23 lessons I learned

23 lessons I learned on my path from $0 to $2M in 8 years / Mar 14, 2021

Here is an excellent tweet. Thanks Danny Baldus-Strauss @BackpackerFI. I’ve added my commentary.

Danny Baldus-StraussMy Thoughts
1. “Play long term games with long term people” @naval Anything that provides instant gratification is probably bad for you and your wealth. Anything that provides delayed gratification is likely good for you. There’s no such thing as “get rich quick” or “overnight success”  
Truly agree.
2. “Focus on the $10K+ questions, not the $5 ones.” @ramit Spend time focusing on the big decisions like asset allocation & building good credit rather than the $5 Starbucks decisions. Set an hourly rate for yourself. Outsource everything that’s under that rate to save time.  
Lets say you earn Rs 60,000/month. That’s 2,000/day or 250/hour. Outsource any work or task if it can be done for less than 150/hr.
3. Invest early and often. Time in the market > timing the market Consistency is the name of the game. Automate everything. Sometimes investing can be boring and that’s a good thing. Early on, investing more and often is far more important than yield or portfolio performance.  
In investing, smaller and earlier is better than later and more.
4. Learn to avoid lifestyle inflation. You really do need less than you think, trust me. Get out in nature, and you’ll see. Freedom + time are worth much more than nice cars and clothes. Keep your lifestyle flat even as you get promoted and make more. Invest the difference.  
5. You can get rich at your job, but you only get wealthy at home. 9-5s build necessary cash flow to consistently invest. But your employer isn’t responsible for your wealth building, you are. You are the director, try to do things every day that build your future.
 
6. Live in the present, while still building and planning for the future. The point of having $ is to not have to worry about having $. If you’re miserable while building wealth, you’ll be miserable when wealthy. If $ is all you think about, you’ll miss the present moment.  
Or Rupees
7. “You’ll never get wealthy renting out your time” @naval  9-5s can be great and necessary tools for building financial independence. But have an exit plan if you truly want freedom over your time and energy. For every 9-5, you have an entrepreneur to thank for your job.
9-5 is important to learn skills. To do things. But you are doing them for others. At some point, you should start doing things for yourself.
8. “Cut expenses in areas you don’t care about so that you can spend extravagantly in areas you do” @ramit You don’t need to live frugally your entire life to become wealthy. Cut out what doesn’t bring you immense joy and don’t feel guilty for splurging on things that do.
 
9. “Every action is a vote for the type of person you wish to become” @JamesClear  Your net worth is a lagging indicator of your financial habits of the past few years. Start now by “placing votes” every day for the financial future you desire. Habits compound just like your $.
 
10. “Money’s greatest intrinsic value is its ability to give you control over your time” @morganhousel Time and freedom is what you’re after. Nice things, looks, social validation … they all fade away. Time does too, but at least you can control it through financial freedom.
 
11. Generating income is more important than cutting expenses, but it’s a balance. Cutting expenses has a floor, you can only cut out so much. Generating income has no ceiling. Promotions, side gigs, investments, and business ownership have no limits, only you.
Stock market investing too has no ceiling. Rs 500 invested in 5 stocks can lose you Rs 500. They can also gain you Rs 10,000 (over a long time).
12. Mind, body, and business are connected. Wealth starts in the mind. Being broke is also a mindset and identity. Healing what’s in your mind, becoming aware of your limiting beliefs and toxic thoughts, & taking care of your body, spills over into business and wealth.
 
13. Be an optimist. Being a pessimist rarely lines your pockets. This doesn’t mean it’s ok to be reckless and ignore risk. But envision a better future and invest in it. The point of maximum fear is the point of maximum opportunity. “Be greedy when others are fearful”.
This is so important. Long back I used to be hopeless and negative. But positivity can be learned and practiced. I do it.
14. Invest in your greatest asset – You! I’ve invested tens of thousands in my own education, retreats, and men’s groups. The ROI has been incalculable. Don’t be cheap when it comes to your self-improvement. You are your only asset that is truly recession proof.
Always keep learning. Asking. Reading. And changing.
15. Money is made in the waiting. Sometimes good investing can be boring. Sometimes it’s more about the stomach than the brain. Sometime it’s more about inaction than action. Tune out the noise and play the long game.
 
16. Volatility is not the same as risk. It’s the price you pay to outperform. And it’s a mechanism that “transfers wealth from those who can’t handle it to those that can” @BrianFeroldi
 
17. “Focus on the future – not as in the next year, or even 3 years, but as in the next decade, or even two decades. Focus on the world-changing trends that will occur, irrespective of recessions, boom and busts, interest rates, even wars.” @OphirGottlieb
This is hard. Its uncertain. But so important.
18. “Only when the tide goes out do you discover who’s been swimming naked” @WarrenBuffett  It’s only after crashes and bubbles pop that people realize how over-leveraged they were. It’s only after one loses a lot of money that they realize how much needless risk they took.
It surely takes several cycles of boom and bust to really get this.
19. The way to create life changing returns is to hold onto your winners. You want to be in great companies in the first inning, out by the 7th. Pay up for quality and only invest in the very best businesses.
True about Long Term Investing.
20. Tune out the noise Financial media makes money on your fear. People on TV or on social media have very different backgrounds, risk tolerances, time horizons, and amounts invested than you. Take it all with a grain of salt and stick to YOUR plan and what works for YOU.
Note that People on TV or SM may have very different incentives than you. Why should they help you become wealthy? Are your objectives aligned?
21. Realize that stocks take the stairs up and the elevator down. Risk can come in a flash when you least expect it. So use the good times to plan for the bad times. Expect the best, but prepare for the worst.
 
22. “You do not rise to the level of your goals, you fall to the level of your systems” Goals help with process, but it’s your systems that allow you to make real progress. Set up your investing rules, create a non-negotiable morning routine, automate your finances.
 
23. “People who are right a lot of the time are people who often change their minds” @JeffBezos  Don’t get married to your stocks or portfolio. Embrace conflicting opinions to understand the other side. Humility is key. It’s ok to be wrong, but staying wrong is even worse.
Its true, of course. But I’m still grappling with this. This also means that whatever I know is always up for discussion, and can also become wrong sometime.

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

25 Investing lessons – Great Investing Wisdom

Here is a brilliant tweet from @jposhaughnessy. I have added to it some of my commentary. In the note, he touches upon the classic challenges – uncertainty, fear, under-performance, the big new industries, standing out, biases and luck. It is great investing wisdom. 

Jim O Shaughnessy My Thoughts

I’ve added a few of my thoughts, and an Indian angle.

jainmatrix investmentsjainmatrix investmentsjainmatrix investmentsjainmatrix investmentsjainmatrix investments
jainmatrix investments

Here are the links that Jim had referred to in case you are interested

Hope you liked this. Do comment below.

Punit Jain

DISCLAIMER:

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JM at punit.jain@jainmatrix.com.

How much is Conviction and Confidence worth?

Hi friends, here’s a small story I’d like to share with you.

Over a year ago, JainMatrix Investments (JM) did a research and found an interesting investment opportunity. It was a mid cap firm. JM then went ahead and created a detailed 9 page equity research report and shared it with its subscribers. They projected a target price with a 50% gain in 2 years. They were convinced that this was an excellent firm, with good prospects. In the next 6 months, the share did well, it appreciated 60%, and seemed to justify the recommendation. The target price was achieved, but JM continued to be positive about the firm and retained a BUY on it.

Then things changed suddenly. There was a ‘bad news’ article about the firm in the papers. It contained unconfirmed but serious allegations. Suddenly there was uncertainty around the firm. The share price started falling. Market pundits all said they were unsure about the firm. Every action of the firm became suspect. Management interviews and press releases were cast aside by investors. Within weeks, the share price plunged 65%. In such a situation most investors would buckle under the pressure. Mutual funds cannot allow such losses on investments. HNI investors in the firm panicked. FPIs demanded investor calls and worried about everything. Naturally everyone was worried.
In share market parlance, this is called a Falling Knife.

At JM, the approach is to analyse such situations from the fundamentals and find the facts out of the news flow. The recent quarterly results of the firm were excellent. The stated 3 year vision was taking shape. There is normally no reason to disbelieve management statements and official press releases. Most of the rumors were vague, difficult to disprove and causing more controversy. Its possible that share market operators may have grasped this opportunity to drive down the price. But this can only be done for a short period of time.

It requires a lot of character to stand up to a Falling Knife. But the analyst at JM was sure. So JM advised their subscribers to hold on and not be swayed by the price movements and controversy.

jainmatrix investments

After the 65% fall, the share stabilized. It then started rising again. The JM subscribers, who were invested and took our advice, saw their notional losses disappear. The brave ones actually took advantage of the fall and saw a nice profit in a few weeks.

This brings me to my question,

How much is Conviction and Confidence worth to an investor in the stock markets?

Any answers, my friends?

Feel free to add your comments, below, to this post.

Regards,

Punit Jain, founder JainMatrix Investments.
PS – This note has been created as marketing and educational content to help investors. No security is mentioned here. Such a situation can arise many times in the stock markets.

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012.

This note has been created as educational content to help investors. No security is mentioned here. Such situations can arise many times in the stock markets. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

Why are Indian stock markets attractive for Investments?

In this 5 minute video, JainMatrix Investments founder Punit Jain presents a few reasons for investing in Indian stock markets. This is part of the Investor Education section of http://www.jainmatrix.com.

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DISCLAIMERS

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

Do you want to be a value investor?

I came across a Question on Quora, the Q&A website, and would like to share my Answer here:

The question was – How do I start value investing?

To a new individual investor, learning Value investing can open the doors to wealth and a nice side income. In fact if Indians take to investing like in the developed countries, half the population may eventually have at least some money in stocks.

Here’s what to Do: 

You may find some points are from an Indian context:

  1. Start by looking at your finances. Can you set aside some money for a 2 year period without needing it, and which if your experiment fails, you can lose? This is your seed money.
  2. Get a brokerage account. If you are internet savvy, online only accounts are sufficient. Look for convenience and low brokerage. Buying or selling a share today is as easy as eCommerce.
  3. Next you need to find listed companies whose products or services you (or people around you) love. It could be your bath soap. Or your savings bank. Or your biscuit snack. Whats the brand? And company. Connect backwards. Use moneycontrol.com to see if the company is listed.
  4. Now Research this company identified. What else do they make. How are their finances. Who owns the firm. Are the promoters good people. Have they done well in the past. What are growth plans. There are some financial ratios that you need to check. The P/E, P/B and D/E should not be too high. Look for companies with high RoE. There are other ratios, but this is a good start. Value stocks are those that are worth much more than indicated by their current share prices. The research can result in a fundamental thesis for a company, like “with a new factory revenues will grow 45% and profits 60% in 2 years”, or  “the 40% fall is share price is unjustified and we expect a full recovery plus 20% based on growth of financials”.
  5. Investing is like growing a tree. It can’t be hurried. It needs care. Embed from Getty Images
  6. If you feel good about the research for a certain company, start your investing exercise by buying a few shares, a fraction of your seed money, say 20%.
  7. Repeat above exercise in some time to find 2-3 more companies and add 20% of the seed money for each. Track these firms for a few months. Keep reading up about them. See if the news flow is positive or negative.
  8. Review your company in 3-4 months by relooking at (4) questions periodically, say after the quarterly results. Sell the company if (4) answers on review don’t add up or price has gone too high. Buy more if the company performance is good but price goes low.
  9. Remember, a fall in share price and a notional loss for you is not necessarily a sign of a bad company. Check against (4) questions. Similarly the converse. A gain in share price may not necessarily be the sign of a good company.
  10. Build your learnings. Find non consumer companies that you understand or are comfortable with, to invest. Read books by great investors like Warren Buffet, Peter Lynch and our own Mohnish Pabrai. Keep learning.
  11. Cut out investing noise. Any stock tips you get should only be starting point for research with (4). There are a lot of hot stock picks floating around. But who is tracking it for you?
  12. Both greed and the pain of loss will hit you over the years. There will be times where you see a 30% notional loss in a share. Just check against (4) questions for buy and sell decisions. Try to stay satisfied with past decisions, while learning from them.
  13. Be humble. You will be wrong many times, but you have to bounce back.
  14. If you get it right, over the years you can outperform the Sensex / Nifty Indexes, equity Mutual Funds and Portfolio Managers. If you grow in learning and confidence over months and years, as does your portfolio, this door has opened for you. Congratulations.
  • This is how I did it. This is my process and some lessons learned over 12 years as an investor. I am now a SEBI registered and certified Research Analyst.
  • Visit JainMatrix Investments  to fast track your above process, or to get an experienced stock market Analyst to partner and help you. Note that not everyone can be a good value investor, or even spare the time required. A section called Investor Education has been created only to guide you along.
  • Read Disclaimer below also …… one point from there I would like to emphasise is – The suitability or otherwise of any equity investments will depend upon the person’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor.

Upvote my answer on Quora if you liked it – Quora

JAINMATRIX KNOWLEDGE BASE 

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  2. Mahanagar Gas IPO 
  3. How will Brexit impact Indian investors?
  4. A Repurpose for our PSUs
  5. How to Approach the Stock Market – A Lesson from Warren Buffet
  6. An IPO Roundup and Update 
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  8. New Banks: Big Changes in Small Change
  9. JainMatrix Investments Announcements
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  15. Syngene IPO: Good Pharma R&D spinoff from Biocon.
  16. JainMatrix IPO Reports deliver 60.5% returns

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  • Visit the Investment Service page to find how you can get more. Or Click LINK.
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DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst (SEBI Registration No. INH200002747) under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

How to approach the Stock Market – a lesson from Warren Buffet

This year the world’s most famous investor Warren Buffet did something unusual during his firm Berkshire Hathaway’s AGM.  He let the Apr 30th one-day event be telecast live over internet to anyone interested. I have taken one wonderful lesson delivered that day by Warren Buffet and rewritten it for the Indian market. It is here in 7 simple points.

  1. Lets say there are a 100 people sitting in front of us, and these 100 represent the entire Indian stock market shareholders, they own all the shares available. See Picture 1.  jainmatrix investments. audience
  2. Lets make a line in the center, and separate them out with the left half owning 50% of all shares and similarly the half on the right. The left half are passive investors. They do not trade shares much, just buy and hold. The ones on the right are active investors and traders. They invest through equity mutual funds, equity futures, buy and sell options, trade intraday, hedge funds, etc.
  3. The Indian Sensex has given 14.8% CAGR annual returns in 14 years since 2002. See Fig 2. jainmatrix investments, Sensex May 2016
  4. The people on the left are going to get the average returns of the Sensex, ie. 14.8 % CAGR over this entire period. They are passive, and so they will get the average returns. Tax on profits that are Long term capital gains (>365 days) on equity is zero.
  5. The ones on the right are also going to get an average of 14.8% over this entire period. However, their real returns will be much less due to tax, commissions, brokerage, AMC charges and success fees.
  6. Why is this? This is because:
    • The equity mutual funds are going to take away as much as 2.5% per year of AMC charges.
    • The traders in Futures and Options are essentially playing a +14.8% sum game, where the underlying equity is on average appreciating by 14.8%, and all the trading only declares some winners and some losers. The losses of the trading losers get transferred to the winners. Also, the intraday, momentum and swing traders too are in the same boat as F&O.
    • Trading is governed by an equation, Profits (by winners) + commissions + taxes = Losses (by losers). Of course if you are a good trader, you will get superior returns while another group will face the losses. But risks are higher here.
    • A lot of your money is eaten up by brokerage, taxes, AMC charges, fees and commissions.
  7. The lesson here is – become a passive long term investor and get the 14.8% long term average of returns. Spend your time on more useful things, and get good returns on investments.

Once again we thank the great investor for his simple but powerful messages.

JainMatrix Investments helps you in your investing process with good stock picks for the long term, monitoring of the firms over these periods and superior returns, all at a low fixed subscription rate!!

We have given Sensex plus returns in our Large Cap Model portfolio for over 3 years. And our Mid and Small Cap Model Portfolio has actually provided exceptional returns. See JainMatrix Track Record !!

Annual subscription for the Investment Service is available for Rs 11,999/- (India located) or US$ 210 (located outside India), for individual / Retail investors.
Investment firms, wealth professionals and Institutions may contact us for a quote for Investment Services.

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Warren Buffet enthusiasts may see the entire 7 hours of the AGM event on video on LINK.

JAINMATRIX KNOWLEDGE BASE 

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  9. JainMatrix Investments presents the Investment Outlook for 2016
  10. Alkem Labs IPO
  11. Goods And Services Tax (GST): Integration And Efficiency
  12. Café Coffee Day IPO – Very Hot Coffee 
  13. Syngene IPO: Good Pharma R&D spinoff from Biocon.
  14. JainMatrix IPO Reports deliver 60.5% returns

Search for companies/ sectors of your interest in Search box in the right panel.

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DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst (SEBI Registration No. INH200002747) under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

A Superior Investing Process – Do a DIP SIP

Did you know that the DIP SIP is the most efficient way to invest in the stock market?

We at JainMatrix Investments recommend investors to invest in equities in a Direct Equity – DIP SIP mode. The equity markets have fallen sharply this year, and this is a good time to invest. Let us explain this process.

What is a SIP?

A Systematic Investment Plan or SIP is a smart mode for investing money which allows you to invest a certain pre-determined amount at regular intervals (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments where the saving habit becomes a routine. The SIP approach can be used for any investment vehicle, such as FDs, MFs, direct equity, etc.

Why Equity investments?

Historically investments in equity stocks have given higher returns amongst all the other asset classes if investment was done with discipline and a long term time horizon. See an assets map where we present a number of asset classes and the Risk-Return trade off, Fig 1.

Fig 1 – Comparison of Asset Classes, JainMatrix Investments

Fig 1 – Comparison of Asset Classes (click on image to expand)

What are the benefits of an equity SIP?

  1. Ride the Volatile Equity class and reduce Risk with Rupee Cost Averaging
  2. SIP can be started with very small amount of money, and increased at a later date
  3. Timing the market is not necessary. But gains are best when markets are low.
  4. Long term financial goals can be aligned with SIP
  5. Disciplined approach towards Investment helps in controlling the emotions
  6. Investments get aligned with income flow and it becomes a regular habit

The JainMatrix Investments Model Portfolios

JainMatrix Investments launched its Large Cap Model Portfolio in Dec 2012 and its Mid & Small Cap Model Portfolio in Feb 2013. These two portfolios are chosen from over a 100 stocks that we have researched over the years. The main reason for two separate model portfolios is to offer simple investment choices, and to align with the risk appetite of investors.

  • The Large Cap Model Portfolio consists of 7 stock picks from 7 different sectors. The firms chosen are identified as high potential large caps with good fundamentals. The minimum investment period is 2 years. The objective is to outperform the Sensex/ Nifty by 5-10%.
  • The 7 stock picks from the Mid & Small Cap Model Portfolio are from 3-4 high potential sectors. These firms have very good growth potential irrespective of mid, small or micro size. The minimum investment period is 1 year. The objective is massive out-performance of Mid/Small cap Indices.

DIP SIP and equity MF SIP compared

Now that you have understood the equity SIP mode of investment, it is imperative to compare DIP SIP – investing directly in equity with equity Mutual Funds.

1 – Expense Ratios

Investments in equity Mutual Funds are expensive in terms of the expense ratio cost incurred to the investor. Expense ratio states how much you pay a MF in percentage term every year to manage your money. This includes the fund management fee, agent commissions, registrar fees, and selling and promoting expenses. The Expense Ratio that is disclosed every March and September as a percentage of the funds net assets. As you grow your investment portfolio over the long-term, a high expense ratio will eat into your returns through power of compounding. The expense ratio of debt MF’s is typically in the range of 0-1% whereas it is in the range of 1-3% for equity MF’s. See Fig 1.

Exhibit 2 – Expense ratio of MFs, JainMatrix Investments

Exhibit 2 – Expense ratio of MFs (Source: Finalaya.com)

In comparison to this, the JainMatrix Investment Service has a fixed/ flat annual charge.

2 – Performance

Now let’s have a look at various index returns, top performing large, mid & small cap MF’s and the performance of JainMatrix Investments model portfolios.

Top 10 Large Cap MFs over last 3 years

JainMatrix Investments

Fig 3 – The top 10 Large Cap MFs over 3 years (Source Value Research)

The best performing large cap MF over a 3 year period is Birla Sun Life Frontlife Equity Fund which has given investors a 13.7% simple annual returns. In the same period the SENSEX has given investors a simple annual return of 7.27% and JainMatrix Investments Large Cap Model Portfolio has given a simple annual return of 13.3%. Let us understand this graphically in Fig 4.

JainMatrix Investments

Fig 4 – The Sensex, MF and JainMatrix LC Portfolios (Source Value Research)

Top 5 Mid Cap and Small Cap MFs over last 3 years

JainMatrix Investments

Exhibit 5 – Return and expense ratio of top 5 Mid and Small Cap MFs (Source Value Research)

  • The best performing Mid-Cap MF over a 3 year period is UTI Mid Cap Fund with a 28.08% simple annual returns. In this period, the S&P BSE Mid-Cap gave returns of 17.14%.
  • The best performing Small-Cap MF over a 3 year period SBI Small & Midcap Fund gave 33.23% simple annual returns. In this period the S&P BSE Small Cap gave a return of 18.22%
  • The JainMatrix Mid & Small Cap portfolio gave a simple annual return of 47%. See Fig 6.

JainMatrix Investments

Fig 6 – The Indices, MF and JainMatrix MSC returns (Source Value Research)

3 – Control

Investors in MFs hand over the investment performance to the portfolio management team of the MF. They can now decide only to buy, hold or exit. However in the case of the JM Model Portfolios, investors retain control over the purchases as the investments are in their own trading/ demat accounts. This offers additional flexibility to investors for both entry and exits.

4 – Liquidity

Liquidity is the investors ability to encash in the case of urgent need for money. MF’s can be closed ended MFs that will be locked in until maturity thereby removing chances of liquidity during the investment term. Thus if an investor wants the money immediately, then he/she would have to pay an exit load for the same which is again 1-3% of the invested amount. ELSS MFs are locked in for 3 years. Direct equity is very liquid as within 2-3 days the stock can be sold and the cash credited into the linked bank account. However from a tax perspective, the treatment is the same for direct equity and equity MFs. Long term capital gains kick in after 1 year of investing.

How to execute a DIP SIP?

Checklist for a Direct Market SIP:

  • You can use your current Online Trading account/ broker relationship for the DIP SIP. If you have to choose among your broker options, choose the one with lower brokerage or better ease of use.
  • Decide on the 5-7 stocks you will invest in.
  • Decide on the amount you will invest every month – here I would suggest you fix an amount in the range of Rs 5,000 to 50,000 and keep up this amount every month. Thumb rules here can be 10% of your take home salary or 50% of monthly savings.
  • Create a small calculation excel for helping you decide the actual number of shares to be bought. See section – Start Investing.
  • Decide a date for investing. If you are salaried, perhaps 2nd or 3rd every month is a good date as it is right after you have received your salary. Or any other convenient date. Keep a reminder for this.

Choose Your Stocks

This is an important step. My key principles in choosing the stocks are:

  • For a high stability low risk portfolio, choose large liquid blue chips.  They should be Nifty/ Sensex stocks. You do not want too much volatility in this investment.
  • For an aggressive higher risk portfolio, choose mid & small cap stocks with high potential.

Subscribe to JainMatrix Investments Investment Service to receive proven, high performing Model Portfolios

Start Investing

  • You are now on the day you are starting your DIP SIP, within trading hours.
  • Choose your DIP SIP portfolio of stocks. Lets say you chose the top 5 shares by mkt cap.
  • Lets say you have chosen the amount Rs. 30,000 to be invested every month for your DIP SIP.
  • Create a small excel – which can help you calculate the number of shares right now. See fig 7.

JainMatrix Investments

Fig 7 – Tool for DIP SIP purchase

  • Open the excel, do the calculation; then buy the DIP SIP through your broking account.
  • Your DIP SIP can be done in 10 minutes every month. 

Start your DIP SIP today. Subscribe to the JainMatrix – Investment Service to get our top performing Model Portfolios  and recommendations and you are ready to go.

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Happy Investing!!!!!

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DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain has applied for certification under SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .