Funnily I do not get paid for the best investment advice that I have ever given! Let me enumerate some of the client questions which have been addressed in the negative.

For a few of my clients the best investments are those that they did not make – but they do not know the value of the service, they have not paid me for the service, nor do they even realise the value of the service. The questions and answers are as follows:

Client 1: My friend runs a taxi hire service and wants me to invest in that, should I do it?

Ans: No. When the taxi hire service guy does not have a licence, asks you to ‘own’ the car yourself (so that you can claim the depreciation) he is actually leveraging off your capacity to borrow. So in a way you are lending to him at a rate at which ICICI Bank will not lend to him – BECAUSE HE IS HIGH RISK. Also if the driver did anything illegal or got killed in an accident, you will spend a lot of money, time and effort on courts and police station. NO do not invest.

Update: the taxi business is closed, the big contract from a IT company has been withdrawn, one of the customers was an IT company which is on the verge of closing down, huge amount of debtors, – my client would have surely lost all his money and sleep.

Client 2: I have been offerred a pre-IPO placement of a fantastic company DO you want it, and should I take it?

Ans: No thanks, I do not invest in pre-IPO shares even if I know the promoters. If the market contracts the IPO will get postponed (or perhaps cancelled), and I like shares which have a free entry and free exit – at whatever price. This way one is sure that all the risks are priced into the share. So I will stay away immaterial of when the IPO is being launched.

Update: IPO still awaited – requires a brave man!

Client 3: My current ctc is Rs. 100 lakhs, I have an excellent offer from a big infrastructure agglomerate to join at a  salary of Rs. 30 Lakhs + 25000 shares of their company at a ‘throw away’ price, should I take it?

Ans: NO. If you take the last 5 years average price (or eps * agreed p/e) you will realise that the share is currently terribly over-rated (frankly I feel buying put options could help!!) so ask for a much higher cash component.

Update: currently the share is quoting at HALF the price at which price the deal was being considered.

Client 4: My banker is offering me a great investment product, will you check and tell me whether I should invest?

Ans: sure, please send me the mail.

Client4: Have sent the mail, have you seen it.

Ans: I have not seen it, but please do not take the product.

Client4: At least you should have a look …before you rubbish it, do you not think so?

Ans: The product comes from a life insurance company, and you have adequate TERM life insurance. Since you do not need any life insurance at all, there is no reason for me to look at the pdf documents you have sent me….

Client5: My bank has sent me a proposal to invest in a Real estate pms of Rs. 55 Lakhs, but I need to invest only Rs. 7 lakhs now. The balance in installments when they call on me to pay.

Ans: No. Never ever commit to a ‘leveraged’ investment. The call has an uncanny knack of coming when you do not have money in the savings account. You will then have to sell something at prices at which you do not wish to sell – and that would be a sub-optimal solution. At your net-worth of Rs. 2 crores, you are better off in a product where there is easy entry and easy exit and in smaller multiples – at least you have partial liquidity.

Update: the calls have come and many ‘middle class’ investors risk losing the initial contribution because they cannot make the 2nd payment!

Client 6: same question….instead of Pms it was a Venture capital fund.

Answer: same!

Update: Out come awaited, very recent!

And for all this advise, I never got paid, so sad! However these are all friends – much more than clients. You do not want a friend to lose money, do you!

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  1. Dear Subra sir,

    i guess i hadn’t read so backwards in your archives. thanx for putting the link on facebook. A very good article…..i guess you should write one article on how people did not heed ur advice n had consequences….

  2. I liked the client 4th one the best 🙂

    It shows you the essence of a lot of things in one shot , Its also a analytical way of thinking in personal finance. Based on current situation and from the source of where the product is coming, we can take decision of looking at it or not . thats great


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