 Good afternoon everyone and when we planned the session that how to plan your investment. We thought that in the routine we are taking the sessions in the evening. So let's change our planning in a different way. The investment of time is the another facet which we all learn in time. But we all know that they say that if things are planned in the right way, you get the better results. Though it has no relevance with that, they say that you should always have with the plan A fails, you have the other 25 well puppets to plan in life. So taking cue from that, we are taking the session forward from Mr. Shankar Nath. Mr. Shankar, you were able to hear me? Yes, yes, I can hear you Vikasji. I don't know. A lot of people are writing that we are not able to hear. A video card. We will restart the video. I think that I've been told by my team that they are not connected through the audio. That's why they are having a problem. So they can log in, we will restart. So good afternoon everyone. Amongst us we have Mr. Shankar Nath, who is formally associated with ET money, ICCI and HDFC. We were planning as to how we can discuss like our sessions. We know that by the name of Beyond Law CLC. We take sessions not only on law, but other aspects. But not only the lawyers, but we felt during the flux of time, that everybody thought how one should plan the investment. Though the topic, as I say, the lawyers always think differently. Investment could be of time, money, health, etc., etc. But the common issue when we shared it on the social media, we realized that Mr. Shankar has created his niche, that everybody knew that the session would be with relevance of the financial investment, etc. But as they say that everybody has to think in its own way. And there is some semblance and their goodwill. And I can congratulate Mr. Shankar that he has created his niche in that particular field. That once we said that how to plan your investment, it only meant and only meant one aspect that it has to be a financial investment. I will not take much time since he would be giving us food for the thought. But at the same time, it's also a time when people would like to have food also. But as they say that you don't have only just to have food, but you also have to have good planning for future. Then they say that you have to plan in a better way. We have been following Mr. Shankar in a lot of his videos, not only when he was in ET, but thereafter also. Those who want to connect with his videos, they can always log in on the YouTube by the name of Shankar Nath itself. And you will get a lot of relevant aspects for planning. We can say that it's a teaser from our side to look into his other videos and for his financial planning. Or do you, Mr. Shankar? And we are so obliged that you have accepted our invite. Yeah, thank you. Thank you so much Vikasti. So, you know, you use big words all the time. So thank you so much for this wonderful introduction. Actually, it's very nice the way you kind of connected lawyers and investing. In fact, I was just thinking about it that, you know, what is law? Law is definitely, you know, where two people have a difference of opinion. And then the law comes into the picture with certain rules and opinions. And, you know, there's an evolutionary process. I think investing is also a lot like that. So what I say might, you know, not be suitable for certain people, might be very suitable for other people, but investing is also nothing but a difference of opinion. So for example, when we go and we buy, let's say a stock or we buy anything, the guy who is selling always thinks that probably the price of that particular stock is going to go down, which is why he or she is selling. And the person who's buying at the same price thinks that the price is going to go up. So just like how, you know, law has a kind of a difference of opinion around it, investing also has pretty much the same thing. So what I've designed for today's session is, and I've kept it very open actually. So I'll be going through the simple steps that one needs to take from a financial planning perspective. I like to go into these six steps in a little more detail. And in case there are any questions that come in, I'll not be able to moderate the chat at the moment. But, you know, if you ask you or anyone in the team can actually let me know of the questions. I'll be more than happy to kind of interrupt myself and answer those questions. That's perfectly fine with me as long as the question is of that section that we are referring to. I think that would be a good way of kind of organizing ourselves. So great. So let's start with financial planning. And I think as I mentioned, there are six steps to it. So I'm going to dive right in and start with step number one. I think the first thing when you are kind of looking at your money, looking at your finances, it's to understand where you are at the moment. I think a lot of people don't do that. And when I say where you are at the moment, it is important to look at not just the investments that you have, and you should also look at the liabilities that you have. So the loans that you have, you know, in any form, whether it's home loans, personal loans, credit cards, etc. Now, this is where it gets a little tricky because, you know, you can always look at your savings bank account, you can look at your FDs, you can look at your mutual fund statement and you can say, oh, I have so many laks with me or so many corolls with me in assets that I have. But then when you look at your investments and liabilities, you got to look at it from a hidden perspective also. So I'll give you some examples. So for example, when we look at our investments, we definitely, a lot of people actually miss out on the provident fund that we have collected, you know, in case people are salaried. A lot of people miss it. They assume, you know, it's just there, but that would be a wrong thing to do. You got to look at provident fund. Another very interesting asset that people miss out on is inheritance. You know, a lot of people, you know, parents leave money, parents leave properties for people. It's standard Indian culture of doing that. And when we do our calculations, that is also something we need to look after. That, hey, you know, is there a house that I'm going to get as an inheritance or is there some money? And these are all questions that need to be asked with parents. You need to have that sit down at least once in two, three years. And similarly, there are hidden liabilities also. So for example, imagine a scenario where you are a salaried person, but let's say your father runs a business and your father without telling you has accumulated, let's say a crore in debt. Now you don't know anything about it, right? But then you will, you know, once your parent is no more, it becomes your responsibility to kind of extinguish that debt because those borrowers, those lenders are going to come and kind of hound you forever. So these are some very difficult discussions that one needs to have. And this is basically the starting point. So step number one is understand where you are when it comes to your financial planning process. Okay. Step number two is understanding what are your goals. And again, this is very important. So you need to know, you know, what are you going to need? What are you, you know, where is the money going to be required in the next one year in the next five years in the next 10 years, 20 years, etc. And I'll be speaking a lot more from my experience. So I think the one year goals, three year goals are actually quite easy to kind of think of. I think it becomes tougher when you think of the longer term goals. So for example, if I were to ask someone, or if you were to ask yourself, how much money will you need for retirement? I think that's a very tough question to ask, you know, someone might say, I've discussed it with maybe a dozen people in the last month. Someone says as low as one crore, someone says as high as 50 crores. And when I say, okay, how do you justify something like a 50 crores, the person has no answer. So it's a very, it's a very tough question. But I think the easier way of doing it is obviously breaking down the number of goals. So hey, these are my short term goals. So you've got to pin it down and say, okay, this is what I need to be doing. And then you got to write by when is that money required and how much money is required. I think that becomes step number one, step number two. You know, when it comes to actually thinking through the process, it's not very difficult. And I think when we get into step number three, it becomes a little easier for us to understand. But yes, I think it's important that everyone should kind of list down their goals. That is pretty crucial. Step number three is you need to have an understanding when you plan your investments of where is, I mean, where is the capital going to come from. So you know, we are talking about money as a subject here. So again, where is the money going to come from? So if you're a salaried person, for example, you would have some income coming in every month, but you'll also have some expenses going out. So income minus expenses, what remains is basically your investable amount. So that understanding key where the money is going to come from is it going to come on a monthly basis? Like that might be true for a salaried person, but for a self employed person, it's not necessary that's coming on a monthly basis. It might come once a quarter, it might come once a year also in some cases, you know, in case there are big projects or anything. So understanding where the capital is the cash flows are going to come from is extremely crucial to investing. And on that basis, you can do a lot of calculation and smart calculations. In fact, talking about smart calculations, think of it this way. If I know that I'm going to have 10,000 rupees every month that I can put inside this investment box. And you have a long term goal, let's say, of a caror for whatever reason. Then basically, if you put in 10,000 rupees every month at 12% over 20 years, that can become a caror of rupees. That is simple mathematics. So 10,000 rupees every month when invested at 12%, which is what I think any diversified equity fund in India will give any mutual fund will give. If you keep it there for 20 years and it grows by 12%, then you are at one caror. So that is how you can think if the money is coming on a monthly basis. However, let's say the money is coming on a lump sum basis for you. So in one shot, you get, let's say, a lack of rupees, for example. And again, your hopes are the same that you want one caror at the end of 20 years, then what do you do? So again, if you have that one lakh rupees, if you compound it by 12.2% over the next 20 years, then that one lakh becomes one caror. So it grows by, sorry, it's not one, sorry, it's 10 lakhs. So 10 lakhs at 12.2% over 20 years grows up to one caror. So it grows by 10 times. So these are some principles that need to be thought of. But it starts with that very first question that when are you going to receive the capital and how much capital are you going to receive? So that's step number three. Step number four, and this is where things start getting a little more complicated, that where is this capital going to go? And as people, we have a lot of options available with us. We can put it in a regular savings account, we can put it in an FD, we can have gold, we can put that money in real estate. There is obviously equity, with an equity, there is mutual funds, stocks. I've given you very basic kind of instruments which are there. If you start looking beyond, then there are dozens of more instruments which are today available. And I think that's where the confusion part really starts. I think when we start thinking in terms of financial planning, it's always important that before you reach this fourth step, you have to connect the fourth step with your earlier steps. So for example, I spoke about goals, which was step number two that we referred to. Now, it's important that when we do our financial planning, we don't make one single plan for all goals. Basically, every goal has a different plan. As I said, there's a different capital requirement, there's a different frequency of cash flows that come in, etc. Similarly, you need to have a different goal, you need to have a different set of plans for different goals. That's very important. So for example, your retirement goal, which is probably 20 years, 30 years away, that can be fulfilled using equity as your primary tool of where you want to put your capital into. But if you have a very short-term goal, let's say in the next two years, you want to fund your daughter's education, for example. Now two years is too small a time to put into an equity kind of instrument. So that's where probably a debt instrument can be more helpful. If you have a 10-year goal, you will say, oh, I'll do a combination of equity and gold, for example. So these are how you got to think. So different strokes for different folks. So similarly, there are different set of plans that you need to create for different goals that you have. I think this is where a lot of people make this mistake of having only one kind of goal and saying that I will keep on earning money forever. It doesn't need to work that way. I think it can be broken down very easily. Also, when it comes to looking at your different instruments. So I mentioned things like equity and debt and gold, etc. I think investing requires you not to be stubborn. And when I say stubborn, you should not just pick up one particular asset and say, this is going to be my asset for this current lifetime. That's not how good investing works. Actually, what we have seen is that at different points of time, different assets do pretty well. So if you take two years back, for example, I think the worst instrument to put in your money was actually debt. Which was hardly giving, I mean, you know, the FD rates one year back, right? They were hardly 4%, 5% or something. Now they have improved, obviously. But at that time, gold was probably the best instrument to put your money into about two years back. Then came equity, obviously. And equity also did very well, but debt was the worst instrument. Now things are changing, right? So now equity is not doing as well. Gold is also relatively flat at the moment, but debt has really improved. It's now, FD rates have gone up to almost 8%, 7.5%, 8% now. So that's how the rotation keeps on happening. So similarly, when we look at our financial planning, it's important to have a mix of assets with us. So you need to have some equity. You need to have some debt with you. You need to have some gold with you. Even with an equity, we look at large cap companies, large cap are India's top companies. The biggest companies, your reliance, your emphasis, your HDFC bank, etc. And we also look at smaller companies also, which is what we call a small cap companies. Small but growing companies, right? So equity works that way. Again, with an equity that is also international equity. Like today, a lot of people put in money outside of India in the US markets, in the Chinese market, etc. So that's very important. So in fact, there's a word for this. It's called asset allocation. So probably after this call, you can do some research on the internet as well. So asset allocation is basically nothing but putting your money across multiple assets so that as a whole, your portfolio can give you decent returns and it can give you those returns at a low level of risk. I think that's very important. That's what asset allocation tries to do. So for instance, I can give you my own example. My own portfolio is right now split as 60% in equities and it is 40% in non-equities. When I say non-equities, most of it is debt. About 35% is debt and 5% is gold at the moment. Why 60-40 is because that's the number I'm comfortable with. Similarly, different people will have different ambitions. But within the 60-40 also, what I've done is my retirement goal, I have put 100% into equity. And for my more near-term goals, I have put 100% into debt. So I hope you can understand what is happening now. So I have this big box with me and within that big box, I have 60-40. But within the box, there are a lot of smaller goals which are there. And for every goal, I have set up a different set of asset allocation mix saying, I will keep 100% equity and some places I'll have 0% equity also. So that's how I kind of do this. Once you sit down on a Sunday, you kind of do this exercise exactly the way I'm putting it. That is define how much of money you already have, define your goals, define where you are going to get the cash and how much you're going to get on a month-on-month basis. And then you define where I'm going to put the money and therefore what returns it's going to get. I think things will become easier. Also one more point, when you do that, understanding equity generally keep an assumption that it's going to give you 12% returns. It can go a little higher, it can go a little lower also, but over the long term, it's about 12, 12.5%. When we do the same analysis with debt, we keep 6% as the assumption. And savings account, I think it's better to keep 3%. And it's not too much of use putting money into your savings account. So that's how this particular part works, which is the part on where will the money go. The next one is, once you've kind of defined it, I think things become easier. And just the way I gave you those examples of putting 10,000 rupees every month at 12% gets you a crore of rupees over a one year, over a 20-year period. Similarly, the same kind of using 12% as your average, by the way, 12% is a great number to actually achieve. And if you're expecting more than that, then obviously you've got to be really good at your work to be kind of getting 15, 16, 17%. It's not very easy actually. Even the best investors in the world struggle to get 18%, 19% of returns that's there. But it's always good to have a balance and keeping a 12% return actually works for someone like me because that's still 6% better than inflation. And that's where probably an FD doesn't help me out much because FD gives me about 7%, 8% and inflation itself is growing at 6%. So there's not too much wealth to be made. So it's always better to kind of have your hopes high. 11, 12% is actually quite good. The fifth part of any financial planning process is actually how can you improve your returns? I think that's something everyone is interested in. And how can you reduce risk also? I think it's the second part that people kind of miss out on that, you know, they are so busy saying, you know, I want to improve my returns, improve my returns that they even forget that reducing your risk is very important. So let me give you an example. I have seen in my life five occasions when my stock portfolio and mutual fund portfolio, it actually went down by 15% in a single day. So I've seen five occasions like this, right? When my entire wealth in equities actually went down by 15% in a single day. The first one I saw was in 2004. I think it was May or June of 2004 when I first saw it. And that's what we define as a bloodbath. So that kind of got me that learning that it's not important to be uni-directional and say, you know, I'll keep on increasing my returns. It doesn't work like that. You got to find out ways of actually reducing the risk. And when I say you reduce the risk, it doesn't mean that you have to compromise on returns. So I'll give you an example. So for example, when it comes to equities and you've seen what has happened with the Adani stocks very recently, they were very expensive and they have been expensive for quite some time. And now you have seen a 60% drop in those particular stock prices which have happened. Now the problem is not, you know, buying Adani stocks or anything of that sort. It's about the recognition of when does a stock actually becomes very expensive. So there was a time when the Adani stocks were actually quite relatively decent in terms of valuation. But then over the last two years, it kind of went up and up and up and up. And that's where things becomes very expensive. So point is if you're going to pay a lot more money, you know, for something which is not worth as much. When it drops, you're really going to feel the pinch of it and you're going to make massive losses. So that's what I mean by kind of, you know, making sure that your risks are reduced. And the exact opposite also works. So for example, if a stock right now is very undervalued at the moment, I mean, not saying anything, but let's say this Adani stock itself, okay, it's now 60% down. Now some people might say, oh, you know, 60% down means it's a really good deal at the moment. So when you buy stocks at that particular moment, then that's where your chances of, you know, improving your returns actually improves massively. Because you've got something which is worth probably 100 rupees, but you've got it for let's say 60 rupees. And that's something that you need to look out for investors. So how I would kind of look at this entire thing from a design perspective is when you plan your finances, always do a core portfolio of your own. So this core portfolio is probably let's say 80% of your portfolio. And this 80% will be exactly the way I told you that it'll take care of the major goals that you have in your life. It will probably do about 11, 12% returns for you. And then you keep about 20% aside, which can be your experimental portfolio. You can try it out for the other things which I've been referring to that can you pick up a set of stocks which are probably very cheap at the moment. And they're not expensive. So you can do that. Similarly, you can pick up gold, for example, if gold kind of drops down in price. So you can try out a lot of experiments which are there. I do a lot of it and I mentioned quite a bit in my YouTube video and I encourage people to try out whichever suits them. But that's very important. And also, you know, I should not leave out debt because debt is also a pretty big part of the portfolio. Again, you can, you know, kind of reduce your risks massively in debt. And, you know, this is a very important one because what people have seen do is they go to debt mutual funds. For example, or they look at the bonds list and they try and say, oh, it may there is a 10% return. So let me buy this particular thing. But in equity, I can still understand this, you know, because equity is a more riskier asset. But when it comes to bonds, you know, for me, and this is what I advise everyone, return of capital is more important than return on capital. Which means you need to make sure that the money that you put in, the principle that you've put in debt, it has to come back to you. You cannot have a situation where your capital, your principle is actually going for a toss. And we've seen a lot of scenarios, especially in 2017 and 18, right from DHFL to IAFL to other companies like Stray infrastructure, all these companies defaulted on their bonds. And which is why the entire debt scene was in a massive pandemonium. And all this came around with Franklin Templeton in March of 2020, actually closing down certain debt schemes, and saying that, you know, we'll not be able to do redemptions at the moment. So Hamarissa Thora Patience Raki, and we'll pay you money when we receive it. So be careful on these particular things. So, so please improve your returns to some extent. But more importantly, always try and reduce your losses. And, you know, another way of looking at it is just just an example here. If your wealth increases by 50% in one year, and let's say it reduces by 50% in the second year, it doesn't mean that your wealth is at the same level. I mean, we can do it mathematically. Also, if you have 100 rupees with you, it increases by 50% in one year. So be 150, it's reached 150. Now, if 150 goes down by 50%, it doesn't go back to 100 actually goes back goes down to 75. Right. So half of 150 75. So actually what has happened over a two year period, your wealth has actually reduced by 25%. You know, because of that plus 50 minus 50 kind of thing. So that's where for me this 0.5 becomes very important wherein you have to understand how to improve your returns and reduce your losses. And finally, there is point number six, which is obviously you need to review your portfolio. You need to do it. Generally, you should do it twice in a year. You got to review your portfolio in terms of which funds are doing well, which instruments are doing badly and you know, can be replaced with something better. Also, another important part is, and often you will see this sometimes some part of your wealth will increase. So for example, I said 60 14 equity, right? Suddenly, let's say the markets do very well, that 60% split will actually become 70% in your portfolio for equity. Now you got to bring it back to 60%. So which is where you will have to sell some equity by some debt. So this is what is called as rebalancing. Again, when you get the time, you know, please check out about this word called rebalancing your portfolio. And this is about, you know, bringing everything back to track. That is what we mean by it. So these are the top, these are the six major things that one needs to look at. Other than that, there are obviously things like taxes and believe me, a lot of people worry about taxes, but you know, please don't worry too much about taxes. I think the first six steps, which I told you, I think that's more important. And those six steps are exactly the way we learn English, for example. So there are these things that we learn called question words in English, right? What, which, how, where, how much, you know, stuff like that. This is exactly what those six steps were. So again, just to reiterate, it starts with where you are. That is step number one, where you try and see how much of investments you have and how much of liabilities you have. And you also look at what are the hidden investments and hidden liabilities. Then it comes to what are your goals. And this is where you list down what your primary goals are. And again, you got to break down your goals and you got to pin it down, including how much money is required and by when you require that money. Then comes that important part of how is capital getting infused into your life. That is, is it coming on a monthly basis? Is it coming on a quarterly basis? Is it coming randomly, you know, one-off basis? Also, if you are having a second business of your own, let's say you're doing something, some passive income you're getting on the side. How frequently does that money come in, et cetera? So you need to have an understanding of how the cash flows are working for you. The fourth one, the most important one, the more difficult one is how you're going to deploy this particular capital, which is where we talked about different assets like debt, equity, et cetera. The word asset allocation is very important. So you need to allocate money in a particular way. And again, you got to use a different set of allocations for different goals. The fifth one, very important is on improving your returns. There are different strategies on how you can improve your returns. And more importantly, you got to understand how to reduce your losses. In fact, if any of you read Warren Buffett, I think it's a very quoted one where he says rule number one is, you know, don't make losses. And rule number two is remember rule number one very quickly. So, so remember that. And point number six is obviously reviewing your portfolio where you have to kind of make sure that you have an eye on what is happening. You got to track and you got to rebalance your portfolio. So that's how the six steps of financial planning are. It might sound very, very long. Actually, it is not to be very honest with you. For me, when I started first doing this particular activity, it didn't, it took me like half a day actually to get everything in one place. So I was able to finish step number one, two and three in half a day. Actually, step number four is more of a gradual exercise where you got to spend some time. You got to go to websites like value research online, where they kind of explain different mutual funds in a very nice way. If you're into stocks, then screener dot in becomes a very good place to start out things. There are some decent books. One book by Deepak Shanoi, which has just come in, which is on money wise, very simplistic kind of a book that's theirs. But the more you read, the more you kind of understand these things, your knowledge improves. Step number four, I would advise you never try and do it within a day. You got to your knowledge will only improve once you put in some money and you kind of make some mistakes. Your interest and your knowledge will improve from time to time. Step number five is again, something that will improve over time where you know how to make more money and how to reduce your losses and reviewing. Obviously, it takes half a day and you got to do it just twice in a year. So this is basically the timetable on how I would say how you one should plan their finances better. And now if there are any questions, I'll be more than happy. I think with investing and finances that there are lots of questions. So I hope people have been using the chat section to kind of put in a lot of questions. Vikas G. Otiv. Yeah, and thank you. Since you have taken all the sessions in English and I saw that you were equally at ease just like I can say. I'm a daily boy. I'm a daily boy. Hindi. That's what I'm saying. You're as good as Surya Kumar Yadav. You can play all shots with ease. Oh, yes. Thank you so much. So we can all sum up like what he said that the first of all, he says that where you are. What is your goal? How do you intensify your capital infusion into that? Then how there can be a passive income because everybody has read about Warren Buffet that you should earn in such a manner that even while you are sleeping that you should be able to earn that everybody wants. But at the same time we remember that what Shakespeare has said that if to do was as easy as to say then poor would have lived in palace. But I believe that once we are connected with Mr. Shankar, at least that will not be a wishful wish but it can be a wish which will actually translate into a reality. And then he said that a location and how to improve the returns. We will take those questions also and anybody who wants we can you'll be taking the questions from the chat box. But he says in a mutual fund. How can we harvest capital gain tax for a long term. Okay. So it's it's good that you know, someone is thinking in these lines. I think a lot of people don't look at capital, you know as a tax harvesting actually. In fact, I'd done a video also on this very recently that was in my YouTube channel. So, so tax harvesting is pretty much what you're trying to do is you're trying to reduce some of your taxes, some of your capital gain taxes by selling some of your assets which are at a loss. And this need not be done on equities only this is available across different assets. So if you have let's say you made let's say 10,000 rupees of profit on let's say some stock for example just taking one simple example. So you got to pay tax long term capital gain tax on that or even short term capital gain tax on that particular 10,000 rupees. So that is about 15% correct. So 1500 is what is right now your taxability on the capital gain. So what you do is you try and find those assets on which you've made a loss, and you sell those particular assets which you've made a loss and then you kind of square off. So what happens is it will be plus 1500 in other place will be minus 1500 and therefore your taxes will become zero. This is something that I would say now is a good time for anyone to do it the months of February and March that's the best time because before the financially closes. One should definitely do one review of your portfolio with the sole attempt of trying to find out which are those, you know, which are those capital gain, capital gains and capital losses which can be squared off and you can make your capital gain taxes to zero. I think it's very important exercise to do. Yeah. So she says, tell me which instrument is the best for investment. It will depend on your goal. So for example, if you have a long term goal, then obviously equities, you know, gets the, you know, takes up the first spot. But let's say if you have a goal which is three months from now, then probably that money has to go into the savings account. So what I actually refer to when I said about the financial planning part right that for different goals you need to have a different set of assets which will do the job for you. So I'm assuming you're right now referring to your long term goals, which is probably 1020 years from now. In that case, equities, you know, will be the best. And even within equities and I can see a few questions here on large caps, small cap, etc. within equities also you need to kind of device your asset strategy in such a way that it is, you know, it can improve your returns and it can even reduce your losses. So, so, so go for equities, but within equities also look at the asset allocation part. He says, is it good to put money in a large cap versus ETF? When you say large cap, I'm assuming Satyan means large cap mutual fund, because you know, ETFs can be in large caps also. So ETFs and mutual funds, you know, index funds, it's more or less pretty much a similar stuff, you know, it's all passive investing only. So tell you what I do, I generally when I do large cap investing, I generally put money into ETFs. I don't use much of active funds, even index funds, I don't use, I use more of ETFs when I put money in, you know, I use ETFs for large caps. And I generally use index funds more for some of the, some of the mid cap funds is where I have more of mutual funds which I use. And for small caps I actually use more of stocks actually so I neither use ETFs, neither use mutual funds, I use more of stocks. So somehow it's a very comfortable thing for me. So large caps I generally use ETFs, mid caps I generally use mutual funds, and for small caps I generally use stocks. Vishnu, does over diversification also kill the long term returns? Actually, no. I am yet to find that yet. In fact, in a recent video also someone asked that similar question. But the answers I got was all logical. And why I say so is because, you know, in my days in AT money, we've done this experiment quite a bit. It's not diversification that reduces your returns. It is more about, you know, where you've kind of put in your money that becomes more important. So what is diversification? So for example, if I tell you you have to put your money in index fund, you might say, oh, that is also diversified because that is diversified, right? So if you put your money in a Nifty 50, that is 50 companies, 50 is not a small number, right? So you can say that is also diversified. But that doesn't kill your returns by any chance. I think Nifty 50 has given very decent returns. Similarly, if you look at Nifty, mid cap 150 or even small cap 250, putting it in 250 stocks has not killed my returns yet. It's giving a decent 14%, 13.8% has been the CAGR over the last 15 years for the small cap 250 index. So no, it doesn't. I think there are a lot of other things that can reduce your returns. But in my opinion, diversification doesn't reduce it. This is if one wants to plan for a child education after 15 years and want to have a corpus of one crore. Planning to invest 16,000 per month and 4,000 Nifty 50 index in a PPF tax favor, 4,000 in a small cap. So I'll make it easy. If instead of 16, you can put in 20,000 rupees, then it's very easy because there's a formula that can help you. If you put in 20,000 rupees, it gets you 12% returns in 15 years. This is equal to one crore rupees. You can try it on any standard calculator. I think sites like ET Money, Grow, Scriptbox, I think all of this have this particular calculator. It's called an SIP calculator. You can check this out. So if you put in 20,000 rupees for at 12% for 15 years, it gets you a crore. That's what the formula is. So if you want to do it at 16, your returns then will have to increase a little bit. So I think at 13, 39.5% returns, it should get you to that one crore number in her 15 year period. So it's possible. What is your recommendation in the NPS as far as the asset allocation is concerned? So NPS, one has to be slightly, so I like NPS as a product. In NPS, one has to read the rules very carefully. So what happens right now is whatever asset allocation you put in right now, from the age of 50, the government automatically starts reducing the asset allocation from equities and it I don't remember the numbers exactly, but I think what happens is you can right now do an asset allocation of maximum of 75% in equity at the moment, if you are less than 50 years of age. But the moment you hit 50 years of age, automatically your asset allocation of equity will keep on reducing. So 75 will become 71 at the age of 51. When you're 52, it becomes 3-4% or katega. So it keeps on reducing till probably it reaches 25% or something like that or even zero, I don't know. But so NPS, my suggestion would be go for the maximum equity allocation if you're less than 50 years old because NPS is a long-term product. And long-term means your equity will definitely give you the kind of returns that you seek. It will maximize your returns definitely. So go for the highest equity allocation when it comes to NPS and after 50 years, automatically the government is going to reduce it for you. Is it better to opt for EPS with higher pension for which deadline is termed, 3rd of March, 2023? I am not, I don't know about this particular topic as much, I'm sorry. You are talking about the Supreme Court judgment. No, no, no. I'm sorry. Piyush says it's smart, sip a good option of a regular sip to opt when the monthly installment is just 5000 for a period of almost 25 years. Can we really get a significant benefits practically out of it because theory says otherwise? Yeah, I think you can. I think that smart sip has the potential to give at least maybe an additional 1% return. I have tested out myself. So what I always do is I pull out a lot of raw data from sites like niftyindices.com and I try to do, I try to simulate the smart sip in a simple Excel sheet. And I've tried out like more than a dozen scenarios and every time I do some tweaking, whether it's done on the basis of relative price, whether it's done on the basis of the valuation of the company, valuation of the index, etc. I've always seen there is some uplift that comes in. It's generally between 1 and 2% depending on the kind of things that you do. So, but over the long run, 1.5, 2% is actually a pretty big deal. It can give you an additional, so if you said 25 years, it can give you an additional 40% extra wealth, that small 1.5, 2% increase. So I would say that have that smart sip idea in mind. You can do it in a different way. Instead of putting all 5000 rupees in a smart sip, you can probably put 4000 rupees in a regular sip. So as I said, 80% you can put it as your core portfolio and the remaining 20% can be an experimental portfolio. So for 4000 rupees, you try out the regular sip and for 1000 rupees per month, you try out the smart sip part. I have a strong feeling it will work. I mean, I've been doing it myself on the small cap strategy and has definitely worked for me. In fact, it's given almost 2% additional returns. So I would endorse you trying out at least the smart sip strategy. Diamond is the goal then and the investment should be done in an equity or NPS? This is by Kirti Vishal. Equity or NPS? Yeah. I think either ways should be good. I like both products, NPS because and okay, so one thing I should definitely tell you about NPS. I think the one of the institutions, one of the regulatory bodies in India, which is doing a fabulous work is actually the PFRDA. I think the kind of stuff that they have been doing over the last two, three, four years has been absolutely wonderful. They have kind of, I mean, number one, it's obviously the charges are very low for the product with brought in new changes. Can you just give me a second please? I think someone is at the door. Yeah. Okay, yeah, cool. So I think NPS is a wonderful, you know, a wonderful instrument to work with. If you have to make a choice between equity and NPS, then probably you can look at a 50-50 scenario. I think that's easier. So the equity part will obviously help you with a lot of flexibility. So if you want money, let's say immediately for some reason, you can redeem units from your equity and, you know, your liquidity needs will be taken care of. NPS is not possible because they'll make you wait till 60 years for you to remove any money. So have a mix of the two, have some in equity and have some in NPS. I think that's the better way to go about. This is you Raj, can we ignore asset allocation at the beginning of the career in a career of 33 years? Can we invest first 10 years in the 100% equity and start reducing the equity exposure after that? Yeah, you can do that. Definitely you can do that. The only thing is you got to mind your behavior. I'll tell you why I say that I was this kind of a person. So I also thought exactly the same way I said, you know, I'll put all my money in equity and you know, whatever happens. It's not going to be a problem. But then when I saw that equity can fall down by 15% in a single day, I saw that. I saw scenarios where my wealth was down by 55%. This happened January of 2008 till October of 2008, my wealth was down by 50%. When you have occasions like this, that is where you are really tested. So, you know, on the face of it, it might seem that putting all your money in equities for the first 10 years is, you know, very feasible strategy. But then what happens is your behavior starts, you know, your, your, your real world circumstances start coming in and makes, you know, it makes you take a lot of bad decisions. So for in my case, the bad decision was once my equities had gone down by 50% or the value of my wealth had gone down. I did not touch equities for the next four years. It was a mistake on my part, we all learn from our mistakes, and I learned that part. But you got to mind the behavior part of things also in addition to logic when it comes to investing. Hello, what do you suggest a high growth versus the value stocks for investment parts. Okay, so this is a very difficult question. Why because, you know, this entire thing, investing, especially equity based investing, it works in cycles. So there are times when growth stocks do very well and equity and value stocks don't do well. And then there are times when value stocks do very well while growth stocks don't do as well. If I can give an example on a, you know, on a real time example, I mean something Indian example, there are these two companies. There is AXIS and there is HDFC. So AXIS always works on the growth strategy. So you take any of their funds and you'll see, you know, they're all growth oriented funds. And HDFC, especially the Prashanjian stocks were all based on the value methodology. So I could clearly see that there were some years where the AXIS stock would be number one and the HDFC stock and the HDFC, sorry, not the stock. The AXIS mutual fund will be number one and the HDFC mutual fund will be bottom the last one in some years. So this is 2018, 2019, for example. And then in 2020 and 2021 when value was better, the AXIS mutual funds were at the bottom and the HDFC ones were at the top. So I hope you can understand what is happening here, right? So it's not about having one strategy forever. It is about being flexible enough, your portfolio should be flexible enough to understand which strategy is better to take up and then make those allocation decisions that I will put some money. I'm going to remove some money from here and probably put it in this particular strategy because this strategy is the environment is better suited for this strategy. So it's not easy, but if you do it over the years, it gets a little easier and there's a lot of money to be made that way. Just one thing, which one should one select? Nifty, 50 ETA or a portfolio of 20 blue chip companies based on coffee can investing? Before we take that question, I will just say that these are all suggestions which are of Shankar, but you will have to study on your own. He or I would not be responsible for that. In fact, the channel also. So again, it's a matter of choice. This coffee can versus going with market capitalization based strategy. It's a matter of choice. Sometimes it might work, sometimes it might not work. There is no kind of guaranteed this thing there. Yeah, I think it's about what you prefer. I think there's no general kind of hierarchy of returns that's available right now saying that this particular strategy does better than this particular strategy. I've not really come across any kind of data that supports or does not support this particular comparison. Sivar Aman, when FDs are giving a return of 7%, but still people recommend that debt giving 6.5% is good. That's a good question. Very good question actually. So see what happens is FDs give 7% and 6.5% of debt. What is being said the 7.5% and 6.5% is actually the pre-tax return. But we have to give money to the government. So money has to move out in terms of taxes. Now this is where it becomes very interesting. Let's say you put your money in a 5 year FD and you are at a 30% tax lab. So come what happens, you have to pay that 30% on the 7%, right? So that is 2.1%. So 7-2.1 comes to 4.9%. So actually your post-tax yield on the FD is 4.9%. Now when you look at debt funds and let's say again you keep it for 5 years. If you keep it for 5 years, there is long-term capital gain that comes in and that is calculated at 20% with indexation benefits. So when I do the indexation benefits etc over a 5 year period, you can go to Google and check out something called cost inflation index. So there is an entire table that the government of India follows for calculating your indexation benefits. In my opinion, this will come to not more than your taxability will be about 0.8, 0.9%. So when you do 6.5% minus 0.8%, it comes to only 5.7%. So that's where the difference is. On a post-tax basis, your debt funds is at 5.7% and on a post-tax basis, your returns from FDs is at 4.9%. So that's a big difference, right? It's a difference of almost 20% in terms of yield. So should we consider macro factors while investing or should we ignore it and focus on fundamentals only? I don't give too much of thought on the macro factors because see this entire talk, inflation, recession, all our life we're going to see this. And if I start worrying about every macro factor that's happening, then investing will become very difficult. So I have kind of, this is again very personal, but I have kind of kept my ears shut of most of the macro factors. And I simply focus on buying good companies. And what I mean by good companies is obviously companies which are growing in terms of their sales, which are growing in terms of their profits, which are companies which have the potential of being market leaders, which have a nice growth runway in front of them. These are the kind of companies which I focus on. Eventually these companies will give you good returns irrespective of whatever macroeconomic environment that's around them. He says that Nifty, Next 50 is nowadays underperforming. Do you believe that one should stick to it or should we switch over or have an equity portfolio that contains Nifty 50 and Next Nifty 50? You'll have to give me two, three days. I'm actually researching on this exact same topic at the moment. In terms of understanding, if a combination of Nifty and Next 50 will actually give better returns and when I say better returns, it's not just returns. I'm also looking whether it actually gives better risk adjusted returns. That is, it can give me returns at a lower level of volatility. I'm yet to complete that particular research. I will be, I'm working on it at the moment and hopefully in the next one month I'll actually have a video on it on my YouTube channel. What is the impact of mutual fund performance? When the mutual fund, when the fund manager gets changed, what is the role of the fund manager at AMC in stock selection? Yeah, it's a very good question. See what happens is, ultimately who's taking the decisions when it comes to picking stocks at a mutual fund. We are not doing anything. It's actually the fund manager who does it. And what I've observed is every fund manager seems to have a particular style of his own. So I mentioned Prashan Jain. Prashan Jain has a value focus. So you will see a particular style of investing of his where he's trying to pick up undervalued stocks. He's only looking at undervaluation and on that basis he's picking up stocks. But if you look at the Axis fund manager and it's Ganesh Gopani who is the Axis fund manager for a lot of Axis funds, he is more oriented towards the growth style of investing. So you've got some people who will be oriented towards growth style. Someone would be more of momentum base. Someone would be more of value base. Then there is the quant mutual fund where the fund managers are doing something extremely different and very complicated also, but it's working for them and working very well for them. So they're doing something different. So the fund manager and his style for me is should be one of your most important criterias when actually selecting a mutual fund. There is no use of looking at how much did it do last year or last last year and all that stuff. Honestly, that doesn't matter because your historical performance has nothing to do with future expectations. It's the fund manager's working style. You got to be comfortable with this working style when selecting a mutual fund. I think that's very important. Abhishek, what are your views on your hedge funds? On hedge funds. Okay, this question comes at a very tough time for hedge funds because globally if you see hedge funds have not been doing well. And it's not just this year. I think if you look at it over the last six, seven, eight years, they have not been doing well. In fact, a lot of people are now questioning what is the utility of hedge funds. I honestly don't know much about hedge funds, but this is something which I have. So one thing I do and it really helps me is that I read a lot of, they call it commentary basically, I read a lot of commentary on how hedge funds are operating. And most of the good hedge funds in the world, what they will do is they will have this quarterly report which they will upload on their website. It's a very beautiful read. It actually explains how they are thinking and how they see the world moving and all that stuff. I think that's the only utility I see with hedge funds, otherwise from a performance perspective, I think they're not doing well at all. I think it's better to stick with your regular market capitalization based index funds or you can have a mix of some good quality active funds in your portfolio. I think that should be more than enough actually. Thank you. We are not taking any other question because it's a lunch time also people would have lunch. And since we have learned that you speak well in Hindi, so we request that all these six bullet points if you could speak in Hindi for the persons who are well versed more in Hindi rather than being worse in English. Okay sir, let's do this too. So these six points are quite simple. The first is that you understand that you are in what state right now. When I say that I'm referring to your investments, where have you kept them, your liabilities, your loans, where are they? And you don't have to see the visible loans or the visible investment. You have to take care of the hidden investments and the hidden loans in the future. Point number two is what are your goals? What do you want to do in the next one or two years? What are your goals in the next 20 years? What are your retirement goals? What are your child's education goals? You know, someone had also written that after 15 years, they have to collect money for their children's education. So that is also important. It's very important to write it down also. Keep it somewhere and definitely review it in every three months, six months. The third one we spoke about was that where do you get this money from and when? So the salary individual comes every month. They get income, they spend something and the rest of the money is saved, they can invest. Similarly, for a self-employed person, he may not come every month. He can come randomly. If someone works on a project basis, it becomes even more random. So it is very important that you understand that your money is going to be available to you anytime so that you can make a good plan. I think that's very important. The fourth point was that where can you deploy your money? And this is obviously the most difficult question. That I put it in equity, in debt, in gold. Again, put it in equity, put it in mutual funds, invest in stocks. I think that is important. But my suggestion here would be that you use a different approach for different goals. So if you have any goals like going on a vacation for the next year, don't put that money in equity. Put that money in a savings account, in an FD or in a debt fund. Or put it in a short-term debt fund in a debt fund. So similarly, if there is a long-term goal, a retirement goal, then my suggestion will be that you can keep all that money in equity. There is no problem. The money grows well in the next 20 years. The fifth point was that, and this comes with a little bit of experience, how you improve things, how you improve your returns and how you reduce losses. And I also gave you an example where if your 100 rupees and your 100 rupees grow by 50% for a year and the next year it goes down by 50%. Then actually your 100 is not at 100. Your 100 is actually at 75%. So there is a 25% drop which has happened. So the more important it is to improve your returns, the more important it is to reduce your losses. So that's actually very critical. And the final sixth point is that you keep reviewing your plan from time to time. You can do this once in 6 months. You can do it once in a year. There is no problem. Especially don't review long-term plans frequently. You can do it once in a year. That's not a problem. And there are some concepts like rebalancing. You can definitely search on Google and see how it works. These are very small things. Asset allocation, rebalancing. Someone asked a very good question about smart SIP. The point is that if you do all these things, then you can reach 13-14% today. And that extra 1% or 2% actually converts into long-term returns. So that's how we got to think. And you know, definitely keep checking my YouTube videos because I upload 2 videos in a week. And it gets a little advanced. So if you are a complete beginner, maybe you will take some time. But if you are investing for a year, then I hope you will like my videos a lot. Yeah, Vikas, this is how I wanted to summarize it. Thank you. And what you said, it's for the beginners. I am reminded. Then they say that if the results are good, then the results are good. Absolutely. And you have taken a lot of questions and you are quite happy during even the lunch hours. You will be able to hit the century in the Zoom Club Meet. Thank you, everyone. Stay safe. Stay blessed. And we will have a few more sessions with Mr. Shankar. So stay connected with the sessions of Beyond Law and more so if you are a Die Hard fan or if not, you will surely become that. You can connect with his YouTube sessions of Shankar now. Thank you, everyone. Stay safe. Stay blessed. Namaskar. Thank you, everyone.