Engaged in spreading financial literacy, Vineet Patawari, CEO of StockEdge and StockEdge & Elearnmarkets, is focusing on being a peaceful long-term investor rather than a full-time professional trader when it comes to managing his own money. 

Patawari also holds an MBA from IIM Indore and is a qualified Chartered Accountant. In an email interaction with FE PF Desk, Patawari shares how he invests and manages his own money in times of rising interest rates and inflation. Edited Excerpts

What is your saving and investment philosophy?

My saving and investment philosophy is centred around the belief in the power of savings and long-term wealth creation. Saving is crucial, and if one’s income permits, saving up to 50% by cutting down on unnecessary expenses is a good practice. It may require postponing luxury expenditures and upgrading one’s lifestyle, especially in the early career years. This habit can create a strong financial foundation for future years. However, saving alone is not enough; one must also invest prudently to create long-term wealth.

Short-term trading or derivatives trading is not my preferred investment strategy as I lack the time and skills required to make profitable trades in such instruments. Furthermore, studies by SEBI have shown that over 90% of derivative traders don’t make money. Therefore, I focus on being a peaceful long-term investor rather than a full-time professional trader.

How do you invest your money?

Considering my age of 38 years, savings, and income level, I believe in having a higher equity exposure in my portfolio. Equities can lead to significant wealth creation over the long term, and my financial asset portfolio is composed of around 75% equity through direct equity investments or mutual funds. I maintain a 20-stock portfolio as I believe that anything beyond that is over-diversification.

How do you pick stocks?

When selecting stocks, I use screening criteria that prioritize companies with a strong management pedigree, consistently operational cash flow positive, and consistently profitable companies with sales and profits increasing at a minimum of 15% CAGR. The Return on Capital Employed should be greater than 20. I also avoid companies with a Debt Equity greater than 0.5, except for professionally managed companies. I prefer companies with promoter holding of greater than 50% and zero pledge of promoter shareholding. Additionally, the company must reinvest capital generated as capex for capacity expansion.

What types of mutual funds are you investing in? 

I invest in passive mutual funds including ETFs or Index Funds as they are cost-effective, low-risk, and predictable investment options for investors like me who prefer a diversified portfolio and a long-term investment strategy. The broader indices like NIFTY 50 have given a CAGR of approximately 14% plus dividends. 

I also invest in Sovereign Gold Bonds as I believe that it has many advantages over physical gold. Gold as an asset class has a proven track record of being a hedge against inflation. 

Do you have a home loan? Are you happy with it, or have some issues?

Yes, I have a home loan and I have no issues with it so far. Though I don’t prefer loans, I believe that a home loan is a good loan because it gives you tax advantages, plus the rate of interest is much lower than other loans because it’s backed by an asset.

Also Read: How falling interest rate spreads provide an opportunity to homebuyers

What percentage of your income do you try to save every month?

I aim to save at least half of my monthly income. But this isn’t easy, and I’ve learned that to succeed, I need to remove emotions from the saving and investing process. This means creating an automated system of payments towards different investment avenues such as mutual fund SIPs, stock SIPs, and contributions towards NPS for retirement planning. This automated system helps me stay on track, even during times of financial stress or temptation to spend on unnecessary luxuries.

What do you read to keep yourself updated with personal finance gyan?

Investing is not just about accumulating wealth, it’s also about staying informed and making smart choices. To truly understand different investment products, I believe in getting my hands dirty. I start investing, even if it’s in small amounts. An effective hack I use to gain a deeper understanding of investment options is to directly contact salespersons and enquire about their offerings. They are experts who can guide you through the features and benefits of each product in great detail. 

Furthermore, the blogs, podcasts and youtube channels by experts provide a wealth of information on the basics of any investment option, making these valuable resources for those who want to expand their knowledge and make informed investment decisions. Remember, investing is a continuous learning process, and the more you learn, the better equipped you will be to navigate the ever-changing investment landscape.

What do you think is the best investment strategy in current times? 

When it comes to investing in unpredictable markets one should avoid trying to time the market by catching the bottom. This is because it’s nearly impossible to predict the exact moment when the market will hit its lowest point, and attempting to do so can result in missed opportunities or buying at a higher price than anticipated.

Instead, it’s recommended to have a list of well-researched stocks at the ready. These should be high-quality companies with solid fundamentals and strong growth potential. By doing your research ahead of time, you can identify stocks that are likely to perform well over the long term, regardless of short-term market fluctuations.

Once you have your list of stocks, it’s important to implement a disciplined buying strategy. This means buying in a staggered manner on every dip, rather than investing your entire quantity in one go. This allows you to take advantage of market volatility and potentially buy at lower prices, while also minimizing your risk in case the market continues to decline.

Do you think health insurance is a must or one should rely on emergency funds for unexpected health expenses? 

Having adequate personal health insurance is a critical necessity in our country. The public healthcare system is often overburdened, making it difficult to receive timely and quality medical treatment. The high and unpredictable costs of medical care mean that relying solely on emergency funds is risky and can be insufficient.

I’ve witnessed many families struggle to pay for medical bills, often resulting in them having to sell their assets and taking on crushing debt. The financial and emotional burden of such situations can be overwhelming.

In short, the importance of health insurance cannot be overstated. It provides crucial financial protection against unforeseen medical expenses, allowing you to focus on recovery without the added stress of worrying about the costs. Don’t wait until it’s too late – secure your health insurance today and protect yourself and your family from the uncertainties of life.

Also Read: Life insurance: Disclose true health status when buying a term plan

What’s your advice for others on saving and investing?

Investing can seem daunting, but with the right mindset and strategies, anyone can become a successful investor. Here are some tips to help you make the most of your money:

  1. Firstly, keep track of your investments by maintaining proper accounts. This will help you evaluate their performance and make necessary adjustments. Additionally, it will simplify the tax process and enable you to achieve your financial goals more efficiently.
  2. Secondly, learn about different investment options available to you. Understanding the risk-reward profile of various asset classes is crucial for diversifying your portfolio and optimizing your returns.
  3. Thirdly, create financial awareness within your family. Encourage them to reduce conspicuous consumption, save more, and invest wisely. Teaching financial literacy to your spouse and children will make your life easier and set them on the path to financial freedom.
  4. Finally, remember that investing requires patience. The power of compounding takes time to work its magic, so avoid chasing quick returns. Instead, focus on building a well-diversified portfolio and letting time work in your favor. Keep in mind that there is no such thing as easy money – investing takes hard work, discipline, and a long-term perspective.

By following these tips, you can become a savvy investor and achieve your financial goals over time.