What Retail Investors Do Wrong Thrive By Groww

TITLE: What Retail Investors Do Wrong | ₹80,000 Crore Fund Manager’s Masterclass CHANNEL: Thrive by Groww DATE: 2026-05-02 ---TRANSCRIPT--- In the streets, when your car enters a street, there’s a stray dog which chases your car. At the end of the street, you slow down to turn, so the dog catches up with you. And he doesn’t know what to do. Indian ministers are typically like that. They invest in it. It’s “Badhega, badhega.” They They don’t know when to exit.

You bought a share at 100 rupees. It’s gone down to 60. You then don’t sell it until it comes back to 100. Central bankers are not investing in gold because they’re expecting great returns from gold. The fundamental reason central bankers are investing in gold A very warm welcome to you, Mr. Subramaniam, to Thrive by Grow. Thank you. Thanks a lot, Radhika. We’re looking at central banks increasing gold reserves. You mentioned that yourself. And uh do retail investors need to copy that strategy? Or do we treat that So differently? Uh central bankers are not investing in gold because they’re expecting great returns from gold. Retail investors should invest in gold because they’re expecting to get good returns from gold. Sure. The fundamental reason central bankers are investing in gold is de-dollarization. Yes. They are protecting themselves against a depreciation of the dollar. So, it’s a defensive tactic. Mhm. Like tomorrow, if they find an alternative, uh anything, they can easily switch out. Whereas, a retail investor is buying it, so he should track what central bankers are doing. And the moment there is news items that central banks have started reducing their reserves of gold, Mhm. he should then turn down his portfolio. So, his portfolio has to track that. But fundamentally, you must remember what is the reason he’s doing that. Because central banker reserves never converts into profit. It’s a paper wealth. Yes. Whereas, for a retail investor, at some point of the time, he’s got to look at converting it and taking it home as hard cash for doing whatever, fulfilling his dreams and desires, right? So, there’s a fundamental difference, but central bankers, because they are big big gorillas in the place, their actions drive prices. So, you have to track what they do and that will give you a sense whether prices are going to go up or not. So, definitely that information is important, but remember that fundamentally they have different reasons to do that. Like I said, let’s repeat, they are not doing it because they think gold prices are going to rise. Whereas, you are doing it because you want to be in asset class that’s going to rise. Yes, absolutely. So, you know, you’ve said earlier that nobody ever catches the bottom. Now, we are in a world where there are there’s material scarcity, there are strong narratives. How should investors think about position in commodities without falling into FOMO? So, I think that the best way to do that is to um uh use diversification. So, what are the various asset classes? I mean, crypto is no longer not allowed properly in India, so leave crypto. Otherwise, you have uh um bonds which give you some amount of guaranteed returns in a way or assured returns, right? You have equities, which is high risk. You have real estate, which correlates with inflation generally. And then you have commodities in which the only commodities you can play as an investor is gold and silver in India. Uh you can invest in commodities outside India, but So, the way one has to look at it is that choose low correlated assets to put together in a basket, right? So, commodities by themselves are low correlated with equities. The only thing being that within equities, there are commodity stocks. So, let’s take it up. Okay, yep. Hindustan Zinc. Yeah. Zinc is a commodity. Hindustan Zinc is a manufacturer. So, to some extent in your equity portfolios, you get exposure to commodities through those commodity companies. ONGC on oil, right? Indian Oil. So, so what I’m trying to say is so, when you then put them into your portfolio, right? If you’re going to a mutual fund, you can take the factory to see what is their exposure to commodity within that. But overall, I would say that the philosophy we should have is a 40% core portfolio should be equities. Mhm. Right? And then at 20% you put in bonds. Mhm. Right? And 20% you put in commodities and where are you excluding the precious metals back? Mhm. Which you keep separately at 20%. Mhm. So, right? So, 20 20 20, right? Is is the way you build because then you get the advantage of risk weighted return, right? Because they’re not low correlated. Mhm. So, that’s the way to then approach it. Like I said, but within equities, take care that your commodity stock exposure and your actual commodity exposure. So, but for Indians, Mhm. unless you’re willing to take the risk of uh putting your money in a commodity in a copper ETF listed outside India. Now, those need a high level of knowledge and uh at this for people. Management. I’m assuming that people don’t do that. So, there for you then, the only space that entire 20% of non-precious metal commodities is only we going to play through the equity component. Understood. So, you know, your fund manager will have a share of metal stocks, a share of steel companies, share of aluminum companies, all of it in there. So, you’re anyway getting the commodity play through your diversified equity mutual fund. So, you don’t need to separately build that sitting in India. Mhm. One final point on commodities is that Uh it is the best hedge against currency. Mhm. Because prices of gold, silver, metal, oil are fixed in the London Metal Exchange or the COMEX outside of India. Mhm. So, any change in the Indian currency makes a rupee depreci- rupee change. So, you can see that the MCX gold is different from the US gold. So, automatically you get a benefit if you assume the rupee is going to be a depreciating currency, whether faster depreciation or slower depreciation is only question. Rupee is going to be a depreciating currency because our interest rates are higher than the US interest rates. Right? So, essentially, your best hedge against our own country’s depreciating currency is commodities. So, it’s a good hedge against that. Especially you have if you have longer term visions of sending a child abroad for foreign education or doing cruises and holidays abroad. If you want to manage the currency part of it, commodities are a very good play. In fact, gold and silver, all of them are positively correlated with currency. So, currency depreciates, their price increases in India. Very well explained, sir. Mr. Subramanyam, the biggest risk in cyclical investing can sometimes be entering late, right? Now, for sectors that have already rallied for a few years, how should investors manage entry, exit, and exposure without really trying to, you know, trying to time peaks? Do every investment with a non- investment-related goal. So, you’re doing the investment with a purpose. Right? What is that purpose? Define that. So, I would say that tagging your particular investment of a particular asset class to a particular goal in your life. And track that performance of the asset class versus that goal, regardless of the cycle of that particular asset class. So, it doesn’t matter if you entered at a peak, what what you think is a peak or at the bottom. The peak could lead to a higher peak. The bottom could lead to a later bottom. You don’t know. So, take out that cyclicality element in your mind, but based on where you think the cycle is, you set a goal for that money. Right? Now, you all know of the rule of 72, right? That your money doubles in 4 years. So, you want to double your money in 4 years. So, that means you need an 18% return per annum, correct? So, let’s say that’s what you want to do as a goal, just for one example. So, the moment you get that 18% annualized return in that 4 years, your money doubles, exit, regardless of what the station situation is of that commodity. People will be saying, “Oh, it’s got a great future.” Forget it. The purpose you set for yourself has come about. Go into it. Now, that goal, what I do is I modify it. So, this goal of 18% over 4 years is roughly what I use when it’s near the top of a cycle, which means I’m investing in an asset class that’s already run up. Silver, for example. Then I would say you can rule the use of rule of 72, right? But when you are investing in a contra asset class, which means let’s say silver, or not silver, something has gone down very sharply. Right? Now, as an experienced investor, you know that what goes down will come up. You can do. But how do you then decide when to exit, right? So, I set a more aggressive rule of 110. The rule of 100 Rule of 72 is 72 divided by that gives you the number of years it doubles, right? The rule of 110 tells you the number of years it triples. Okay? Okay? Set an aggressive target, right? So, that means in 3 years, if you want to triple it, that’s 33% return, right? 110 divided by 3, or whatever. Use that, and when that happens, exit. You may be leaving some money on the table because the rally could have some more legs to run, but you when you started the process, you decide your end goal right at the beginning. So, that’s the only solution I have found over my four decades. But you know, this is something that I think every investor struggles with, when to exit. Yes. The only way is to like it link it to a goal. Set is what I want with this corpus of money. I’m putting a lakh of rupees in. What do I want it to become? Want it to become 5 lakhs? Want it to become 10 lakhs? Or you want to buy a Benz car? And so, today’s Benz car costs maybe 70 lakhs. Let’s say it’ll cost 1.2 crores because you inflate the cost. Yeah. Set this money is meant for me to buy a Benz. Mhm. I may do it in 3 years, I may do it in 5 years, maybe 10 years. When that happens, don’t worry about somebody expert telling you that this asset class is set to double in the next 10 years. No. Your original goal, that’s why you should hard capture it. That’s why for me uh you know, pen and paper is still valuable compared to an iPad or an iPhone because things get erased on iPhone. But that’s the only way because otherwise, like I said, silver’s already run up. Yes. And I’ve been telling you that it can run up even more. Yes. So what do you do? So there is no such thing as uh uh everybody to catch the top or the bottom, right? The only way to do it is set your benchmark for when you will exit at the time that you enter. Very interesting. I think that’s my big takeaway um you know, from this interview already. Uh you know, when we look at uh some global views and uh you know, advisors talking about commodities, they say that you could look at replacing bonds with commodities in traditional portfolios. Is that a view you would agree with uh or is that a very risky thing to do? That’s a very, very risky thing to do because the role of bonds is a shock absorber. Mhm. Right? Because whatever your volatility in interest rates, right? They don’t match the volatility in in equities or your commodity cycles, right? They’re generally more stable asset classes. Yes. So the the reason you put in bonds is to reduce the volatility of your portfolio so that a combination of so 60/40 which is what it’s all is that you use 60% of volatile assets and 40% of stable assets to blend it. Now, commodities are as volatile as equities. Mhm. So if you’re combining two volatile asset classes, you want to make sure that you’re choosing low correlation. That is the only substitute for the low volatility of bonds is the low correlation. So if you choose a low correlation commodity as your commodity, then it can substitute. And traditionally, gold I think has been viewed as that low correlation. Gold has a low correlation. So, I would say that you can do that, but be prepared for the fact that while gold is got a low correlation with equity, it has as much volatility as equity. Yes. Okay. So, today if you take the 10-year returns of gold and equity is the same, but the reason for that is because gold delivered 70% last year. Right? If you take off that, it’s nowhere. But that 70% of last year has compensated for years. So, what I’m saying when you see individual returns in the last 10 years, gold also had two negative years of returns. Equities also had negative years. So, why I’m saying this is you could get caught in a spot where both are negative on one year. Mhm. But with bonds, that’s highly unlikely to happen. Mhm. Especially if you’ve chosen accrual bonds, right? If you choose a very long duration 30-year G-Sec, it can also go through volatility, right? So, it’s not that bonds are not volatile. But if you can choose an accrual portfolio where you’re getting 8% or 10% depending on the interest rate scenario, you’re assured that in the worst of times you’re getting 8%, which is a plus 8%. But equities can be minus 20%, gold can be minus 20%. Yeah. So, over the long run, this substituting this low correlated commodity with equity will work, provided you have the stomach Mhm. to tolerate that one year in which both will be negative. You’ll say, “What happened to my low correlation?” Low correlation doesn’t mean it’s not minus one plus one, right? It’s somewhere along the curve. Mhm. So, there could be spots in time when both are getting negative. Whereas with with a bond, especially with an accrual-oriented bond, you’ll never be in a situation like in the month of when COVID occurred, March 20. Yeah. Equity markets corrected. Everybody who put their money in a bank deposit is saying, “I got 5 10 25% alpha. I got 5% from my bank deposit. Equity market it down. What I’m trying to say is that the cushion that you have that your portfolio will be very likely never be negative if you have 40% bonds, especially of the accrual type in your portfolio, is a insurance premium that you’re paying for that comfort that I don’t want a red on all my portfolio. What if the commodity equity portfolio, there could be points of time when both are showing red in your portfolio. Are you prepared for that? So, it ultimately comes down to your risk appetite. Uh but a couple of more questions around India and now specifically on agricultural commodities. Uh we’re seeing sharp moves there. They’re driven by climate uh you know, climate change, climate events, supply shocks. Do agri commodities actually deserve a place in long-term portfolio discussions or are they to be seen as tactical trades and something that a retail investor don’t really doesn’t really need to uh learn more about? See, I think a retail investor doesn’t have an option to play the agri commodity wave. Okay. Because it’s only again through uh fertilizer stocks. You again do it play it only through the equities, sir. All right? Directly for in India, uh Indian See, at least gold he can buy gold nuggets and keep it in his locker. He cannot buy rice bags and keep it in his So, how does one play this? One plays it only through an agri fund. And you know, I would say that that’s a too much of a risk. While these factors affect it, I think it’s best that as a retail investor uh you leave that to the fund managers to take tactical calls. Because for you to directly play in that is a huge thing because again geopolitics. So, I just think that geopolitics involved there, too. So, how would how do you how do you play this, right? So, I would say agri is best uh left alone for a retail investor. Okay. to worry too much about it. It is very politically sensitive as a topic to price controls, minimum support price the government will fix. Take Take the case of sugar stocks. The kind of volatility that they have shown and we have lots of people have burned their fingers trying to play only the sugar story. Mhm. Uh so, I would say that agree is too high risk a play, too politically uh influenced for a retail investor get caught in that you know uh uh milestone. Okay. I do want to uh you know, talk to you about your glorious career before you retired from Sundaram. You’ve had uh such a brilliant career. Uh you know, you let Sundaram Mutuals AUM grow from about 2,256 crore rupees. When you left, it was 80,761 crore rupees. So, that’s the kind of impact you made. Uh and during that journey, uh what were say the one or two traits that you felt were very unique to the Indian investor? Okay. I think uh you’re looking for a negative trait or a positive trait. Whatever trait you want to share with us. So, Okay, the first thing is that we tend to uh carry baggage in our mind Mhm. about the price at which we bought a particular asset in deciding whether to sell the asset or keep the asset. Mhm. Mhm. You bought a share at 100 rupees. Right? It’s gone down to 60. And you then don’t sell it until it comes back to

Right? You wait and wait and wait. And from 60 it goes down to 40 and then 20. But for you, you’re mentally transfixed on the fact I bought it at 100. Mujhe nuksan nahi karne ka hai. Why I don’t want it. But it make make better sense because if you sell it at 60 rupees and you deployed it in another one which was going to double to 120. Your original 100 has become 120, no?

But nobody can guarantee that also. selling decision from the buying decision. So, put it in a more proper framework, right? Is that most people don’t do that. The big thing is and that is a learning for me, too, is that separate your selling decision from your buying decision. What you bought is a sunk cost. Mhm. Forget it. Mhm. I bought it at 100. Today I’m holding it at 60. Is it worth holding at 60 or do I switch? That price of 100 should not come in. So, this is a trait that most Indians have. We carry this baggage in our mind. When it was dumped at the rate I was right. That I think is is the one trait which people should get rid of because they will be making much better decisions with their money if they simply adopted this that I evaluate all at today’s point of view. It doesn’t matter what I bought it at. Today I’m holding this stock at 60 rupees. Mhm. Is it worth Is it not going 60 going to 120 or another stock likely to go to 120? I switch ruthlessly from 60 to that. That That That That is a trait. So, that I I don’t know how to put it. There is obviously a behavioral finance word for what I’m saying, right? The technical jargon will be there of some bias there. I don’t know what, but I’ve explained what I wanted to say. So, I think that’s one one trait. Okay. The second trait I think I already referred to is that and I will use a very crude example if you don’t mind, right? But that’s the best way I have found. It’s like a street dogs. If you’ve noticed uh in the streets, when your car enters a street, there’s a stray dog which chases your car. At the end of the street, you slow down to turn, so the dog catches up with you because otherwise your car can always outrun the dog. Mhm. It catches up with you and it doesn’t know what to do. It didn’t know why it ran all the way to catch it, right? Indian investors are typically like that. They invest in it. It’s going to go up. It’s going to go up. It’s going to go up. They don’t know when to exit. They don’t know that when So, that point is that you will at some point you have to do something with it. You’re not going to die with that, are you? So, when do you exit, right? And for which already referred, right? That’s why I learned a lesson that for every investment decision, write down what it is for. And when that it happens, exit this. It has nothing to do with the future. It achieved a purpose for you. So, putting a purpose Most people do purposeless investments simply saying, “Wealth creation but in a hurry.” But, that’s another trait of Indian investors which I believe would be much better off if they anchored it to a goal for that investment. So, these two things. Uh so, final question as we say goodbye to you. One mistake you see a lot of young investors making today that you think is worrisome. I think that what they are doing is they are treating uh investing as a as an entertainment and as a as a place to uh enjoy a joyride of like a roller coaster ride you go into a theme park. So, they’re treating it investing as a exciting thing and putting their efforts into it with that perspective. Whereas, my suggestion to them is to take the risk with controls and use everything I’m not saying don’t put it in a crypto, don’t put it in a F&O. I’m saying put it in all of that. But, do it with a systematic way that you learn from your mistakes and you learn from your winnings. Why did you succeed in what you thought would happen? Why did you fail? So, if you use that as a learning curve, I believe that but I don’t feel that they’re doing that. They’re doing it for the thrill of the joyride. The the the thrill of gambling, the thrill of saying, “Oh, I doubled my money in 3 days. I doubled So, that excitement quotient, which is very high for them, and it’s given the nature of how that generation is. So, I have no qualms about it. But, I My worry is that they’re doing that recklessly. If whereas if could they could do that with guardrails and treat and lay down like I said that my old thing about two things, right? Lay down a goal for every risky investment that you do. Whatever you do, lay down a goal. It could be a goal of a 1 week. You want to double in 1 week, but if you double in 1 week, you exit. The problem is they double in 1 week, and then somebody tells them it’ll quadruple in the next week. So, they hang in there. So, I’m saying that learn the first that rule. The second rule again is about separating the selling decision from the buying decision. You bought something, it went down. Don’t hang on in for dear life. But, I see that the youth of today also repeating those mistakes with the previous generations made. That is hanging on to your losses in the hope they will turn positive. Whereas, cutting your losses and doing something that you use that as a learning. So, I think best is to treat all the exciting high-risk investment options that you are doing, continue it, but do it with guardrails, do it with goals, treat them as a learning curve, and cut your losses or book your profits based on a system that you generate. I think that’s a great positive piece of advice that we can end the show on. Thank you so much for sharing your experience with us, and you’ve given us so much guidance on key topics. I’m sure it’s appreciated by all our viewers. Thank you so much for joining us. Thanks. Thanks a lot, Radhika. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Please read the risk disclosure documents carefully before investing in equity shares, derivatives, mutual fund, and all other instruments traded on the stock exchanges.