How ‘Safal Niveshak’ founder still follows Charlie Munger’s advice
Vishal Khandelwal says he tries to be useful, through his own writing and everything else that he does.
When investing legend Charlie Munger was once asked in an interview what he wanted his epitaph to read, he replied, “I tried to be useful”. Munger, who along with Warren Buffett built Berkshire Hathaway into an investing powerhouse, died late last year. His legacy lives on through millions of investors who continue to swear by his investment philosophy.
Vishal Khandelwal, founder of ‘Safal Niveshak’—a popular blog on investing that is now into its fourteenth year—is one such investor. Khandelwal says Munger’s words struck a chord with him and he has since made it his life motto—to try and be useful, through his own writing and everything else that he does. “While I have been following both Buffett and Munger for several years, Munger’s teachings hold a very special place in my life,” he says.
In an interaction with Mint for the Guru Portfolio series, Khandelwal shares how he has applied Buffett and Munger’s investing lessons to his personal investment portfolio. In this series, leaders in the financial services industry share how they are handling their finances and investments.
Asset Mix: Khandelwal says Indian equities comprise 90% of his asset allocation. The remaining is invested in other financial products, including liquid funds, public provident funds and gold jewellery. While a bulk of his equity investments—60% of the equity portfolio—are held in direct stock holdings, 20% is held in equity mutual fund (Parag Parikh Flexicap Fund). The remaining 20% is in two portfolio management services (PMSes).
Khandelwal, whose portfolio delivered a 35% return in the past year, says he tries to make sure that there are not more than 15-16 stocks in his portfolio at any given point in time. When it comes to investing in stocks, he likes to look for high-quality businesses available at reasonable valuations.
Khandelwal adds that once he buys a high-quality business, he likes to stick with it for the long-term. “I have become much more empathizing of the business managers now and that has made me a long-term owner of the businesses. I have shifted to being a ‘buy-and-never sell’ investor now. Never sell doesn’t mean buy and forget; it means buy and keep reviewing. But don’t do anything till the business managers are not doing anything wrong, till the business is doing fine,” he says.
Learnings from Munger: Khandelwal says Buffett was in the initial years a lot more quantitative in his
Lender
City Union Bank
Bank of Maharashtra
Central Bank of India
Union Bank of India
South Indian Bank
Bank of Baroda
Bank of India
Canara Bank
Indian Bank
Indian Overseas Bank
Punjab National Bank
Nainital Bank
IDBI Bank
UCO Bank
Punjab & Sind Bank
PRANAY BHARDWAJ/MINT
Interest rate (%)
8.25-10.50 8.35-10.90 8.35-9.50 8.35-10.75 8.35-11.44 analysis. “It was Munger’s influence that pulled him more in the direction of quality. I also had the same focus on numbers when I started my career as an analyst. Reading more of Munger’s writings helped me appreciate the importance of a high-quality business and finding the right balance between valuations and quality,” he says.
He adds that value and growth investing should not be looked as contrasting styles, but as parameters that need to co-exist in identifying a
A8.40-10.60 8.40-10.85 8.40-11.25 8.40-10.35 8.40-10.60 8.40-10.10 8.40-11.00 8.45-12.25 8.45-12.60 8.55-10.00
WHAT'S YOUR ASSET MIX?
A Equities
B Liquid funds +PPF+ family gold Excludes primary residential property
HOW ARE EQUITIES SPLIT ACROSS PRODUCTS?
A Direct stocks
B Mutual funds (PPFAS Flexicap)
C PMS
HOW HAS YOUR PORTFOLIO PERFORMED IN PAST YEAR?
It has delivered 35% returns
HOW MANY STOCKS DO YOU TYPICALLY HOLD?
I make sure the number of stocks doesn't exceed 15-16.
SO, YOUR STOCK PORTFOLIO IS HEAVILY CONCENTRATED?
The top-5 stocks would be around 70% of my stock portfolio and 30% would be rest.
WHAT WERE THE WORST DRAWDOWN PERIODS FOR YOU?
For me, it was 2015 and 2020. In 2008, I was investing, but with small amount of money. which I am willing to buy the stock, but also highly conscious of the quality of the business. I may still pay what might appear to be expensive but that is only for very high-quality businesses,” he adds.
Life lessons: “From Munger’s writings, I have not only learnt about investing but about life as well. I have learnt about the idea of not doing what can kill me, the idea of communicating my ideas in the simplest manner, the idea of also focusing on what really makes you home loan is probably the biggest loan that one takes. Not only in terms of the loan amount, but also tenure, which can be 15 years or more. The total final amount that one pays can be double of what was borrowed. But a home loan is among the cheapest loans available, and usually it is the only way a person can buy a house. A home loan is called a ‘good’ loan because it helps you acquire a tangible asset that can appreciate over the long term. It makes sense to buy a house if you plan to live in it. Given the fact that the construction of several housing projects in India continues to be delayed or stalled by many years, financial advisers say that one should buy a ready-to-move-in house. Here’s a look at the lowest home loan interest rates of some leading banks.
EMI (₹) 25,562-29,951 26,283-30,762 26,283-27,964 26,283-30,457 26,283-31,869 25,845-30,153 25,845-30,660 25,845-31,478 25,845-29,650 25,845-30,153 25,845-29,150 25,845-30,966 25,940-33,557 25,940-34,296 26,130-28,951
It was not that bad as I focused on owning high-quality stocks. I have not ventured much into micro-caps or extreme low-end of market caps.
I started in 2003.
Smallcaps 20 4
Mid-caps 0.20%-0.35% + GST
HOW DEEP WERE THE DRAWDOWNS?
WHEN DID YOU START YOUR STOCK INVESTING JOURNEY?
WHAT'S THE MARKET-CAP SPLIT IN YOUR STOCK PORTFOLIO? 0.25% (Max. ₹25,000) good investment. “There is a lot of confusion between value investing and growth investing, if people were to use that differentiation. But I have learnt from Munger and Buffett and also practised in my own stock analysis—you only find value where there is growth. If the business is not going to grow in the future, if the business doesn’t have a long runway of growth, then cheap price does not mean that you should go and buy it,” Khandelwal explains.
“I am conscious of the valuations at 0.50% (Max. ₹20,000 )+GST 0.50% (Max. ₹15,000 )+GST 0.50% (Min. ₹10,000 )+GST
Large-caps 0
Nil; Subject to recovery of of up to ₹10,000
WHICH STOCKS HAVE BEEN IN YOUR HOLDING FOR THE LONGEST PERIOD?
Pidilite and Titan, I am holding these stocks from 2011.
CAN STOCK DIVIDENDS TAKE CARE OF YOUR DAILY EXPENSES?
Not really. Still at 75%-level.
WHEN DO YOU PLAN TO REACH FINANCIAL INDEPENDENCE?
I plan to sell a property, which I don't use anymore and buy equities from that. In 4-5 years, I should have dividend income to fully take care of daily expenses.
Mentally, I stopped fearing money the day I quit my job in 2011. + GST (Per Property) 0.25% (Min. ₹1,500 and Max. ₹20,000) for Individuals* 0.50% (Min. ₹1,500 and Max. ₹10,000);**
Up to 0.25%
Up to 0.50% (Max. ₹25,000 )+GST 0.35% (Min. ₹2,500 and Max. ₹15,000)
Not updated
₹5,000 to ₹15,000; Nil for Inward Balance Transfer and PMAY Cases 0.5% (Min. ₹1,500 and Max. ₹15,000)
Full waiver of processing charges
WHAT PROVISIONS DID YOU MAKE BEFORE QUITTING YOUR JOB?
Most of my savings were in equities. I withdrew that to pay off my home loan.
Writing books, blogging, teaching on investing, took care of household expenses.
DO YOU HAVE A TERM LIFE COVER?
I have term life cover of ₹1.5 crore, spread across 3 policies of ₹50 lakh each with different maturities.
My insurance agent, who is also a friend, suggested this to me.
WHAT ABOUT HEALTH COVER?
So, I have an individual health cover of ₹30 lakh. I also have a family floater of
₹20 lakh. happy,” he says.
“Both Buffett and Munger have led long lives, well into their 90s despite certain negative traits such as eating junk food; simply because they have led their lives on their own terms. Buffett says they used to tap dance to work. I have also sort of tap danced to work for the last 13 years, which has helped me immensely,” he says.
“Munger had to deal with a lot more tragedies in his life. Early in his life, he had to go through a messy divorce, which wiped away almost all his savings. He lost his son to leukemia. A botched surgery also led to blindness in one of his eyes. In spite of all this, he has never given into selfpity. Had Munger delved into selfpity, he would not have risen to such heights,” Khandelwal points out.
Beyond stocks: Taking a leaf out of Munger’s book, Khandelwal says that he, too, does not look at stocks as a full-time activity. “As he grew older, Munger spent much of his time on things unrelated to investing or stock-picking. That’s something which I also want to do gradually. Stock-picking is still going to be a part of what I am because it is something that I have done for the last 20 years. But I have a very limited universe. I have never tried to increase my circle of competence. I don’t go to complex industries, complex businesses or complex investment strategies,” he says.
“I am going to keep 10-15 stocks. I have one mutual fund and I can go up to a maximum of three. I have term insurance and health insurance. That’s the entire personal finance I have, and I have maintained that for a few years now,” he says.
He says people should avoid becoming full-time investors. “This is not a full-time activity. The less time you give to it, the better off you are because then you are not taking action all the time and you are not focusing on stock price fluctuations and companies all the time. I don’t see myself as a full-time investor. I see myself as more of an educator, blogger and an illustrator and then an investor. Investing is what I do when I have money from all other things I do,” Khandelwal says.
Today, he has enough dividends coming from his stock holdings that can take care of 75% of his household expenses. “All household expenses may be taken care of by dividends in the next 4-5 years. I bought a house which I am not using anymore. Once I sell it, I will invest that money in equities as well,” Khandelwal says.
“I lost the fear of money the day I quit my job. Thankfully, my writing, my blog and teaching has helped run the house,” he says. jash.kriplani@livemint.com (For an extended version of this story, go to livemint.com)
Making an “All-Time High” is a characteristic of a market in a growing economy. We often face a dilemma when investing at the “All-Time High” of a market. However, when we examine the data from 1991 to March 2024, out of a total of 33 years and 3 months, the market reached an “All-Time High” 22 times. This means the market reached an “All-Time High” approximately every 1.5 years. The most astonishing data to note is that the market has reached an “All-Time High” every calendar year for the last 8 consecutive years.
Since 1991 to March 2024, the nominal GDP has grown by approximately 12% CAGR, and the Sensex has grown by 14% CAGR. So, how does the mathematics work? Growth in nominal GDP consists of the growth of real GDP plus inflation. Therefore, if the demand for goods and services increases along with the prices of goods and services, the profitability increases for providers of these goods and services companies. This increase is eventually reflected in stock prices. And well-managed businesses grow faster than the overall economy, which is eventually reflected in the growth of Sensex. Thus, growth in nominal GDP translates into profitability, which eventually reflects in a rising stock market.
In 2000, when India was the 13th largest economy, the Sensex reached its all-time high of 5,934 points. Ten years later, when India became the 10th largest economy, the Sensex had notched 21,005. In 2020, when we were the sixth largest, the all-time high was 47,751. As of March 2024, the Sensex had leaped to 74,119.
India has just surpassed the UK to become the fifth largest economy and is expected to become the third largest by 2030, surpassing Germany and Japan. However, this journey towards the third biggest economy may be very different from the earlier jump. During this journey until 2030, India may witness noticeable growth in per capita income and hence consumption, which is the biggest component of our nominal GDP, followed by investment, government spending, and net exports.
What is more important is when the economy moves beyond roti, kapda and makan (food, clothing and shelter) to ‘eat well, look well, and live well’, which is led by so-called discretionary spending, the nominal GDP may grow at an unprecedented rate and all this will eventually be reflected in the stock market level.
It’s worth noting that the stock market doesn’t always sync with nominal GDP growth in the short term. At times, the stock market can outpace nominal GDP significantly. While nominal GDP tends to grow steadily, the stock market can occasionally surge, even by 12% in a single month. Such scenarios mark an overvalued market during extreme optimism, which can also swing to being undervalued during uncertain times. These fluctuations constitute market cycles. So, in the short run, it is sentiment like greed and fear, demand and supply that decide the market level. Over the medium to long run, it is profitability that decides the growth of the market, but over the very long term, it is India’s aspirations and dreams that decide the growth of the economy and hence the market.
Chirag Patel, is co-head-products, WhiteOak Capital AMC.