On February 25, 2023, Mr. Kalpen Parekh, MD and CEO of DSP Mutual Funds, delivered a talk on “Make Your Money Work for You” at the Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi. Mr. Parekh covered various topics related to investing and shared his insights on how to make the most of one’s money.
As a student pursuing MBA from IILM University, Gurugram. I got a chance to attend the talk. I am glad to share my takeaways with you.
To Make Money is to Not Lose Money:
Mr. Parekh started his talk by stating that the goal of investing is not to lose money, and investors must avoid the mistake of expecting good times to continue. Asset values fluctuate, and human beings are wired to avoid danger and uncertainty, which works against investors. Therefore, it is crucial to have the right balance of assets, as too many or too few choices are not beneficial. It is vital to find the right mix, and it is essential to understand that if an investment works for someone, it may not work for everyone. Envy is not good in investment because everyone’s context and risk-taking capacity is different.
Mistakes Made by Wealthy People:
Mr. Parekh also discussed the mistakes made by wealthy people, such as locking their money in complex products and investing in fancy products to belong to the masses. He emphasized that simple investments tend to pay well as compared to complex ones. It is important to be aware of the incentives of the other person, take fact-based decisions, and be conscious of the cost. He also warned about the unrealistic expectations of high returns on investment, which are red flags. Diversifying the portfolio helps to reduce risk, and assets have different paths, but diversification helps reduce fluctuations. For instance, having 11 Virat Kohli in a cricket team is not favorable, as diversification is necessary.
Gender Lens in Investing:
Mr. Parekh discussed the gender lens in investing and the need to encourage more women to invest. He cited the results of the Win-Vestor survey, which studied the patterns of how families think of money concerning sons vs. daughters. Money needs integrity, and cultural aspects such as male dominance should not be a barrier.
What to Do with ‘x’ Amount of Money?
Mr. Parekh recommended having a role model, finding an advisor, and reading a few good books such as “Psychology of Money,” “The Art of Thinking Clearly,” and “Subramoney — Retire Rich.” He recommended investing in good Index funds, avoiding following the herd, and investing in portfolios instead of trading, which takes time and expertise.
How to Not React to Fluctuations:
Mr. Parekh emphasized the importance of not reacting to fluctuations, as too much information flow is harmful. Most of the hype is not action-worthy, and such actions are futile. It is essential to invest in good assets and at good prices without overpaying. Spending money on achieving goals should not make one feel poorer. Mr. Parekh used the example of sugar to explain how news is to the mind, and too much information flow is harmful, just like too much of sugar is harmful to the body. It is important to compartmentalize and be still. Patience goes a long way.
What to Do When You Don’t Have Time:
Mr. Parekh recommended investing in Mutual Funds, which have lower tax charges than FDs. Adding small degrees of Equity to the portfolio is also a good option.
About Emergency Funds:
Mr. Parekh emphasized the importance of having liquid investments in case of emergency situations. Being asset-rich but cash flow poor can cause issues, so having liquid investments is crucial.
Investing in Art:
Mr. Parekh advised investing in art only if one has knowledge about it. Investing in art can make sense if one has an interest in it and understands its value. This can be applied to traditional art works as well as NFTs.
Green vs. Red:
Finally, Mr. Parekh talked about green vs. red market. He explained that you would want the prices of investments to go down, and it is important to celebrate when the market goes red as it will be easier to buy those investments. He advised the audience to not be disheartened and have patience.
