There is a bunch of investors with whom I am friends with.  Some of them are real rich and some of them are super rich. Let us say apart from a nice house with a value of about a Million US $, they would have a net-worth ranging from a Million US $ to 10 Million US $. A couple of them would be in the region of 100 Million US $.

Having introduced them, let me tell you what these guys are doing. They are sitting on their equity portfolios. For example if you believe your Relationship Manager who is asking you to buy put options (market will go down, please protect the downside of your portfolio) or buy call options (nifty has fallen, it will go up in the short run)….well these guys are not doing all that.

Some of their moneys are going into SBI bonds, but they did not invest in the IFCI BONDS, nor are they looking at the SRIRAM TRANSPORT FINANCE – bonds have to feel safe. So some of them have bought bonds, but a very small fraction of their net-worth is in bonds. That money that they are not in a mood to invest is now lying in SBI bonds. Some of them did buy the Tata Motors DVR at 590+…but it is now quoting at Rs. 534 (on the day of writing, 22nd June).

Yes their equity portfolio has shrunk, but they are not worried about it. Most of them are in the market to create wealth, consume some part of it, and leave it to their kids – so a 2-4 year view does not excite them.

Nor have they sold – because the market will fall – they may have sold some share because they found it over-priced. They are not picking up too many shares (we share a broker, and he tells me what he tells them!!).

For many the readers of this blog – and perhaps many more in the outside world – the market conditions are a reason to invest or not to invest. ‘Market is too high, so I am stopping my SIP’, ‘market is going down, I will invest after it stabilises’, ‘market is too volatile I think I will wait’ – these are answers that one hears regularly!

‘You should book your profits when the markets are high’ ….are all brilliant suggestions which people do with a half baked understanding..

This group does nothing like this based on the index. Yes they buy shares and hold on for life. Recently (about 2 years ago perhaps) they sold a share at Rs. 50x (bought for x) – because they realised that the management was doing something foolish and stupid. Never sold because ‘the market was high’ because for them investing means equity. When they deal with a builder, they do a 28% p.a. ‘ready-forward’ – but they will buy only for consumption. They may invest in a ground along with a builder and make a 30% killing on an investment selling flats to the common man. That is not investing. That is a business deal!!

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  1. Hi Subra,

    Could you please elaborate your last 3-4 lines.
    “When thay deal with builder….That is a business deal”.
    Looks like an interesting one.

    Thanks
    Barun

  2. when you invest with a view to getting 28% p.a. return, you are being stupid or greedy

    however if you can do a ready-forward deal with a builder and lend money to him at 28%pa, that is a business deal of lending.

    is it foolish? I do not know…i have seen projects where the builder can afford to pay 28% interest – for a period of say 18 months – from buying the land to the first sale – the risk is the time taken for the first sale. Also in case of distress some builder can borrow…and this group knows when to lend and at what rate. They are not people who do small deals. Normally they syndicate deals in excess of Rs. 10 crores…..

  3. Subra has been keeping rich company.

    One feels nice about it, at least somebody is there by conviction and not by trying to hit the jackpot with every new fishing expedition.

  4. Subra sir,
    Can this amount of wealth built starting from scratch? From what I perceive (i may be wrong) from this blog, most of them have inherited the wealth and increasing it with right investment.

  5. This syndicate is done in everywhere. Even in towns people get syndicated like 10 members each contributing 10 lakhs and financing the 1 crore for a Real Estate deal 🙂

  6. start from scratch go from 10 lakhs to 2 crore or start from 1 crore and go to 30 crores – what diff does it make?

    small syndications are expensive, big ones work better

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