0:00 I want to know what's your net worth and how did you go about building this corpus? I have much more than what I would consume all my life. In 10 12 years I had a cr of cash net worth that might be you know worth something like 50 today. Wow. rupees SIP say you can realistically make your first K. Yes, absolutely. There's AI, ESG, EV also. Do you think these are sustainable themes that people should be investing into at this point? They don't look sustainable. Hi
0:52 everyone. We have with us Mr. Dendra Kumar who is founder and chief executive at value research. Hi sir, how are you? Thank you. I'm very excited for the conversation and I want to talk to you about a lot of things but I want to focus today on how to build your net worth and how to build your mutual fund portfolio. Okay. And honestly, I want that by the end of this video, they should have a guideline on how to build their portfolios and the dos and don'ts that they should stick to. Sure. So, that sound good to you? Yes, very much. That is what I've been, you know, doing to make a living for last 30 35 years now. Amazing. So, I want to know what's your net worth and how did you go about building this corpus? my net worth you know the absolute amount doesn't matter but you know the real thing is that I have much
1:38 more than what I would consume all my life and uh also you know my net worth is not a true reflection of all my earning for the reason that you know I founded value research my first five seven years all my earnings all my profits went into building the value research that is the equity of value research I think my personal net worth you know it became a cr or so after 10 12 years wow So how was the journey to build that first career? Uh one is that you know if I have to really you know for anybody viewing this your state of mind is broadly can be divided into three. Okay. One is that when you just don't have enough you get the money and you spend it all and you know you have things
2:24 lined up. Yeah. And that carried on for in my case for many many years for seven eight years. Initial years I you know I barely had enough then you know so your mindset changes quite substantially when you don't have enough for the essentials true then the moment you have essentials then you but I think you know I feel very uh happy about that phase uh looking back of course at that point I was not happy that I don't have enough but looking back I think it was very useful in a sense that it helped me form habits uh which is you know I can live within my means and not making enough money, barely meeting your ends and uh still living with dignity respectfully and uh I think those years were very nice. I think it took me 10 12 years
3:12 because you know as I was telling you that there are three phases you don't have enough then you have a little more than enough but you still have to prioritize and that was this phase where the show off in the society was just coming up. Yeah. The only car we had was Maruti 800. And then suddenly you had the option of picking any of the 10 brands or the bigger cars or the bigger homes. You know, all these things became lifestyle issues. I was not gripped by this. So I think you know I just was very objective in my spending. And when I had my first CR maybe it was entirely because you know by that time I was very low with my spending and lower with my lifestyle expectations. Yeah. Uh being choosy about it. So in 10 12 years I had a cr of cash net worth but uh but that
3:59 was you know 10 12 years you know it looked like but the worth of that 1 cr uh after 10 12 years you know which is 2001 or 2002 was quite significant because that might be you know worth something like 50 cr today wow so so what I've observed is that your mindset towards money has changed quite a lot towards your journey to 1 cr but 1 cr finally earn you feel portfolios after that first
4:50 [Music] Yeah.
5:40 unpredictable. [Music] mindset. Mhm. Oh, wow. [Music]
6:30 office. office. Long drive.
7:20 [Music] It's practical solution. mental framework. Okay. So for any person for a normal person who's who has a decent salary what do you think investment journey and do you think that there's a checklist that they should follow or ensure before they really start investing checklist
8:14 Earliest invest in bed. Control.
9:03 control. Parents, parents basically guestomic [Music] parents. Rightly so. True. [Music]
9:57 Investment definition. Fore emergency fund.
10:57 station insurance. Health insuranceepend. Financial
11:48 stress insurance. Okay. Okay. mutual
12:36 [Music] fund. Okay. [Music] Mutual fund stock market. There are hundreds of funds right now, right? And I feel like every person is super
13:21 confused. So, how do you make sure that you're actually picking the right fund for yourself and not getting confused? That's true of all dimensions of life. Yeah. If you go to buy shampoo, you'll have the same problem. So, that is true for mutual fund as well. It's a consumer product because it's a aspirational thing. It is you know you are postponing your in spending today to invest for the future. Yeah. So a lot of people weave a story around it. People don't look by based on the objective number that okay this is done XY Z and I'll I'll invest because of these variables. They just buy into the story. Yeah. And humans connect to a story much easier. That is why we have so many sto so many mutual funds or so many type of mutual fund.
14:07 Officially there are 16 kind of debt funds. Okay. And there are 16 kind of equity fund. This is officially sanctioned open index fund. Besides that you have these index fund and all kind of uh in the speciality sector you they can have another hundreds of them. So let that be. There are only four kind of useful products. Okay. Money for few days. Think of liquid fund. Okay. And one will do. There is no great there is no great difference between a great liquid fund and a lousy great liquid fund. The liquid fund universe is such so narrow that if you just drop the funds with the highest you know top quartile based on expense everything will converge in the v you know in the
14:54 in the range of 1/4 of a percentage. Oh wow. The best funds will be 7% and the worst fund will be 6.75%. So you are not and you don't know which one will do well. So don't spend time invest in a liquid fund or ultra short-term bond fund or a money market fund and that is it. Don't complicate it money for few years but within 2 three years make sure that you're not taking too much of equity risk or a negotiable goal. You think that okay you want to buy a car in next 2 three years and if you don't if you're unable to buy the car in three years you can well buy it in the fourth year. M so it's little negotiable that may not be true when your child is going into the college into the school that is non-negotiable. So I'm talking of negotiability of a goal and a non-negotiability.
15:40 The non-negotiable ones should be invested in fixed income fund only. Okay. Predictable return and predictable return of capital. And over 2 three years period you will not be disappointed. You will not get a nasty surprise and that is very important. negotiable goals you can put in something you know which is like a conservative hybrid fund uh which is you know 70 80% fixed income 20 30% uh equity and that will help you reach there without too much of turbulence money for couple of years and that I mean five years and more for that uh if you're a conservative guy start with aggressive hybrid fund okay if you are a you know run a middle of the road person you want you you understand Okay, market goes up and down you know you appreciate
16:27 that invest in a multiap fund or a flexi cap fund that will get you a wide exposure and just start with one fund. Okay, if you are a person who is venture sum, you want good return. Might as well buy a miden small cap fund, might as well buy a small cap fund, make sure that you're buying these generic categories, not a sectoral fund, not a sematic fund. Do your SIP. Don't buy at one go. Initial investment should never be one-time investment. Reason is that you know when you are starting you are compromising, you are, you know, you are deciding not to spend it while you still have something to spend on. And when you invest that money and when you invest lumpsum assuming that you know you have saved one lakh rupees and you have choice of you know doing spending it and investing it. Yeah. The moment you are
17:12 investing it you are coming it with great expectation and your initial money when you invest at one go that 10% decline in the market your one lakh rupee actually is now 90,000. When you see that 90,000 you are it's very unnerving. Yeah. You start relating that okay this is my four months of saving. It has taken so long for me to accumulate this one lakh rupee and you know one day it went down. Yeah. And uh you you are not acclimatized to the market. You're you know you're not used to this market. That is why you know you need to really stagger your investment. Yeah. So that if you are investing your 10,000 rupees spreading it over the next 10 months 12 months then what happens is that market goes down by 10%. You're you are disappointed. Nevertheless you think
17:58 that okay next month I'm buying cheap. uh you feel little happy that okay I may also able to buy cheap so uh that is why you should be spreading your investment that is why SIP and SIP is not a trick that you know you it always works it just helps you manage navigate and get used to it acclimatize yourself better so start with any of these vehicles for the long run got it and which ones to choose just look for the ones which are beating the benchmark mark okay on a 5year basis keep it very simple and if there are 10 funds which are beating the benchmark in a narrow range choose the one with the lowest expense end of the story uh that way you know you will be able to eliminate this this you know the
18:46 problem of plenty which every investor faces and you will be able to choose with confidence and uh if you are following the step of doing your SIP you will not be unnerved by the you know swings that in the market. Amazing. Um but the thing is that investor and when I look at the news of course I get scared because there is so much that is happening right now. So do you think that as a very normal middle class investor who kind of represents a lot of investors that are in the country right now? Do you think considering everything that is happening? [Music]
19:33 middle class. Yeah.
20:19 Okay. Okay. Volatility. Yeah. Yeah. H I've se seen a lot of influencers saying this you start your SIP and after
21:04 XY Z number of years you'll get your first K. Do you think 5,000 SIP say you can realistically make your first kad? Yes, absolutely. You know but there are two things two three things to it. One is that uh there is an easier way. Start with two cr and you'll actually uh end up with a cr uh no but jokes apart you know 5,000 rupees if you start uh then I think you know first 2 3 years you keep doing your 5,000 rupee and if if there is any increment then you know make it 5,000 500 or 6,000 but I think one should not look at 5,000 rupee. Life does not move in a straight line. H you you start you get out of your college
21:50 and you get a job. You get a job when you have not proven yourself who you are, what you are capable of and somebody is taking a chance on you is giving you some responsibility and in return for your time he's giving you some money and uh and if you are able to do it for two three years these this is habit formation. Yeah. This is actually a toddler's thing. You're not saying that you know you are born and you are standing on your feet and you start running. You really don't become a you know marathoner or or a sprint runner. You are basically forming your habits. Then if you grow because for any plan to succeed with investment you need to earn. Yeah. Then you need to save and
22:35 then you need to put it to work. So earning saving and investment this is the prerequisite of you know doing something if in the initial years you start with 5,000 so that when you start earning three lakh rupees a month then you are able to spend invest more the value of five 5,000 rup SIP is not in the 5,000 rupee becomes 60,000 rupees in a year the value of 5,000 becomes 60,000 rupees in a year is one of the biggest demonstration which has impact on your mind that you are a person who has 5,000 rupee. Yeah. And there are all your friends who have also 5,000 rupee. But you have a cash net worth of 75,000 rupees. Yeah. Once you have done this and you have 78 lakh rupees.
23:21 Imagine 5,000 rupee 5 years ago and now 10% increase which could be a very normal year for or maybe a poor year in equity market and you will still earn 75,000 rupees. Yeah. And then you know in five seven years time you will have a situation that the money that you are putting and the appreciation of your investment is more than the money that you're putting. Yeah. And that has a magical impact on your mind. Yeah. And you become a believer. You become a disciplined investor. You become patient. Let's say I'm investing right now in three mutual funds. Right now my ask question to you is key I don't know mutual fund constituents and how do I make sure portfolio is genuinely diversified and job constituents say they're actually not overlapping. So how
24:08 do I go about assessing this? No, one is that choose a diversified vehicle. Okay. The claim is that you know it is claiming that it is not a narrow fund because when you choose a large cap fund, it's not diversified. Oh really? It will be diversified across sectors but it is it will only be large companies. Yes. That is the deal. Likewise, if you invest in a midcap fund or a small cap fund, it will be smaller companies. It might be diversified there. But the problem is that you know some of these companies, some many of the companies or many of the sectors are not meant for small cap. Yeah. You will not have a cement company as a small cap. You know you it you might have a tiny company somewhere but not a meaningful one. So there are many sectors. You don't find metal companies in the small cap. M so you need to
24:53 choose a vehicle which will get you exposure to a very diverse set of uh you know companies across the market. Then comes you know there are different styles. There are growth managers and then there are value managers. Broadly speaking you know there will be many kind of contra and this and that but you know broadly there are two kind of fund managers. Okay. one who are looking for reasonably priced stocks and there are there are fund managers who are willing to pay some premium for a stock which is which commands a premium for the growth that they are able to deliver. Mhm. So you need a combination of this because you know in the market different things do well at different times. Every part of the market is cyclical. Every sector is cyclical. Every style is cycl cyclical. Every segment large mid small
25:40 micro is cyclical. Mhm. So you need to have a broad exposure to the market and that is why mutual funds come in. So make sure that your vehicle is diverse. Okay. And after that if you have to look at you know are you really diversified. Yeah. Are what is your spread? What is the overlap then maybe you know just set it up set up your portfolio at value search online and it'll be able to tell you without without any cost. It's a free service. Okay. uh where nearly you know uh 2 three million people have been maintaining you know from the days of manually tracking their investments they have been doing their at value research. Wow. So mutual funds which absolutely makes sense but how do you know Yeah. Yeah. But how do you
26:27 know can we talk about maybe three or four metrics or numbers or just signals that an investor should look at? You have to be very clear about what do you need? Money for few days, money for few years. Yeah. And money for many many years. Yeah. Broadly if you are decided then you have to set your principle that I need to be very diversified with this. I need to be very conservative with this. And based on this just choose one of the two category you know for example money for few years. There are four five category of funds from which which you should choose which you should combine together and then look at the good fund. One is the multiap fund. Then the flexi cap fund then the large and midcap fund then the value fund. These are the
27:12 diverse category and if you need to save taxes maybe the els these are funds which are go anywhere funds. They are not large cap midcap this they can go invest anywhere based on once you have chosen this universe I think you know if you're doing it at value research look at the ratings this is nothing but risk adjusted performance matrix drop all the funds which are three star and below okay that will reduce your universe to about 10 15 20 the remaining ones look at the funds which have beaten the index their own benchm Mark in 3 years time and 5 years time you'll be left with handful and in the handful if you want to invest in one or if you want to invest in two or if you want to invest
27:58 in three just sort them by the expense you are sorted there are a lot of new funds in the market a lot a lot of new different instruments in the market right u I've seen on the internet there are passive funds ETFs index funds um ams for these funds has gone from 7 lakh cr to now 11 lakh cr in a year which is a massive of jump. Um but I want to ask you do you think these are actually sustainable investment instruments trend that people are excited about it's a new name and people are like okay invest what do you think this is no this is not this is very sustainable okay uh this is this will work and these are not individual investors investing in these funds directly uh the way it is happening is that you know index funds has be become
28:46 the default instrument for employee Provident fund. So if you work in a company, the company opens your provident fund account and it deducts a an amount which is 8 and a half% from your salary. It puts some money from its own side. There is a law which uh mandates that every company should be doing it for all pe all all employees below a certain threshold and uh that money gets into pro employee provident fund. Employee proven fund puts 10 or 15% of that money into index fund and that is why you have this money flowing into index fund. Then comes you have these you know NPS which is putting money into these index funds as well or those companies top 200 companies. This
29:32 you know the institutional mechanism which is channelizing individual investors money through provident fund into them. Then individual many companies some investors have also taken fancy to these index funds. But uh I think you know it is far from gaining popularity because you know the story of the of the mutual fund that here is the EV fund or here is that defense fund and you know here you can do some magic and this is where the magic happens or investors favorite pastime is looking at recent past performance and chasing returns that is where they invest. So you know that money getting into small caps or micro caps or this or some exotic index don't get carried by this number and I think you know index fund is a good way to start if you're unable to decide if you're unable to do all the
30:18 things which I was saying that look at the fund look at the larger and midcap fund flexi cap multicap elss value and then do the sorting look at the comparison and uh drop the funds below three star so you know that might be hard work choose an index fund uh lot of people you will do no better no worse just as good as the index and that that might be good enough for most people uh so I think you know this this is actually the beginning we never had this in the past as I was telling you that I haven't come across anybody who has done a SIP for five years and ever lost money I have come across all kind of investors who have ventured in any other way tried any other thing followed
31:04 the trick, gotten greedy at the wrong time or uh and getting greedy at the wrong time is very easy you know because everybody is making money and you think that you have missed the bus you get leed into it. Yeah. So once you do this I think you know get started somehow index fund active fund whatever fund even even a young person 20 year old getting started with a micro cap fund no and does his SIP for 5 years will end up being a big winner anyway just that you know he might have a heartburn in between. that this damn thing you know fell by 30% uh in one of the months. Yeah. But if collectively the market is going up then you know that your money is safe. You know that you know if you're investing for 10 years you your money is safe. Yeah. Just make sure that you are not catching the market high. The risk of market high catching the
31:50 market high is that if you invested in n in 2001 then it took 5 years for you to break even. Yeah. If you invested in 2008 January it would have taken another four years for you to break even. And the problem of those long period for a new investor is that they don't have the patience and those investor and it is it becomes impossible for those investors to stick around simply because you know a investor who comes at the last or the end of the of the of the of a boom Mhm. comes with a huge expectation and he's so greatly disappointed that he swears never to come back to the market again. True. True. And I've seen it in 1992. I've seen it in 20 2001. And I have seen it in 19 2008 and uh we haven't seen a big fall
32:37 thereafter. Yeah. But I have come across people you know who uh in the month of you know March 2022 the COVID fall 30% in a month and uh the people who got out they never got an opportunity to come back. Yeah. So obviously there are a lot of new avenues but I've realized themes popular there's AI ESG there is um you know now EV also. So do you think again do you think these are sustainable themes that people should be investing into or is it just like a viral trend that people are excited about and then 3 years down the line they're going to be like why did we ever invest in this? Um no at the at this point they don't look sustainable like index fund you are buying the Indian economy you are buying the largest companies in the country not
33:22 these ones some of these as I told you that you know mutual funds are a consumer product people are creating fancy sounding fancy looking you know a product which strikes accord with people you know it's like fair and lovely you know you create one and you make somebody's you know aspirational that okay this will improve you likewise you know you can actually trigger greed here that you can get wealthy because this is a trend you can relate to. I have seen you know uh infrastructure was a buzzword and uh in 2008 everybody was launching a infrastructure fund and everybody tried to launch a infrastructure fund yesterday and after that the you know it has been a test of patience you know five seven years it didn't work and you know even now it is
34:08 there is nothing extraordinary so keep it simple keep it boring diversify be interest your money to a good fund manager if you can't interest If you can't find a good fund manager, put it in an index. I do my SIPs, but I want to ask you, do you think SIP like every month money is going and I should chill out or at some points maybe, you know, every few months can interpit and see if I'm even investing in the right place right now or should I just let it be? First three years, don't do anything. Okay. And after that, do an annual check. Look at the same variables which you should choose which you should look at when choosing a fund. You looked
34:53 at that it is beating the benchmark. You looked at that it is a fourstar or fivestar fund. That is good enough. If you are able to do these two things that it's still beating beating the benchmark is still fivestar and fourstar at at worst three star and it is still in the top cile of the lower expenses. It's fine. You don't need to do anything. Okay. and portfolio rebalance every few years again like you know needs expenses your lifestyle changes every few years to does the same apply for rebalancing my portfolio as well rebalancing is a completely different story to rebalance you need to have an asset allocation and I think you know nobody should actually think of having an asset allocation for the first 5 years of their investment okay asset allocation and rebalancing is
35:40 basically buying an insurance policy that when the market goes down, you have deep regret. Yeah. To save yourself from that regret, you start moving money in a very methodical way to fixed income so that that part of the money will never go down. And that also gets you an opportunity that if the market goes down, you will have money to invest when it goes down. And the simplest way of making money in the market is to buy cheap and sell when it goes up. And but it's very hard thing to do. So you do it in a methodical way that okay you have chosen that okay this money is going to remain invested for 25 years but once you have done it for 5 years and it becomes something meaningful if the market comes down you will have deep regrets which the market will come down
36:26 anyway uh whether you do asset allocation or not so what you do is you move 25% of your money into fixed income now if the market comes down this 75% which was equity will now be 70% Okay. Move your money from fixed income to equity so that it again becomes 7525. This is rebalancing. Yeah. So for to rebalance you need to do asset allocation. To do asset allocation you you must have something meaningful. Yeah. Why do any asset allocation while you are beginning in your first year you don't have any anything to lose. If I'm a new investor,
37:33 Mhm. Okay. Basically, [Music]
38:22 So 2080 ratio follow 2080 ratio Rebity debt.
39:13 predict. Aggressive hybrid fund equity fund. Okay.
40:19 Okay. Mhm. income. Retirement 65% equity 35%. I think the biggest insight
41:05 focus withdrawal maybe. So sir amazing interview but one last question do you have any word of advice for our viewers out there broadly I would say that you know get started now if you have been not doing and uh do your job well so that you can keep earning you know that's the best investment that you do yeah that is that is you know that is what produces the earning and saving for you. Yeah. And once you have done this simple thing that I I was referring to, don't listen to anybody else. Yeah. Your own rules and your own belief and your own confidence, your own discipline, your own patience, your own plan. They are the biggest drivers of your performance.
41:51 Uh not somebody's secret formula. Don't listen. Don't don't expect any secret formula for anyone. If somebody has one, he won't share it with you. True. Thank you so much, sir. That was a wonderful session. I learned a lot of new things and I think take away that I have to methodical and I have to make it simple. Don't absolutely complicate it too much. Investment in the securities market is subject to market risks. Read all the related documents carefully before investing.
