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Sankaran Narens Top Long Term Investing Secrets Revealed Sonia Shenoy Podcast

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TITLE: Sankaran Naren’s Top Long-Term Investing SECRETS Revealed | Sonia Shenoy Podcast CHANNEL: Sonia Shenoy DATE: 2025-12-25 ---TRANSCRIPT--- What are the mindset changes that investors should remember to make when there’s so much noise around you when markets are down? [music]

So money mindset is a lot of detachment to the money. The detachment to the money allows you to make money. Too much attachment to the money does not allow you to make the money. when uh Warren Buffett had come to India. The only time when was this with you? This was I think about 7 7 8 years back people asked him what did you learn over the last five decades. He said in five decades you get five good opportunities to buy and you have to use those five good opportunities. He said what matters to you is what did you [music] do in those five times in those 50 years mattered so much to your return. One of your own mentors, James Monte, [music] argues that the biggest mistake that investors make is their behavior and not actually market volatility. Each person makes [music] their own behavioral mistake. I’m capable of selling early. My colleagues, you have to just hold me. Some of the profits that I made in telecom stocks or power stocks all are owed to my colleagues who held me back saying you can’t sell so cheap. You have to wait for it to double. You have to wait for it to triple. Even then in a telecom stock, one of my colleagues has made much more money than me because he managed to hold it more than I could hold. So when you get these calls wrong, how do you deal with that pressure? See the way investing is that you can’t get all [music] your decisions wrong. Then you won’t have a job. The way it is is you have to have more number of rights than wrongs. The day you decide that all your decision have to be right. No, you’ll never take any decision. Hey guys, I’m happy to be a part of Zerodha’s media network. Together, Zerodha and I plan to bring to you simple yet effective and impactful news and views from the best minds in the financial world. Hey guys, welcome to the money mindset. My guest today is none other than Sankaran Narin of ICICI Credential AMC. Um Narin needs absolutely no introduction but I’ll give it anyway. He’s somebody who has been a veteran in the mutual fund industry. Someone has been there who has been there for almost three decades now. Manages almost 11 lakh crores worth of AUM at ICIC credential AMC. And today he’s sitting here with me not to talk so much about the here and the now but to give you some timeless wisdom about the markets and perhaps how to approach uh the new year amidst all this volatility as well. Narin, thank you so so much for being on the money mindset. My pleasure to talk to all of you at Money Minds. Last time we met was in Kolkata in September of 2024 and I’ll not forget that you had at that point in time spoken about how this market is looking vulnerable and you know you should be cautious on midcaps and small caps and that has played out. Um where are we now as far as the cycle is concerned according to you? See clearly the small cap euphoria is out and I don’t think there is euphoria in small cap and many people who did direct investing in small cap they I think realized that you can’t make money every month you can’t make money easily I think that part of it is out in [snorts] midcap still there is a little bit of uh overvaluation and uh that continues so I think now we are in a much more comfortable position as far as small and midcap is concerned learned. On the other hand, now you got these new age companies without earnings, without anything which which has become the darling of everybody. So that is a new euphoria. So you know and you have euphoria and new things like silver. So I mean I think euphoria gets replaced and uh and the problem is for people like us managing other people’s money, we don’t know how long these euphoras last also. True. True. Absolutely true. Um you know um I think when we spoke last there was a lot of caution in the system not in the system but caution from your end uh but is it fair to assume now that maybe the worst of the fall that we’ve seen in small and midcaps is behind us or do you think that we could still be headed for some kind of a protracted bare market in mid and small caps? So I wish I knew the answers but I think uh the con the reality is that what happens in US how the US uh dominated financial system of the world what does that mean for emerging markets is not clear to me. [snorts] What is still clear is that US uh artificial intelligence oriented companies are still overvalued and there is a valuation reset which will happen sometime in the next 3 years. So when that happens does do the emerging markets not focused on artificial intelligence like India do they get an uplift do they fall with us do they fall less than US that part of it we don’t know that part of it is not clear to me and it depends on that but if that were to fall along with us even partially then I think there is scope for corrections in the market because it is not as if that absolute valuations in any part of the Indian market is yet cheap that you say ignore everything and buy that kind of situation has not yet come so it’s tough to say that’s that’s where we are at this point okay so you can’t ignore everything and buy at least at this point in time no you can’t because you don’t know what will happen when if there is a US-led global correction how much will India correct effect is something not known to us at this point of time. India is in a very confusing space right now. On one hand, valuations are still not reasonable and on the other hand, growth has not picked up as much as one would have expected to. Yeah. But having said that, I think the government has done all that they can do to create growth, which is cut interest rates, cut direct access, cut indirect taxes. So they have done the three things that are there in their hand and uh normally when you do these three things with a lag things improve. So I would say the outlook for 2026 from an India construct is certainly much better than the construct that we had in 2025. So from that point of view, India certainly looks much better on a relative point of view. But you still won’t go out and buy now. No, I’m not saying you won’t go and out and buy. I would say that the absolute valuations are not thumping the table and absolute valuations do not signify at this point of time that you can put all your money in equity. It would still be that you have to do asset allocation. it doesn’t signify that uh uh I mean although the outlook for India is much better than what it was in 2024 December I would say it’s still not at valuations are not where it is that you can say put all your money in equity that kind of situation hasn’t yet come so that’s where we are so fis have been avoiding India for a while now I mean it’s been one one and a half years and you know the selloff continues why do you think that is I mean is it purely because of valuations or is it the fact that we’ve missed out on the AI trade or is there any other reason and when do you see FIS coming back into the market? Actually, we wish we had all these answers but I think it is because of the fact that we don’t have AI stories. thing that is what is the main reason but when the AI stories when AI ceases to be a story will they immediately come to India or will they come after the UA correction happens that we don’t know that’s why I think India is a good systematic investing story now because end of the day whether India corrects during the AI correction it’s still systematic investing should work asset allocation should work. I think both systematic investing and asset allocation should work irrespective of what happens to absolute investing today. What happens to absolute investing today in equity is not clear to us at this point of time. But both asset allocation and systematic investing should both work. So both SIPs and asset allocation are not something we are worried about. So what do what should the asset allocation be for 2026? I you there is no one single cut for each person. I would say certainly be more positive on equity compared to one year back. Be more negative on precious metals compared to one year back. These two are clear. Be more negative on US AI stocks compared to one year back. These are three things which are clear and be less positive on global investing than one year back. So you wouldn’t chase negative on metals. You wouldn’t chase the gold and silver rally anymore. You think that’s done? It’s not that we know what will happen to gold and silver. Gold and silver are two products without price to earnings, price to book and dividend yield and cash flows. So how do you value them? So frankly what happens in the near term is very tough. But as a framework we use uh things like gold to nifty ratio, silver to nifty ratio. These kind of ratios if you use today it’s very tough to buy gold and silver today because those are products where there is no earnings there’s no dividend yield there’s no cash flows but there safety the safety is in the highs of the beholder so you know so that’s why I would say that these are stocks which are less safe than one year back although they are perceived as more safe today I would say they are less safe than one year back much less safe than two years back and 2 years back we were the people who are very positive on silver at that point of time and uh you know the entire multi-asset framework which we still believe in is something which was something which we believed in and actually recommended because we felt that the Indian investor was actually only invested in gold as a jewelry not gold as an investment and when we popularized multiasset investment we actually popularized invest ing in gold and silver unintentionally at that point of time and that was just the right time for investment in gold and silver. I remember that actually and multiasset funds surprisingly have been the best performing category this year. It’s up 15% year to date. I was looking at the data of course it’s because of the way gold and silver has performed and I remember that conversation we had. So interesting you’re saying that um the outlook for India is good but it’s not a screaming buy just yet and you should be avoiding metals, you should be looking more into equities. I think that’s how the law of the land is. Uh my conversation today with you is more about timeless wisdom in the market and you know the lessons that you’ve had in your three decade long journey and I I’m very excited to learn more about that. But before that you’ve studied market cycles for so many years now. Um you know from a lay man’s point of view there is euphoria and there is fear. So the pendulum swings both ways. Uh which part of the pendulum are we at right now? See market cycles depends on asset classes. Like for example today if you look at Euphoria, Euphoria is there in silver. If you look at Euphoria in US AI stocks, it was possibly peak euphoria was 2 months back. Now is it slowly sliding away? Possibly. But uh that is where I would say second area of euphoria. uh otherwise in all the other things you are at a place where uh things are uh there’s no euphoria. So where there’s least euphoria always in is uh at this point of time in cash debt etc because no one is interested no one is interested in investing in such things. So I would say that these are the areas. So at all points of time you have to search for areas where there’s euphoria and search for areas where there’s anti-uphoria. But anti-uphoria there were very interesting areas one one and a half years back like for example China that time Brazil that time those were all very interesting areas of anti-uporia at that point of time rather fear today you don’t have fear in China you don’t have fear in Brazil all those markets have boomed actually so I would still say euphoria is more more in silver than to an extent in gold and uh to a very large extent in US AI stocks and related themes. So uh you know when we talk about uh market cycles when we talk about the way the market is shaped up for 2026 or just for the next couple of years right we just to wrap up this discussion we also talk about themes and sectors and I remember a couple of years ago you were bullish on sectors that were um not not the darlings of the market whether it’s PSUs whether it is telecom whether it’s defense stocks right and then those sectors started booming and doing well at this point in time What would your or your sectoral biases look like? Where do you think that there’s least amount of traction or you know um favoritism and now maybe those sectors could start to pick up? Actually we missed defense of all the themes you know one of the themes which we really missed I would say is defense the others what you mentioned we certainly made very good money in something we are introspecting as a team and I say credential why did we not why did we miss defense uh after the global war started we should have built a bigger position in defense like what happened between Ukraine and Russia it’s something that we are introspecting but if you look at today what has happened is everyone has taken risk after co. So what happens is once you have taken risk and you have invested in a set of stocks or sectors sometime people lose their patience then they start selling because of lack of returns. We have seen that’s the most interesting theme which we have come up with where people lose patience and you get the opportunity because you have long-term money of investors and you can buy out of the lack of patience of investors. So they invest in a sector or invest in a stock for 3 years. They wait for those returns. It doesn’t come. They sell at the most inappropriate time. So we’ll make money in the next 3 years. Can you give me some examples? It’s happened in like for example it happened in oil and gas for example. So if you look at it uh those uh stocks actually underperformed a lot people uh gave up and sold the stocks to us in select auto stocks. People about 6 months back just before the GST cut there were lot of auto stocks which had underperformed. So you know you got the opportunity to buy auto stocks and you have to remember we are managing public money at scale. So we need to be able to buy scale not small amounts. So so our view is that in the next 3 to 5 years we will let small caps cheap because people would have bought at wrong valuations and uh they would have they would have seen no returns for quite some time. Then at some point of time in the next three to five years they’ll come and sell small caps to us. So those will all be opportunities in the next three to five years. So we have to unfortunately you know investing is there are two big problems with investing. One is investing is not arithmetic. I can do a conversation with you and tell you lot of things. Some of what I tell you will go wrong. So even if I say out of what I tell you today something will go wrong because investing is not arithmetic. The second is you know the fact that investing is a zero sum game in a way what happens if I make money it is normally suppose I bought a share cheap one year back out of another person that person has actually sold cheap to me. So if Warren Buffett was the world’s best investor, the counterparty to that person has lost money. So [snorts] this is the second problem. So these are two things which people forget most of the time in investing that investing is a zero sum game. Therefore, you know, you have to be smarter than the counterparty at some point of time over a period of time and that’s that is needed. So that’s why to buy in 2020 when the whole world was closed was a challenge but it made you money and the seller lost money and investing is not arithmetic and people don’t recognize that even the best investors will make mistakes. Your style has always been contrarian right I mean and that I’m sure is not easy to swim against the tide. Did you develop that over time or did you cultivate it or has it always come naturally to you? No, it is based on the ’90s experience you know in 9495 you know was the first big bull market that I saw and I realized that by being momentum uh you actually get uh get into trouble eventually and uh we are not talking about earnings momentum we are talking about price momentum here and uh when we when 9798 happened the momentum strategies had complete problem the price momentum strategies. So after 98 when we resolved what can work over the long term what we realized was contrarianism works and contrarianism with good research works the best. So in 20078 if you had bought infrastruct I mean you bought in 2010 junk infrastructure stocks they would have gone to zero. You could have bought lot of NBFCs in 2017 18 as they were falling some of them went to zero. So what happens is contrarianism with a calculator which means that contrarianism with good research that works the best and that research has to be there otherwise you’ll end up buying the wrong company and that wrong company will go to zero. Yeah. So contrarian investing if you had to tell us a little more about it because it’s been your style for a while. uh what does it actually entail? You said of course the good research is a must but to be a contrarian investor what kind of behavioral traits does one need? See first is no you first think like take a case like silver today it’s gone up 100%. So you shouldn’t worry to sell silver today once it’s gone up 100% in one year. It’s the best performing asset class over the last 1 year, 3 year, 5 year, 10 year. So you shouldn’t worry about selling. Similarly, if you’re buying an asset class which has given no return for 10 to 12 years, you shouldn’t worry. Asset class, not stock. uh so if you have the ability to buy an asset class which has delivered 5 years zero return 10 years zero return maybe which has gone down 10% CAGGR for the last 5 years given a return of minus 40% in the last 1 year as an asset class not stock then what happens is that makes you a contrarian so because what happens is assets don’t asset classes don’t go to zero In 2012 we actually launched a US fund and at that point of time people don’t know 12 year return in US was zero and people would have it was such a tough task to convince people that US is a good performing market can perform at that point of time but 12 years zero return is an absolute phenomenal contrarian model. So if someone comes and tells you that 10 years zero return in an asset class then that becomes a good starting point for contrarian invest. So um if you go by that theory the only problem with that is timing right like for example mid and small cap stocks they’ve been through now one year of a downtrend but if you look at it that would be a contrarian style of investing to buy into them now but then how do you know that they may not be in a downtrend for the next 3 4 5 years that’s why as I said we had models like 1 year minus 40% 2 year - 15% caggr 3 year minus 8% CAGGR 5 years zero return. So if you looked at it 2018 was when uh small cap peaked then the next small cap rally started in 20134 but if you had looked at in 2013 August and looked at some 6 7 year return it would have been zero. So you can’t take one year and say it has become contrarian. You have to look at five six years in 2024. I think the 24 year return on uh Hen had become zero the Chinese the Hong Kong index those kind of things become very interesting if by chance someone comes and tells you 20 year index return of a market is zero then it becomes even more interesting you can’t predict the bottom correctly you can’t predict the top correctly but the margin of safety which comes out of a 24year zero return is really good at some point of time it had happened in

So then coming back to that point on silver I mean of course there’s a lot of euphoria about silver now but who is to say that silver is not in a 10 12 year bull market and no one can say that’s why no one can time the top that’s one of the basic principle is you do switching you move out of a euphoric asset class and move to a fearful asset class if you find one and that works much much better than deciding that this is the top. So what do you think is a fearful asset class right now? Right now there are no easy fearful asset classes. 2024 there were plenty. Today there aren’t actually but the reality is that if you and you know once it is asset classes and not stocks you don’t need uh so much knowledge you know in 2020 if you looked at it anywhere in India 7ear real estate returns were zero. 2013 to 20 real estate returns were zero in almost all parts of India. When you had 7 years zero return in real estate it was something at that point of time which is uh which is attractive. It was not 10 years but 7 8 years was zero. So somewhere what happens people think that’s why I said investing is not arithmetic. If people think you can get exact bottom right, exact top right, I don’t think it’s just possible. And that’s why mutual funds are doing so well because people don’t have the time, bandwidth, energy, you know, skill set to pick stocks individually. That is why what we tell people do asset allocation and keep doing asset allocation on a continuous basis. That is the best way to build wealth for the long term because that is the easiest and long best way to build wealth for the long term. So you know a lot of us I mean all of us who are in this market have in some way have a confirmation bias. I mean we we choose to believe that India is doing very well. We choose to believe that the growth path is intact which it has been so far. But there are a lot of um you know red flags as well right now. If you look at the AI trade we spoke about that India is lacking. The job situation is not that great. The trade deficit numbers the rupee is at an all-time low. So there are several factors that are also kind of like worrying investors a bit. the lack of FI participation from your view how should one read into all of these macroeconomic trends as a retail investor as a macroeconomic trend you know you have to decide what to look at if FIS being in India is the positive that’s not necessarily the case in 2008 FIS were not there in India that was they started selling in 20089 that was the best time to buy in 2013 they were selling at the time of taper tantrum that was a time to high in 2020 they were they were not buying again it was a time to buy so people use wrong sometimes smack if FIS are very very big buyers that is are actually a more dangerous time in the market from a contrarian point of view if FIS are not buying like today you can do asset allocation if both FIS and domestic institutions were buying very very aggressively that is actually a risky time to for the market today is a much safer time in the market because fi have been selling. So frankly if you look at it you know you can always in any market find some positives some negatives. So the way we look at it India macro has been fantastic over the last decade the only issues have been valuations. If you look at something like trailing PE or market cap to GDP those kind of things have been not have been high. [snorts] So on the macro side things have been fantastic. They have never been better. Actually, India must be one of the few countries in the world where the uh GC yield, the government borrowing rates have come down in the last 5 years. In most of the countries in the world, the government borrowing rates have gone up because uh the fiscal deficit has been in control. So I don’t think macro is a problem. Valuation has been a problem. Not macro. So there is no real concern as far as the Indian macros are concerned. So you believe that earnings will continue to pick up because we’ve seen some signs of earnings picking up. No, I think earnings will definitely pick up. The benefit of lower interest rates, the direct tax stimulus and the indirect tax stimulus should all help in

  1. But the starting point for valuations is not cheap. That is the only problem.

But it’s good to hear that you are much more optimistic now than you were a year and a half ago or so. Yeah. Except on the valuation front we are clearly more optimistic because India has become contra. You go and look at 2025 you’ll find India is the worst performing market in the world and there was nothing macro which went wrong in India despite that India has been the worst performing market in the world. So obviously from a contrarian point of view you can clearly see barring valuation things are much better in India than they were one year back and valuations are also better but valuations were really high last year they’re still not cheap that is the problem. So you don’t think that there could be some more time in which India continues to be the worst performing? I mean you can’t time it. I don’t think so. I don’t think so. I don’t think India can be the market which underperforms in 2026. What absolute return market will give in 2026, I don’t have an answer. But I don’t think 2026 India is going to underperform the way it has underperformed in 2025. I don’t think so. That’s a that’s a very high conviction call I must say. Similar to what you had said a year and a half ago about mid and small caps. At that time I remember everyone was you know like there were so many naysayers and but you still stuck your neck out and you said that because investing is about taking calls you know if you’re managing public money also you have to take calls if you don’t take calls you can’t create alpha you have to take calls to create alpha and hope they go right all you can do is hope that’s true you have so many u mentors or you know investing legends that you always talk about whether it’s Peter Lynch, Howard Marx, um Michael Mobusen etc. I want to understand from you what has been your biggest learnings from all of them. I mean each investing legend has a different style a different way a different you know skill set. So you know if you can just take us through what your biggest learnings have been from them. I think the most important has been from Had Mars uh that you have to have a that’s the whole concept of a cycle possibly I knew it but I didn’t know how to express it. So if you understand cycles in asset prices and in asset classes, you’re in a very good position to make money for the long term when you’re managing other people’s money. So in 2020, the best quality companies were trading at very high valuation. It is not that the companies were bad, the companies were very good, but they were trading at ridiculous valuation. So you had to avoid them. So the concept of cycle in the India’s best companies played out from 2020 to 25. So similarly today there’s nothing wrong with artificial intelligence. Artificial intelligence is going to change the world in the next decade. But the call that we have at this point of time is that the stocks in artificial intelligence are overvalued and they will correct. But it is not that artificial intelligence is not going to change the world in the next decade. I think it will change the way we do things. Definitely just like mobile phone change the way we we live I think artificial intelligence will change. So these are the the whole concept of cycles. So for example what I find very difficult in investors is people take financial investment decisions without creating a framework. So you know if they were to trade in derivatives, if they were to trade in equity markets, you know, if they didn’t follow a process like if they like I tell people take a notebook for every financial investment decision you do write write something before you take that decision. Suppose you were to buy stock of X X stock,000 shares you write out why you are writing why you are buying it. put it in a notebook and store that notebook every year between Christmas and New Year read that notebook and see what what did you do with that notebook so that you know that improves the quality of the decision but if you take investment decision just because somebody called you on the phone and said buy share X then at the end of the year you won’t know what you have done but if you have created a notebook which means that for I’m sure when you buy a car you ask which whether other people who have the car whether that car is good. So similarly for this notebook you create for every financial transaction that you do personally write out why you are uh why you’re doing it and maintain that notebook and set aside the period from December 25th to Jan 1st every year to review what you did that year be a very simple way to understand whether you focused on uh what whether the whole process worked for you whether you should listen to anchor A anchor B look at this channel what should you do and that will definitely improve the quality of your financial decisions. But that ability to cut out all the noise and listen to your inner voices is something that you know not just in the markets but it’s hard to do in general in life as well then you’re not interested in making money for in the long run for as an investor which is very important which is so if you are in this game if you’re trying to do something like gaming through investing then uh so be it. But that is not uh the goal of investing. The goal of investing should be to improve one’s net worth over a long period of time for the sake of you and your family. So I suppose that is the goal and not having a having a not playing a game through investing. Absolutely. And I think when you’re in your 20s or you know when you’re at the early stage of your life, you tend to make a lot of these mistakes and learn from them and then move on. Uh so I guess we all go through that journey. So you said Howard Marx you know taught you about market cycles or you learned about market cycles through his books etc. But how does one study market cycles if you had to give us an example of where of this current situation right how do you know understand because it’s very hard to time it’s very hard to understand peaks and troughs so what what would your analysis be about the cycle that we are in right now so simple thing is any asset class which delivers 100% in a year stay away from it any asset class which delivers minus 40% in a start nibbling in it. Are you capable of doing that? That is contrarianism. But that is a start. So what would have been that would have meant that in 2008 after lemon you would have automatically invested automatically when COVID hit you, you would have put money in equity. So what happens is you would have got invested both in 2008 after lemon and in

  1. So the fact is that you have to create some checklist which forces you to invest at the right time in the market and clearly in 2007 when one year returns on many equity funds went up so much you would have automatically taken out money when one year return goes up above a certain level you say I’ll take out money then you would have taken out the reason for the small cap or midcap was at that point of time if you looked at small cap return from 2020 to 24 it was so high And it was not small. It was possibly one of the best periods of small cap returns from 2020 to 24. And uh so that’s why if you looked at that 4-year return, it must have been stupendous at that point of time. So when returns become stupendous, the ability to book profits is is one of the toughest things. Now people say stay invested forever.

That was my next question. So the stay invested forever is a model that you can do. But then I in my investing career and I’ve been in broking for 10 years and 21 years in mutual fund I’ve seen that once you have a flat period for 5 years or a negative period people want to take out money at that point of time. How many investors are there who invested in 2008 and 2006? Most of the people invested in 2006 and 2007 stopped investing in 2008. That is the problem. So that’s why I’m saying that if you know what you are doing and you have your past shows that in big market corrections you double up then things are fine but many investors don’t do it. So young investors who are starting off now who’ve not seen a big bare market this buying and staying invested is it something that will work for them? It’ll definitely work for them. Starting SIPs today will work for them. Definitely starting SIP today will work for them. starting SIP today in a silver ETF will not work for them. The challenge is you have to start in an asset class which has not delivered glorious returns in the last 2 years. So doesn’t mean that silver will not go up in the next one year or two year. It may go up but you you have to choose an asset class without euphoria to start an SIP. The day you start SIP in uh euphoric asset classes that means actually you’re caught up with this whole euphoria that is the challenge that’s why making money in the long run is very easy but you should know how to manage your temperament in big bull markets and big bare markets and you can’t control when they come that is not known you know when Warren Buffett had come to India the only time so we got a chance to meet uh as a group of some 400 500 people in Delhi. When was this which year? This was I think about 7 7 8 years back I think. So uh people asked him what did you learn over the last five decades? He said in five decades you get five good opportunities to buy and you have to use those five good opportunities. So if you look at the last 37 years I’ve been in markets, there was an opportunity around 20012 to buy very big. There was an opportunity after lemon to buy very big. There was an opportunity after co to buy very big. Now if you used it, you made very good money. He said what matters to you is what did you do in those five times in those 50 years mattered so much to your return. He said that he did beautifully in those five opportunities which came up and he used those opportunities significantly. No the problem with that is why over a period of time over the last 2 years ever since people thought equities is a market which is too easy to make money. I have been telling people don’t go whole time into this business do something else because the moment you go full-time into this business you want to invest every day something you want to do everything every day then it doesn’t make Warren Buffett says in 50 years there are only five years where you have to invest big so then why should you be full-time in investing so you have to be full-time in investing if you then what happens then you invest in all periods of time then you end up disinvesting in a long period of time. Whereas if you are going to invest only five times in a big way in 50 years and you’ll make more money out of it, you don’t need to be full-time in investing. You can be a surgeon. You can be a you can be a a teacher in a college. You can you can be a credit analyst somewhere. You can do something else in your lifetime. But don’t be a full-time investor. Full-time investors can’t take too many decisions every day and they can’t take too many risks. They get very emotional about they get very emotional. Yeah, true. That’s actually a very helpful learning from Warren Buffett. I I didn’t I actually I didn’t even know that he had come to India. I don’t know. Did you get a chance to meet him? No. No. As a group of four that we heard him that itself was great. This this itself was beautiful. After that, you know, in every such event, we’ve been trying to tell people, don’t think that being full-time investor means more money because the because once you’re not a full-time investor, you have more time to actually make money. See, as a CIO, I’m involved in so many things in my company. So what happens is if I buy a power stock in 2018 or a telecom stock in 2018 I am able to wait till 2022 for return the moment you’re a full-time investor doing only that the whether you’ll wait for 4 years for that return I don’t know but we have got so many things to do so that’s why we have patience once you have patience you make money since you spoke about stocks you of course uh helped us understand how to look at market cycles as far asset classes are concerned. But what do you do when you buy a good company, a good stock, great business, great parentage, no red flags, no corporate governance issues, but in a in a market fall, the stock falls, say 20, 30, 40%, but business is intact. What do you do at that point in time? You have to buy more. But you could have paid a excess valuation the first time you bought it. Suppose you bought something at 70p, it falls 20%, it becomes 50p. then you’re still maybe paying too much. So you just just because it’s a great company doesn’t mean it’s a great stock. There’s a difference between a great company and a great stock. There’s a difference between a bad company and a bad stock. Sometimes you can make money in bad companies also. Just because they are bad, they may be available very cheap and another good company may take that take that company over. So it is there is nothing like good company means good stock. I mean there are companies like you know right now quality companies there are some quality companies 2020 onwards 2020 September October to now they have delivered almost no return. They have underperformed fixed deposits. So what do you do at a time like that? No no investing is not meant to be easy. Yeah. So there are times when you overpay for investing. If you overpay then you have to be prepared to take pain and you will realize it later. You will not realize it on that day. You whether you overpaid or underpaid you will come to know later. And many people today overpay for a lot of investments. So whereas going back to 2001 2 and all there used to be stocks available at 23p also today it’s so difficult because there are so many investors in India so it’s very tough to find undervalued stocks okay I want to also talk about uh the behavioral mistakes that people make in investing because you know one of your own mentors James Monte argues that the biggest mistake that investors make is their behavior and not actually market volatility. Um as an investor myself I’ve I’ve made a lot of behavioral mistakes like you know sold during co or sold during layman or not bought at the time when the market was at a uh trough u so according to you what are the big behavioral mistakes that one should avoid each person makes their own behavioral mistake I’m capable of selling early so what happens is normally in every fund I have a co-und manager the co-und manager actually has to hold me back to ensure that I don’t sell early. So that is the kind of mistake that I make. There are other people who can’t buy on a big market fall whereas for me to buy on a big market fall is very easy. So for them they just freeze. So for for me to buy on a big market fall is one of the easiest decisions on earth. So I have to go to them and say buy today. It’s fallen like this. The same company is available much cheaper. buy today. So that’s very easy for me. For others it is very tough. But why do you think that is? Why is it easier for you and tougher for them? That I don’t have an answer. But the other also know I’ll sell up early and my colleagues you have to just hold me. Some of the profits that I made in telecom stocks or power stocks all are owed to my colleagues who held me back saying you can’t sell so cheap. You have to wait for it to double. You have to wait for it to triple. Even then in in a telecom stock one of my colleagues has made much more money than me because he managed to hold it more than I could hold. So each of us will keep making behavioral mistakes. It is impossible to avoid behavioral mistakes. The level to which you make behavioral mistake differs from person to person. Are you making too much or too little or only some amount? You’ll know. But you the basic point is you have to keep introspecting and then you have to come to a framework what can help you to improve. So I have many of my colleagues who help me to reduce my behavioral mistakes. I help my behavior my colleagues to reduce their behavioral mistakes. So each of us work to reducing each other’s behavioral mistakes. So that is what we do at ICA credential considering we manage public money. Now how does an individual do it? I don’t have an answer. But as an individual, what happens? Sometimes what happens? You actually if two of you together can take a decision, it’ll be much better because one person’s behavioral mistakes may be another not the other person. So maybe that’s but if you make it a investment committee sometimes Michael Moesan says big investment committees fail because instead of behavioral mistake of mine getting offset by the other person says all the behavioral mistakes get added and then there’s confusion and then there’s confusion that’s what he says. So he says optimal group to take a investment decision is three. He says in one of his writeups he says if you create a very big committee to take investment decision they fail instead of one person’s behavioral mistake getting offset by another. He says everyone’s behavioral mistake gets added. That’s what he has written in one of his pieces. So as you said right selling early is one of your behavioral mistakes. But when do you sell? Like that’s even a problem that I face. You pick a great stock, it does very well and then you feel like okay it’s going to do better and then there’s a market draw down that comes in then the stock falls 20 30%. Then it rises again. So that that you know when to sell is a confusion that a lot of people have. So it is switching. We have moved to a model called switching. So you sell because you find something better. So it is always switching. So sometimes as an individual you can sell you can switch to buy a house. You can switch to buy gold. You can switch to do something else. You can switch out of gold and silver to buy to buy a house. You can do different things. You can switch to fund education. So you remove this word called sell and move to a word called switch. And this is what I’ve been telling people. The day you move use the word sell, you get into behavioral problems. The day you move to a word called switch, you will have comfort. You evaluate two opportunities. You say today I sell silver and buy this this stock. I evaluate this decision between selling this silver and buying this mutual fund. That is an easier decision to do. Evaluate the switch decision. Can I move out of silver and move to this uh m hybrid mutual fund? You if you’re able to write out the logic for it, do that. Don’t think about the don’t think about the sell decision. think about the switch decision. So have you recently made any such decision switching out of one asset class into another and how do how have you taken that decision? I mean I’m sure you do it on a regular basis. Yeah. I mean if you look at our multi-asset fund it has the lowest amount possible today in gold and silver and we moved that money to equity if you look at our published portfolio. So we have done that but has it worked in the recent past? We got uh we got it wrong. So that is the situation the timing of it is wrong. Okay. But you feel at some point it will work out. Yeah. So so it is a switch from silver to equity effectively. So when you get these calls wrong I mean of course when you get calls right you know it it’s a it’s a whatever an ego boost etc. Everything is good but when you get calls wrong how do you deal with that pressure? part of the job uh I think uh when you keep doing it see the way investing is that you can’t get all your decisions wrong then you won’t have a job so you have to get yeah the way it is is you have to have more number of rights than wrongs the day you decide that all your decision have to be right no you’ll never take any decision so and sometimes no decision is a decision suppose you evaluate a stock and don’t buy it that is also a decision So that is the way it is. So I would say that it is tough to avoid mistakes. It is the number of right decisions have to be higher than the number of wrong decisions. It is never that you can avoid wrong decisions. And no decision is a decision. If you didn’t buy a stock that is also a decision. If you didn’t sell a stock that is also a decision. This people don’t understand very clearly. Can you explain? Suppose you had 100 shares of A. That share is let’s say trading at 2,000 rupees. No, today you evaluated and didn’t sell. Then that’s a decision that you didn’t sell is a decision because tomorrow that 2,000 rupees share can go to 1,800. It can go to 2,200. So you have actually avoided a decision by not you have taken a decision by not selling. People don’t think of it that way. They think that I’m there’s no decision. There’s a decision by not selling also it’s a decision today if there’s an IPO which comes and I have cash in my fund if I don’t invest in that fund I’m in that IPO I have taken a decision not to invest so that is also a decision decision not to invest is also a decision actually I was speaking to a CEO once who told me that decision making is the biggest skill that should be taught in schools or you should teach your children because that is something that we are never taught and then we have to suddenly one fine day take all the decisions in our life but for you personally because you have to take so many decisions is it something that you cultivated or is it a part was it a part of your childhood where you were given the you know responsibility to take certain decisions so as I keep telling my father gave me his entire portfolio once I started working and said do whatever you want you seem to understand stock markets so then with his he had a big portfolio with his money very small portfolio with a small portfolio he he gave me the chance to invest disin invest and he didn’t bother he only knew uh his son he thought his son knew stock market so and and he gave me that freedom so with that I learned and then you keep learning it’s a investing is about making mistakes introspecting making mistakes introspecting even today it is not that at managing 11 lakh crores we can say we will never make any mistake it doesn’t happen that way so we will make but it is about making mistakes introspecting making mistakes introspecting and doing better than peers finally otherwise you won’t have a job [laughter] that is a whole discussion on another level because you know that puts a separate level of pressure because there’s so much noise around one fund manager told me I never look at other fund managers performances because then I just lose track of my thought so I never compare I said how is that possible don’t you you know wake up in the morning and look at other fund managers like no I don’t do it because then if I do it then I lose track of my thoughts but coming back this is interesting so your father gave you your his entire portfolio whatever was the amount and said do what you want with it but there were no repercussions of if you lose money he didn’t bother I think that is what maybe gave you the you know the extra sort of I don’t know freedom to choose and buy and sell whatever stocks you want without any repercussions absolutely that’s a big learning actually as a parent also I always I I struggle to you know teach decision-m to my son because as a child every decision has a repercussion. So you’d rather not take that decision only and not deal with that repercussion than you know the other way around. But anything else anything else from your childhood that helped you cultivate this mindset where you know you don’t you’re not bothered about the noise you’re very focused because contrarian investing is really it’s it’s tough. It’s not that easy. No, you finally need to create a group of people who also feel comfortable with the framework that you have. And that over a period of time uh we have in our company people and I have my colleagues in the entire company starting with sales. So if you give a call saying that midcap and small cap is overvalued don’t think that I’m the only person being talked about every salesperson is also questioned by his distributor. So it is a it is a organizational DNA that we are going to do everything. We are going to take calls but we are not taking these calls uh just just like a joke. We take it in the interest of the investor. We can go right, we can go wrong but we will always try to do it. So that is the way it works. So it is becomes an organizational DNA that we try to do what is possible and hope everything works and as I said some will go wrong. True. True. uh coming back to learnings from you know the legend legendary investors we spoke about Howard Marx uh Michael Moeson as well I want to understand from you a little more about his style of investing and what your biggest learning has been from him so we always do premotms so you know we we have done historically premot I think the best premot we did was when we launched value series one what is a premot I mean for people premotum is simple that you assume there is going to be an election so you take A you say postmortem is that something uh some act something goes wrong then you say who is responsible for this error that is postmot as you know premotum is you say okay there’s going to be an election or there’s going to be an RBI policy now what are the possible things which can come out of this RBI policy now what do we take do you think in RBI policy a rate cut will happen will it not happen so you do a premotum and say Okay, RBI will not cut rate and then we take a decision on that basis or RBI will cut rate and we’ll take this decision. So that is what we call a premoter meeting. But how do you know the outcome is binary? No, that’s why it’s not it’s binary. So we take a call based on probabil probabilities. So you keep on taking like for example in 2013 we realized that the upside on the market after a 5year no return was so high that we said that we have to launch closed end funds now because that gives you the opportunity to uh invest for 3 years. So imagine for 5 years there were no return from 2008 to 13. you there were 3 years more no return it would have been 8 years of no return which rarely happens in a growth country like India so we took a call that after 5 years you should launch a closed end fund and try to collect money that was that was almost the bottom of the market in August 2013 way back that happened out of a premotum discussion that we had in our company that uh where we had a discussion where we said like what happens if what will happen. 8 years zero return is very unlikely. So let’s take this call of launching money through a closed end debt fund. Okay. Any other examples of premotms that you’ve done recently and where you’ve learned from? I mean every time any Fed meeting happens we take a decision. Every time there is a big U US presidential election we have done a premotum. But some of these calls even if for example uh we will try to do it for every budget we’ll do a premot. So because your postmortem what happens is that you always try to find out who has gone right who has gone wrong. This is a decision you say okay probabilistically this is what is h going to happen. So then after that this debate is probabilistically you can go wrong but at least you have had a proper discussion before the event. You’ve thought it through the entire thing. So we have we have had probabilistic discussions on something like Indo Indo US trade treaty which have not happened but we have had this again we’ll have every 10 days we have a premotum on the trade treaty. Okay. I would love to be a fly on the wall in that discussion [laughter] because no one knows what where that’s going to go. What is your understanding Ben of this? I don’t know anything. No I I’m sure it’ll happen but I know nothing more than you you would know. But there’s there is as an investor there is no reason to bank on that and you know plan according to because everyone says that once the US trade deal comes through then the markets will fly once the but that’s that is one of the reason why I’m quite optimistic that at some point of time the trade treaty will come and that will help fi flows also interesting uh so okay from Michael mobin you learned premotms what else that was the main thing that uh we learned from Michael M said as I said no investment committees you can’t have four people trying to take a decision take three people and take it interesting your journey has really been I mean you know every time I meet you there’s so much to learn there’s so many new things to learn if you had to encapsulate your entire journey three decade long journey of investing into a few key points what would they be as I keep saying no first is investing is not arithmetic Take second is think where you are in the cycle. You will never be clear but at some points no you’ll be clear and when you’re clear you have to act with intensity. I would say that and don’t worry about the outcome. The moment you start worrying too much about outcome you can’t take decisions. You have to take you have to act and not think about the outcome. Every day you think about outcome and that to here you’re managing other people’s money becomes very tough. So without thinking of outcome you have to act most of the time and that is what has worked over a period of time and asset allocation works at the level of the individual. Asset allocation works. If you do asset allocation over a long period of time most investors will be in a better shape over the next 10 years, 20 years, 30 years, 40 years. That is what I can clearly tell you and this is something people people kept telling me equity works but I changed it with lot of effort. I tried to convince lot of people asset allocation works and uh I would say it is much more comfortable uh from the point of view of the investor that asset allocation is much more comfortable than depending on only one asset class. Take for example, no one would have believed that gold and silver will be the best performing asset class in the last 3 years, five years as we speak. But asset allocation told you that you have to put some money there and that is how multiasset became such a interesting and important category popular product. You think multi for someone who is maybe missed out on this multiasset uh boom you think 2026 2027 multiasset funds will continue to do well? I don’t know over the next decade certainly 26 27 and all I don’t have answers. So for someone like you know in their 20s and looking to allocate money into mutual funds multiasset funds is still the best way to but one of the best ways considering that it has all the asset classes it has equities it has gold silver it has extended traded com it has retinate it has debt it has everything and taxation benefits also. Yeah, because a lot of it gets done internally itself. So you don’t have that hassle at least in multiasset funds. Okay, this was a really special conversation. I I enjoyed it a lot. Narin, thank you so much for your time. I’m just going to wind up with a few you know a few um sort of ending notes because our our show is called the money mindset. So I believe that it’s not so much about uh you know tracking prices, valuations, fundamentals that of course is the basis is the fundamentals but it’s also about your mindset shift like a lot of people have this scarcity mindset and you know they like you said they just they just can’t sell or they just can’t buy when markets are tough etc. So what are the mindset changes that investors should remember to make uh when there is so much noise around you when markets are down? Anything that you’d want to advise? No, I think no it’s like you know war you have to focus on a process and you have to first save then you have to ignore completely noise. How it is possible? Don’t ask me. But uh your goal is uh as I said I I don’t like the idea of too many full-time investors. I’m saying as long as you’re not a full-time investor and you save money for a lifetime, it is too easy. investing is too easy because I believe that uh over a period of time what we think in ICA is that you do hybrid uh asset allocation that itself will uh take care then once in a decade you’ll get one opportunity something will go wrong somewhere in the world when that something goes wrong somewhere in the world at that point of time uh I’m sure we you will know that something has gone wrong seriously somewhere in the world at that point of time your money mindset should tell you that this is the time to take risk for the long term that’s all. So it’s so it’s very simple actually and every day you can’t be bothered about what has happened to your money what [snorts] you’re doing what what is happening to your money the day you start worrying has my NAV gone up so much this month then that’s a problem because if you are investing in the depth of the COVID problem imagine looking at your NAV daily that It would be extremely painful. In 2008, people thought that the financial system is gone in the world. On that day you invest uh if you started looking at your NAV every day or looking at your net worth every day in the fin you would not have invested. So you have to have a proper detachment. You have to invest in periods of panic and not worry. In normal times do asset allocation. Can you predict when panic will come? Who knows? Did we know that I joined this firm in 2004? Did I know panic will come in 2008 and 2020 and small small panics at various points of time? Answer is no. We didn’t know but you’ll have to do it. So that is a money mindset. So money mindset is a a lot of detachment to the money. The detachment to the money allows you to make money. Too much attachment to the money does not allow you to make the money. This is my learning uh which I share with lot of people and people say are you sure? I tell them yes because it is uh in fact says that you can’t if you need to you can’t have this attachment. The day you have this attachment, you can’t take decisions in panic. That is what Mark says. He calls it something I’m not able to remember. But he says you you can’t have attachment. There has to be detachment. The detachment is what allows you to make money. It is the detachment to money which will allow you to invest in 2020, 2008, 2002, these kind of periods. It is only detachment which will allow you to invest. So the money mindset has to be a period. It will involve a certain amount of detachment and an ability to invest in panic. Can that be created? Most people can do it. Will everybody do it? No. If everybody did it, there won’t be panic. I think it’s easier said than done because if you look at our country’s population of 1.4 4 billion people there are barely 20 30 40 really successful stock market investors right if you if you count it you can pretty much count it on your fingertips so it’s easier said than done I guess yeah because the to invest in panic is not an easy job and that is why asset allocation is the second best asset allocation and SIP are clearly second best to investing in panic So do asset allocation in SIP. That is also a good money mindset. Investing in panic is the best. Asset allocation and SIP is the second best. And don’t start SIP in a in a asset class in Euphoria. That is not uh asset allocation anyway. So I’m saying asset allocation and not starting SIP in an asset class in Euphoria. That is what I would say second best. And any big regrets that you have in your investing journey? No, I have had a I would say we are part of the lucky generation because I passed out of college in 1989. The regulator called Sebi got created and they changed the entire capital market. I was telling uh I was telling people when I I was an investment banker in early ’90s at that point of time uh public issues used to take 70 days for listing now they take 3 days. So just look at how much the financial system has changed and hats off to all the entities involved like SEBI, NSC, all the registar and the way digitization has happened the way you know we have managed to use technology in financial services. Hats off to everybody involved. So [snorts] I think we have I think I think our generation my generation has been the luckiest generation because we got into the entire financial system at the right time. You think success is all a lot about being at the right place at the right time and luck or is there something more involved? is being at the right place at the right time. But uh in 989 many people were in financial services between 192 and 94. But in 1998 they left the industry for IT for the technology industry. They all left. Whereas to stay in financial services between 98 and 2003 was the toughest part of my life if you ask me. Why was that? Because the industry was in very bad shape. Financial services industry was in very bad shape between 1998 and 2003. If you look at it, market did not deliver returns between 1994 and 2003. I think 9-year return in Nifty was zero between 1994 and 2003. So it was a very tough time. I had faith in equity markets. I had faith in the fact that India would finally deliver. So somehow I stayed close to equity despite equity not doing well. That was maybe contrarianism in uh in in its early stages. In its early stages I would say okay that’s what taught you perhaps to be a contrarian investor. Yes maybe. It’s really it was really a pleasure speaking to you. Thank you so so much for your time your wisdom and your energy. I mean it’s really infectious you know the the kind the um all the advice all the learnings. It helps everyone as individual investors and of course mutual fund investors as well. Thank you so much. Thank you. Thank you. My pleasure. Happy New Year to everyone. Yes. Merry Christmas and happy new year. Thank you guys for watching.