Category: Finance

Hello Everyone! In this blog, I’ll share why I decided to invest through Portfolio Management Services (PMS) despite everybody advising me against it & what factors helped me take this decision. 

What is PMS?

1. PMS, or Portfolio Management Services, is a professional service where fund managers actively manage your stock portfolio, to achieve maximum returns & charge a fee for it.
2. As per SEBI, over 400 PMS funds manage assets worth more than ₹30 lakh crores for ~2 lakh investors (as of October 2024)
3. The minimum investment required to opt for PMS is ₹50 lakhs. 
4. PMS had always appealed to me, primarily for its higher returns, but I had doubts. Finally, I decided to research a bit seriously. I spoke to a number of people about this, my friends, my financial advisor, researched online. Everywhere I was advised against it. Mutual funds comes out as a better investment option. But, with careful analysis of my current situation, expectations & some courage I went ahead with it. I will share the points that helped me decide, they might be helpful for you.

Reason 1: Managing Sudden Liquidity

1. Mutual funds are great. Specially for disciplined investments like SIPs from monthly savings.
2. However, events like receiving a Bonus, ESOP realisations, or property sales create sudden liquidity. Investing such a large sum directly into mutual funds isn’t advisable (unless you know what you are doing).
3. 3 years back, I had a similar liquidity event. My financial advisor invested the entire lump sum in a debt fund first and then transferred it to equity via an STP over 8-12 months. 
4. This slow & systematic is the ideal way of investing large amounts with MF, as this minimises risk. But it also limits returns, as debt funds typically yield around 7%.
5. So 1 reason to choose PMS was that the entire corpus start working for high returns from day 1.

Reason 2: Risk-Managed High Returns Potential

1. The funds that I had shortlisted & spoken with, quoted coservative returns of around 20-25% & aspirational figures reaching 35-40%. This is post tax, post fees, net returns. 
2. Now these are excellent figures, but I thought that in last 2 years, multiple small or mid cap mutual funds, (like Motialal Oswal Midcap) fund have achieved similar or even better returns. And they have advantage of taxes, fee, minimum investment value. 
3. Then I realised I cannot compare PMS with a single category mutual funds. The risks are different.
4. Investing large lump sum in 1 mutual fund or 1 category of mutual fund is high risk. To mitigate risks, I will have to diversify across large, small, index, thematic etc. And this will then reduce the net returns. 
5. PMSs, on the other hand, claim to offer risk adjusted high returns. They are usually multicap, they buy sell stocks much more than mutual funds.
6. So my risk is similar to large cap, but target returns are similar to small or midcap.

Reason 3: Worst Case Scenario

1. For any investment, it is good a practice to visualise what is the worst that can happen. Can the entire sum be wiped out? I think that is unlikely.
2. So, let us assume the fund underperforms the sensex or benchmark by 5%. Sensex delivers 12%. So, the fund is at 7-8%. Net of taxes it would be around 6%. They don’t charge a fee if they underperform. 
3. I think thats ok. If the downside is ending up with FD like returns. And the upside is getting 25% returns, where the corpus might double every 3 years. With this calculation, I think I will take my chances. 

Reason 4: Leveraging Professional Expertise

1. My previous experience with a financial professional has been stellar. With him, our portfolio has transformed from 6% (Fixed Deposits) to 20% (current IRR of Mutual Funds)
2. So, I think it makes sense to bet with a professional again who might push this to 25-30%.
3. Now, there are individuals who do great at stock markets themselves, and might not need such help. But I am not one of them. I am not good at handling market volatility. And if there is someone who can do the job much much better than me, then it makes sense to outsource it.
4. This frees up my time to focus on what I enjoy, while ensuring my investments are actively managed.

Final Thoughts

1. These are the key reasons I chose PMS for my investments. Of course, these are just projections and expectations. Time will reveal whether these claims hold true. Since I’m early in my PMS journey, I won’t share the specific fund I’ve invested in just yet. Once results start to come in, I’ll provide updates.
2. For now, if you have any questions about my investment journey or want to share your experiences, feel free to comment. Don’t forget to like, share, and subscribe if you found this post helpful. Stay tuned for more updates!

Introduction

Hello everyone, and welcome to another blog post! In this post, I’ll share our family’s experience with high-return Fixed Deposits (FDs), specifically from Shriram Finance FD and Bajaj Finserv FD. I’ll cover:

• The investor profile
• Why we chose these options
• How we discovered them
• Our doubts and decision-making process
• Current portfolio status and future plans

The purpose of this blog post is to provide insights from our personal investment journey with high return rate FDs, so that, investors looking for such options can have more relatable insights.

The Investor Profile

My parents invested in these FDs. My father is a retired government official receiving pension & medical coverage from the government. My mother is a homemaker.

• Financial background:
  • We have a very conservative financial mindset. So much so that we had ZERO equity exposure at the time we made this investment. All our mutual fund & stock investments were also just starting at the time, and we were very skeptical about market linked securities. Before these, all our investments had been in traditional bank FDs and real estate. Thats it.

How we Discovered & Why We Chose High-Return FDs

When my father retired, he received liquidity from GPF and gratuity. We wanted to explore avenues offering better returns than traditional bank FDs (offering 6-6.5%). Online research and Google search results brought these FDs to our attention. The high-return FDs from Sriram City and Bajaj Finserv promised 8.5-9% returns, making them appealing.

Spoke to our financial advisor, who advised against these options. His reason was that FDs should be low-risk, and for higher returns, mutual funds or stock markets might be better options. I think it is very valid point. Despite the advice, we felt the risk-reward ratio was acceptable for us, which can vary from person to person, and hence we invested.

Decision-Making Process

I did more research. Mainly around how safe these FDs are. I found out that these FDs had never defaulted ever in their histories of over 40 years. There were a couple of negative reviews around poor experience for pre mature withdrawals.

Keeping this in mind. We registered online, but did not invest straight away. We thought of visiting them & meeting in person. After registration, both companies were equally proactive in contacting us back, and setup visits from their representatives to our home. They visited us a couple of times, answered our queries patiently, and did not pressurise us in any manner.  So, we started small with ₹5,000 and ₹10,000 FDs and short termed.

Current Portfolio Status

• As time passed and our confidence with them grew,  our portfolio with them have also grown to multiple tens of lakhs. These FDs now make up 5-10% of my father’s overall portfolio. We invested in shorter durations (12-18 months) rather than the highest-return, longer-duration options (3-4 years).

Overall Experience

• • Overall, we are very satisfied with these FDs. We have had no complaints or bad experience on any front.
  • That being said, we do not have plans to either increase or reduce our investments. As our understanding of personal finance gets better, and our risk taking ability grows, we plan to explore other asset classes more.

Conclusion

If you’re considering these high-return FDs from Bajaj Finserv or Shriram Finance, I hope our journey provides  some useful insights. Remember, your decision should align with your financial goals and risk tolerance.

If you have any questions about our experience or want guidance, feel free to ask in the comments. I’ll be happy to help. Thank you for reading, and have a great day!

Introduction

Hello everyone, and welcome to another blog post! When it comes to investing in gold, there’s no shortage of online  content advocating for Sovereign Gold Bonds (SGBs) as the best option. Comparisons often suggest that other methods, like digital gold, physical gold, or gold ETFs, fall short. While these discussions can be helpful, I’ve always felt the need for real data or portfolio performance examples to back these claims.

In this post, I’ll share the performance of two SGB portfolios from my family over the past two years. Goal is to provide real-world data to help anyone looking to make better financial decisions when it comes to gold investments.

Starting the SGB Journey

We began exploring SGBs in 2022. While we liked the concept of SGBs, no one in our known circles had invested in SGB at that point. Even our financial advisor wasn’t very bullish on them. Despite the skepticism, we believed the risk-reward ratio was favorable and started investing.

Portfolio Performances

Portfolio 1: My Father’s Investment

• Start Date: August 2022. Current XIRR: 21.7%

Portfolio 2: My Wife’s Investment

• Start Date: December 2022. Current XIRR: 25%

The amounts invested are different for all for investments, purely based on funds available at the time. That is also the reason why IRRs are different, despite both starting their journey the same year.

Also, These returns are based solely on gold price appreciation and exclude the additional 2.5% annual interest paid semi-annually. If the interest is factored in, the net IRR would be even higher.

Another Case Study

I also did some working on a different scenario. If someone invested in 1 gram of gold in every SGB issuance since May 2021:

• Total Investment: ₹93,000
• Current Value: ₹1,14,000
• IRR: Over 17% (excluding the 2.5% interest)
• Current Gold Price Used: ₹7,800 per gram

Once again, these returns are based solely on gold price appreciation and exclude the additional 2.5% annual interest paid semi-annually. If the interest is factored in, the net IRR would be even higher.

Observations and Learnings

1. • Gold has performed exceptionally well over the past few years and SGBs have been  particularly profitable investment for us as a family.
   • That is why we are gradually increasing gold’s share in our investment portfolio.
   • But there have been no fresh SGB issues since February 2024. Speculation suggests the government might discontinue SGBs as they haven’t turned out well for Government’s plans. 
   • With no clarity on future SGB issues, we’ve started exploring other gold investment formats and alternatives.

Share Your Experience

If you also invest in gold, I’d love to hear about your experience.

• What instruments do you prefer for gold investments?
• How has your portfolio performed?

If you have specific questions about my investment journey, feel free to ask in the comments. I’d be happy to help!

Thank you, and have a great day!