Subra I have a portfolio of debt and equity investments. They are in pension plan, equity funds, some bonds, and some bond funds. I have been getting decent returns but I wish to turbo charge the returns…can you please suggest some more investments to boost my returns? A person I know in Bengaluru who is in alcohol and construction business wants to take Rs. 1 crore from me and give me 24% p.a interest payable on a monthly basis. Do you think it is a good idea to do so?

My answer:

When you ask for a suggestion, do not ‘lead’ me into saying yes. That is bound to create stress in our relationship. If this person had asked me ‘should I invest in a bitcoin or a real estate fund’ I could have answered far more easily.

So this is what I said

I am sure you will find many advisers who will have many ideas on how to make your money grow in leaps and bounds, but you have come to the wrong place. I’m confident those advisers will have no trouble coming up with a long list of alternative investments for you to invest! It will be ranging from commodities, precious metals, hedge funds, private equity, alternate investment funds, PMS, tax lien certificates, structured settlements, mining rights, investing in funds abroad, etc.

Let me answer your questions one by one. Your equity mutual funds have done well – almost brilliantly, but if you compare it to some fund which has given 39% or 43% in 2017, that is a poor comparison. Worse, it is wrong.

Lending money to a person whom you do not know well that too Rs. 1 crore is a high risk proposition, and it could get you into trouble. What if that person does not make the interest payment on time. Even worse if he were to default and somebody came after him? Too risky me thinks!!

Of course, there will be many advisers who will claim that they can skillfully integrate any number of alt investments into your portfolio and manage it too! Maybe after doing some research on their track records, you’ll be able to identify ones who have managed it in the past, for a fee of course. Some of these PMS are really expensive to hold!

I think the majority of investors—by which I mean people like you with a portfolio of Rs. 5 crores – are better off just sticking to a broadly diversified portfolio of shares and debt. Your current portfolio needs some little tweaking, that is all. You have a portfolio, but you aren’t pleased with the returns you’re earning. I find that puzzling. In the nearly nine years since the market hit bottom in the financial crisis, almost all funds have given good returns! In fact, returns have been so strong since 2009—that I seriously wonder how long this party can last. I am feeling like Cindrella and the party hall has no wall clock. I feel we are at 10.45, if not at 11.45, and a great time to leave the party for many of the participants who think they can time the market! And while bond funds have not done so well, they too have done well in the same period. It is only in the past 4 months that bond funds have done badly!

It makes me wonder whether the only way you can feel better is if you re-set your expectations.

 

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