People should spend more and also be more ambitious: Motilal Oswal Wealth CEO

How is your portfolio divided?

My portfolio would be 100% equities. Around 5% must be in provident fund that I’ll get on my retirement but I don’t count that in my wealth portfolio.

My largest equity holding is in Motilal Oswal shares and that would form roughly 75% of my portfolio. These are shares that I’ve received through the employee stock option scheme (ESOP) over the years. The remaining 25% is in mutual funds, portfolio management services (PMSes), and a few stocks. I invest in liquid funds from time to time but I have no allocation to debt funds.

That’s a lot of equities. How do you cope with volatility?

It’s simple. I don’t look at my portfolio. I’ve been in the equity markets for 25 years now and I’ve seen many ups and downs. I have experienced the 2000 dot-com crash, the 2008 housing crash, and of course the covid pandemic crash too. The dot-com crash was scary but with experience, you realize that every 7-8 years, there is a major crash and you have to be ready for volatility. You got to put that much money that you don’t need and that’s why I keep so much (6-8 months) of expenses in my savings account.

What’s your emergency corpus?

I have at least six months of my expenses in my savings account and that’s why I’m able to invest so much in equities. This part might earn only 4-5% interest but I like the comfort of having excess liquidity. That helps me stomach the volatility of the stock markets.

You seem to have put all your eggs in one basket. Isn’t that risky?

What I’m doing is not suitable for 99% of the people. We advise clients on their asset allocation and I’m a staunch believer in diversification for most clients. In fact, if you ask me, the best asset allocation is 20% in Indian equities, 20% foreign equities, 20% fixed income, 20% gold, and 20% in cash. If you rebalance this every year, it will give you fantastic returns with very low volatility. But what I’m doing is like entrepreneurship. You can make a lot of money by starting a business but it’s not everyone’s cup of tea.

Experts say debt allocation should go up with age. Any thoughts?

I will give you a different perspective. I manage wealth for high net-worth individuals (HNIs) and most of them will not be able to consume their wealth in their lifetime. Their wealth is going to outlive them. It makes sense to put that extra amount in equities because the time horizon of that money is super long-term. I’m now telling my HNI and ultra-HNI clients to decide on a finite allocation to debt, like ₹1 crore or ₹5 crore or whatever. Beyond that, make your portfolio aggressive if you think you can manage that. In fact, I convinced my parents to put all their money into equities.

How did you convince them?

They basically told me “You manage money for other people, why don’t you manage our money too?" Then I said okay but I told them that if I manage their money, I will manage it my way. Of course, they kept aside some emergency corpus and I was there to help them if they wanted anything. Secondly, I told them there would be no dinner conversation on portfolios. It’s working fine till now.

Do you own a house or rent?

No, I’ve always stayed on rent. The current house I’m renting, I think I can stay here for life because the landlord owns the entire building and the apartments on rent. So as long as he’s happy with the rent he’s getting, he’s not going to evict me. That way, my rented apartment is like my own house. Also, luckily I have a spouse who is comfortable staying on rent so that helps.

I’m not saying I’ll never buy a house, but I don’t want my house to be more than 10-15% of my net worth and I want to buy it with cash. I don’t like loans. I also don’t have any loans, not even a car loan.

Do you have any unique money ideas?

Nowadays on Twitter and other social media, I keep seeing posts that say: save more and spend less. I think they’re overrated. I think people should also spend and be more ambitious in their careers. You should spend more and work hard to earn more. People confuse frugality with being simple and modest. One can be rich and simple and modest. Also, this concept of financial freedom is overrated big time. People keep talking about retiring early but what do you do after retiring? I don’t want to spend the rest of my life tweeting about how I’m financially independent. Personally, I want to work more and I aspire for more.

Any investment bet that worked out well for you?

In 1999, I had a portfolio consisting of a basket of stocks. I must have invested ₹70,000-80,000 in it. Last year, I reviewed that portfolio and it had become ₹1 crore. In that portfolio, I had invested in a lot of useless tech stocks that went bust (like cyber tech, Silverline, etc.) after the dot-com crash, but luckily I had some good quality stocks like Nestle, ITC, and a few other good quality stocks.

I don’t time the market. Earlier I used to do that but after spending time with Raamdeo Agrawal, I realized it’s futile to time the markets. I feel very uneasy having too much cash, so the moment I have money, I put it directly in equities. Anyway, beyond a certain point, you can also use your equity MFs like a liquid fund.

How do you use equity MFs as a liquid fund?

Let’s say you have built an equity portfolio over 25 years and you decide to redeem some part of it today. You have to understand that the money you take out today is something that you’ve invested long back and in this case, going back up to 25 years.

Funds follow the first-in, first-out (FIFO) method which simply means that when you start selling, the units that you bought in the beginning will start to go out first. The point is once you’ve invested for a long period in equities, it’s difficult to lose money and if you have a large enough corpus, you can withdraw this money without worrying too much.

What’s the most expensive thing you bought recently?

The company bought me a Mercedes E-class . I think when I got the car roughly two years back as part of the company policy, it was priced ₹89 lakh, inclusive of registration charges. Ultimately, this amount would go from my total compensation. I believe you should enjoy money but it’s very important to also not live above your means.