Mahatma Gandhi: Why 1G is better than 5G

Oct 03, 2022
Author: Ajit Dayal

On October 2nd those who believe in the non-violent, inclusive, and simple nature of what are known as 'Gandhian ideals' will have marked with prayer and respect the 153rd birth anniversary of Mahatma Gandhi. Others will lay wreaths and parrot words of praise but not reflect the spirit of the Mahatma because, to many, Gandhi represents a 'backward' India: a country that is not in step with the modern globalized economy. Their belief is that India must rank high on all that can be measured, such as:

  1. GDP,

  2. Rate of growth in GDP,

  3. Market Cap,

  4. Number of Billionaires,

  5. Foreign Investment Inflows.

Focusing on trying to grow an economy is important as there are people to feed and families to nurture. But there is also a 'happiness' quotient that does not neatly fit into any acceptable numerical depiction. Hence, it becomes convenient to discard and ignore all that cannot be measured. Many countries I travel to are far wealthier than India - the people have more measurable money and wealth - but the populace looks miserable and dissatisfied. One doesn't have to travel outside India to meet individuals who, despite higher monetary wealth, reflect the same disconnect between 'money in the bank' and 'happiness in the heart'.

Money is important and we all must acknowledge that money can help you tide over some problems - but not all problems. One must strike a balance between the money factor and the happiness factor.

While the controversy of Gandhi's legacy will be stirred up time and again, we would like to present the Mahatma from a different perspective. Not only was the Mahatma wise about how to deal with the Colonial Empire, but the Mahatma was also wise about the ways of life. In many ways, the Mahatma was the best financial advisor one could have had. Though there were no mutual funds to invest in when India was seeking Independence from the British, one can use some of his timeless quotes and apply them to the world of investing.

Why Mahatma Gandhi would never subscribe to 5G.

"There is more to life than increasing its speed".

For anyone who watched the Mahatma walk in his many battles against the Imperial rulers, you knew he could have entered an Olympic walking competition. The speed at one level was important. But so were thoughtful prayer and silent meditation. While the world is moving onto the next generation of 'speed of communication' and India has jumped in with the launch of 5G networks, the Mahatma was the original 1G phenomenon. At a speed set by him, with his energy, focused message, clarity of thought process, his discipline - and with the partnership of the leading luminaries of his day - he helped India fight for and win Independence. Would 5G impress him? I doubt it.... he would have focused more of his time on the next pointers below.

Read, absorb, evaluate.

"Those who know how to think, need no teachers."

The Mahatma did not believe in any interface between an individual and God. And neither did he believe that any one god was better than another god. He criticized the belief that people had about their gods being better or superior to any other. "For me, the different religions are beautiful flowers from the same garden, or they are branches of the same majestic tree. Therefore, they are equally true, though being received and interpreted through human instruments are equally imperfect."

If you have read the guides and information on you will have had the time to absorb the fact that there can never be one fund house, one fund manager, or one style of investing which can claim to be superior over all other styles or approaches to investing over long periods of time. And being invested in the wrong asset class - at the wrong time - can cost you dearly. Fund houses are not temples and fund managers are not gods. Make sure that you understand whether the temples marketed to you are designed to capture your money, or as a pathway to your salvation.

As an investor for over 3 decades across 11 governments and umpteen Finance Ministers, I can write a book on my bad investment decisions. Some were bad luck; many were blunders and bad judgement. All were humbling experiences from which one must learn lessons. A fund manager's interpretation of investment opportunities is as imperfect as those of the robed interpreters who deliver to you a very different message of the underlying thesis of a religion. Where there is love, they may sow hatred.

SEBI as a regulator has forced every fund house to give you a direct link between your money and your fund: with no intermediary for interpretation in case you prefer to go 'direct'. SEBI has also asked for good information to humanise fund managers and open the community to scrutiny. But SEBI does an unintended dis-service when they restrict Fund houses to report track records only on an inelastic time period such as 1 year, 2 years, 5 years, 10 years etc. While those are useful, SEBI should be asking for more declarations to help you evaluate other aspects such as:

  • how did a fund compare in each bull/bear market since its Inception - the upside/downside capture?

  • how liquid are the underlying stock holdings of the fund?

  • How many days will it take each fund house to buy (if more money flows in) or sell (if money is redeemed from the fund) and replicate the existing portfolio based on which it has enticed an investor to invest?

  • What is the capacity of each product launched by the fund house? A car factory has a capacity that ensures guaranteed quality, as does a cement and steel plant. Does a fund have a capacity?

Know what you want.

"Action expresses priorities."

An individual who is clear on what they want to do will act. The more urgent or inevitable the objective, the sooner one will act. For example, if a doctor tells us our diet is too risky for our health we can either listen to the doctor immediately and correct the diet - or ignore it. How we act determines whether we think of our health as an area of concern or not. It is a known fact that our expenses - even if we don't enlarge our needs - will increase every year and years into the future.

We also know that we have a limited work lifespan. Few of us have an inheritance to tide us over our lifetimes. What we earn, what we spend today from that income, what we save from that income, and how we invest those savings are the only determinants of how we will live until we die. In many cases, we have plans to have a family and look after our families. If those, indeed, are our priorities - and we are clear about it - then one should act now. We can tag the opening quote of the Mahatma with a closing quote from him: "The future depends on what we do in the present"

Your money. Your comfort level. Your truth.

"Even if you are a minority of one, the truth is the truth."

One of the biggest dangers to mankind is that we have outsourced all our thinking and decision-making to others. You are ordering some food and the 'artificial intelligence' (yes, it is 'artificial', and it is not 'intelligence') tells you to add some other dishes - and maybe a dessert. It may not be good for your health, you may not feel like have the other recommended dishes now, or you may not wish to spend the money but, because 'others have bought it or you had 'purchased in the past' the machine tells you what to do next. It is easy to fall into that trap when discussing investments with family and friends. The loudest voice in a room may be that of an individual who discusses how their portfolio has multiplied. Good for them. While there are many important questions one may ask about how much risk was there for the return taken? Did they never make a loss? Did they sleep well every night if the portfolio was moving around like a yo-yo during turbulent times?

The indisputable fact is that you are not that person. Your situation and your needs may have very little in common with any other individual in the room. You will have your own assessment of what you have available for investment today, what you can put aside every month, how much money you need, by when do you need it, and for how long do you need it? And, most importantly, how frightened will you be if a global or local catastrophe rams into the value of your portfolio along the way: not once, but maybe a few times in a decades-long journey of investments.

It is very unlikely that two individuals will have an identical response to every question listed above.

Every situation may be unique - like your fingerprints - with some similarity.

And, finally, a last bit of advice from the Mahatma.

"There is enough in the world for man's need, but not for man's greed."

Investing is not an end in itself. No one should invest to win a gold medal or be the best in some artificial category where temples are on the left, churches on the right, mosques in the centre, a gurdwara in here, synagogues out there...

If your fund manager is trying to prove they are the best god, you should step out of the way because, when god's fall, a lot of people could get hurt. You should invest to meet a defined objective - not for the right to boast at a dinner party. Those who were born after 1960 - as I was - are lucky that we are witnessing the Indian economy moving from strength to strength based on a series of good economic reforms that began under Prime Minister Indira Gandhi (1981), Rajiv Gandhi (1985), P. V. Narasimha Rao (1991), Atal Bihari Vajpayee (1998), Manmohan Singh (2004), and Narendra Modi (2014). Across political parties, the focus has been on how to enhance the lives of India's growing population. Economic growth has translated into profits from investing in stock markets.

Why 12-20-80 (baaraa, beess, aur assi) is all you may ever need.

The Mahatma also said, 'be the change you wish to see'.

Like the home-spun, khadi that toppled an empire, 12-20-80 is transparent, honest, and guarantees you a direct connection between you and your money.

The Quantum Mutual Funds 12-20-80 (baaraa, bees, aur assi) solution is the base suggestion - which you can modify as you see fit. This one-click solution will help you implement your personalised needs. There is no temple you need to visit, no need to attend any dinner party to hear loud voices and there is no interpreter required - just a few minutes of your time and you are on your way. CLICK HERE

The basic tenets of building a 1G portfolio in a 5G world investment portfolio are:

  1. There must be diversification across asset classes (see 12 20 80; baara; bees aur assi below but the base case suggested allocation is 12 months of your expenses in the safe liquid fund and then the balance is 80% in equity mutual funds and 20% in gold; and you can modify this to levels that make you feel comfortable);

  2. Investors must own various kinds of equity mutual funds - investors must invest in a diverse range of investment styles: small cap, mid cap, large cap, blue chip, growth, value, ESG, etc. And though these funds can all be from the same fund house - with different fund managers managing each of these styles. No fund manager should fool you: each of these equity 'styles' needs a different mindset and skill set. A long-term value investor cannot be expected to do satta in small-cap momentum and produce consistent performance over longer periods of time;

  3. Having 100 equity mutual funds in your portfolio sounds intuitively silly. It is like having a boat with windows: chances are that in a storm some will break and require all your attention. Having 1 to 3 sounds risky. Maybe the answer is somewhere in the 8 to 12 range?

For my portfolio, I have followed a balanced path of investing for an optimistic future outcome - while ensuring I have built in a safety belt for the sudden twists and turns of life and markets which come hurtling at you unexpectedly from any direction.

Enjoy the freedom to choose your path forward by using the easy-to-use calculator 12 20 80 (baaraa, bees, aur assi).

Table 1: Passively managed and factor-based equity funds cost 60% less than Actively managed equity funds: you can decide which path you wish to follow

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%
After safe money, the balance in:
Gold, after Liquid Fund 20% 0.06% 20% 0.06%
Equity, after Liquid Fund 80% 0.72% 80% 0.27%
Of which Equity Fund of Fund 75% 0.51% 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% - 65% 0.20%
(Source: )

This approximates my holdings and planned investments as of July 2022.

Table 2: Baaraa, bees, assi (12 20 80) - and my asli allocation as of July 2022

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 75% 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
(Source: Ajit Dayal, July 2022)

(Although Gandhi's quotes are known to many and can be found in many places, I checked the precise words of the quotes from "125 Quotes of Mahatma Gandhi / Parade")

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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