Enjoying the fruits of your aazadi.

Aug 09, 2022
Author: Ajit Dayal

Nations do not become independent and free overnight.

There is an underlying yearning for freedom against oppression which can foster over decades which then result in a murmuring of discontent before it glides across the populace like the ripples of a headstrong stone cast on a seemingly calm lake.

Before you know it - there is a groundswell of popular support for the idea of aazadi leading to an often-tumultuous period of strife and revolutionary fervour. That is when the fight for independence explodes.

The rising waters cleanse the land of the invader or the irritant and, having tasted the salt of the earth, the waters settle into a new calm, a new equilibrium. With that equilibrium comes the bliss: the amrit of the azadi. The joys of the painful and often violent fight for freedom.

India@75 was not the result of one protest. It was a 90-year struggle that started in 1857 and ended on August 15, 1947, with the unveiling of the tricolour which led to Pandit Jawaharlal Nehru's inspirational speech at the stroke of the midnight hour, while the world sleeps, India will awake to freedom'.

The Oxford Dictionary states that Azadi has its roots in the Persian language, and it means 'freedom' or 'liberty' which in turn means: 'the power or right to act, speak or think as one wants' and 'the state of not being imprisoned or enslaved.' Freedom and Independence in the political and social context are not attributes that you win in one day and then lay back and enjoy it. The perseverance of freedom requires the deliberate building of institutional safety nets with clear-cut roles for the evolving polity, the executive branch of the government, the courts, the police, and the press - and the reminder to the populace of the balance between rights and responsibilities.

But it is pertinent to note that while we enjoy political freedom free of any colonial bondage, how free are we as individuals - in the financial sense? Do we have the liberty to know where our next meal will come? Or whether we will be able to pay for our future needs - be it for education, for buying a home, or for retirement? Or is this an aspect of our lives where we still live in bondage?

Cementing your financial freedom

The starting point of any discussion on financial freedom has to be: how will you start earning? Unless you have an income, you cannot build a pool of savings for it is that pool of savings which you need to invest for financial independence. The act of investing - if followed methodically - can give you the financial freedom or the aazadi ki amrit which many yearn for, but very few achieve. For some, no matter how much money they may have, the money will never be enough because they are smitten by the disease of consumption. However, for most people, financial freedom does not mean making it to the Top 10 list of the world's wealthiest people. Their measured needs will be met from the outcome of their thoughtful investments.

One of the best avenues for putting your savings to work for you is investing in the stock markets. Stock markets, over longer periods of time, tend to reflect the health of the economy and - more importantly - the profitability of companies that can take advantage of the business opportunities in a growing economy. Like the fight for Independence, the roots of the revolution for the ability of any individual to invest in stock markets began over 100 years ago and has been a long battle. The Bombay Stock Exchange (BSE) is Asia's oldest stock exchange and began in 1875. But a lack of focus on technology and working for a larger base of investors led SEBI to give permission to create an alternative stock exchange. The National Stock Exchange (NSE) began in 1992 and introduced computerised systems to lower the transaction cost for investors. Despite the birth of online trading in 1999, many individuals were unsure what shares to buy so, in 1993, SEBI allowed the launch of mutual funds. Investors could now entrust their savings with professional fund managers whose job and focus it was to identify the best shares to purchase. The global scepticism of paying a mutual fund house fees to select the best stocks and the inability of many mutual funds to 'outperform' their benchmark indices that they were measured against, led to the popularity of Index funds and ETFs. This was dubbed as the 'shift from active management (where a fund manager chooses stocks based on their declared criteria) to passive management (where the fund manager mimics the stocks within an Index selected by a neutral third party).' The lockdowns during the pandemic resulted in millions sitting at home and, rather than twiddling their thumbs in boredom and frustration, they turned to invest or speculate in the stock markets.

Just as there are many paths to freedom - from the non-violence espoused by Mahatma Gandhi to the violent methods adopted by Bhagat Singh - there are many paths to financial freedom. The azadi ki amrit can be attained in many ways: a portfolio based on actively managed funds or on passively / factor managed funds. Irrespective of the path one may choose to follow, it is important to understand the concept of Risk and then Plan your investments to help you control your financial destiny.

A sensible and thoughtful investor should NOT be an investor in one style of investing, in one approach, in one asset class, and you must allocate your savings across a few asset classes to build long-term wealth. using their simple to use calculator which has a base suggestion of 12 20 80; namely, 12 months of expenses kept aside in safe, liquid, and lower return Quantum Liquid Fund; 20% of the balance in the Quantum Gold Savings Fund and then the 80% in a bouquet of equity funds. For those investors who prefer the index-hugging, low-cost solution, the Passive option is a click away. You have the freedom to choose your path forward.

Table 1: Passively managed and factor-based equity funds cost 76% less than Actively managed equity funds

Asset class allocation illustrations as per QMF 12 20 80 % weight in an Actively Managed Portfolio Expense Ratio % weight in a Passively Managed Portfolio Expense Ratio
Liquid Fund, safe money 12 months 0.16% 12 months 0.16%
Gold, after Liquid Fund 20% 0.84% 20% 0.84%
Equity, after Liquid Fund 80% 1.15% 80% 0.27%
Of which Equity Fund of Fund 70% 1.16% 0% -
Of which Value Fund 15% 1.29% 0% -
Of which India ESG Fund 15% 0.94% 15% 0.94%
Of which Nifty Fund of Funds 0% - 85% 0.15%
Source: www.QuantumAMC.com

Despite my bias for value investing - a style that was taught to me by the late Tom Hansberger, the co-founder of Templeton, Galbraith, and Hansberger, I have diversified my own investments in the Quantum Mutual Fund complex. This is an approximation of my holding and planned investments as of July 2022.

Table 2: Baaraa, beess, assi (12 20 80) - and my asli allocation

Asset class, QMF Base Suggestion Ajit Comment
Liquid Fund, safe money 12 months 21 months Partial Switch to Q Nifty ETF FoF
Gold, after Liquid Fund 20% 25%
Equity, after Liquid Fund 80% 75% I have the Multi-Asset Fund that has some equity exposure
Of which Equity Fund of Fund 70% 25%
Of which Value Fund 15% 44% I have a Value bias
Of which India ESG Fund 15% 30% I have a 'Values' bias
Of which Q Nifty ETF FoF Pending allotment
Other: Multi Asset Fund 0% 5% Alternative to an FD

The fight for Independence and the arrival of India@75 has been a long and difficult journey. Your path to financial freedom is made easy with the birth of 12 20 80 (baaraa, bees, aur assi).

A few clicks on www.QuantumAMC.com and, while the world is asleep, this simple tool will help you rise to your financial freedom!

Stay Thoughtful and Deliberate and make balanced investment decisions for your family and you. Embark on your journey of protecting your capital and enhancing your wealth with the powerful tool of 12 20 80 (baaraa, bees, aur assi). And tell me what you think about it...

Ajit Dayal is the Founder of the Quantum Group which includes Quantum Mutual Fund and PersonalFN. Ajit has over 35 years of research and investment experience. An avid writer and speaker, Ajit has been profiled and interviewed by many international and local newspapers, magazines, TV channels and radio shows and is never shy of speaking The Honest Truth. Sign up here to get The Honest Truth delivered every week into your mailbox. It will change the way you think about your investments.

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