Business Standard 2

The mania in Bitcoin, baskets of stocks, IPOs & influencers

Keeping your head when others are losing theirs

Published in Business Standard in December 2021; Cached copy of the article

Excerpt: Pointing to gold, the only important exception to the intrinsic-value rule, is a very weak justification for arguing that Bitcoin will retain its value


Case study - Retirement Planning is the hardest problem in finance

Longevity, post-tax real-returns, insurance and the trade-offs between goals are all difficult to predict

Published in Mint in Dec 2021; Cached copy of the print version of the article ; A one-word error crept into the article during the publishing process. The original and correct version in both paragraphs reads as "till Sangeeta turns 90". Further, to clarify, this is a fictional case study.

Excerpt: The interest on the net worth in the first year of retirement is almost irrelevant for the calculation of how much one should save for retirement. Due to inflation, it is normal for the net worth to increase during the initial years of retirement, then to plateau out, then to drop back to the initial amount and finally to rapidly drop towards zero. This is normal but it is counterintuitive. And the high inflation in developing countries such as India makes this calculation even more counterintuitive.

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YouTube: Retirement Planning is the Hardest Problem in Finance

And how you can turn the pathetic advice of all 'Influences' to your advantage

Published on FreeFinCal's YouTube channel in October 2021

Excerpt: There are dangerous side-effects of believing the myth that Retirement Planning is just common sense

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Podcast Video: Clients unknowingly gift two apartments to a 1% of AUM Financial Planner over 30 years

So, if you choose to engage with an RIA, then engage with one of the 25 Hourly-Fee / Fixed-Fee RIAs

Episode on Paisa Vaisa released in August 2021 and was recorded a couple of months earlier

Excerpt: Why the flawed fee structure is the root cause of bad investment advice by most MF Distributors and many Percentage of AUA RIAs


Avoid Percentage of AUA fees for financial planning and investment advice

Ask Fixed-Fee RIAs to disclose the number of hours of effort

Published in Mint in Aug 2021; Cached copy of the print version of the article ; A 1 - 2 word error crept into the article during the publishing process. The original and correct 5th sentence was: "Here, I explain why you should select an hourly-fee RIA else then a fixed-fee RIA."

Excerpt: Clients should select a more transparent fee structure because that minimizes the conflict of interest between the client and the RIA; Hourly-fee is the most-transparent fee structure and hence is the gold-standard in the US. However, currently hourly-fee is almost non-existent in India and hence clients are forced to select fixed-fee.


The Ten Commandments of Personal Finance

There is no predictable way to become rich but there is a predictable way to avoid becoming poor

Published in Mint in May 2021; Cached copy of the print version of the article  

Excerpt: Diversify; Minimize investment costs; Minimize reckless mistakes; Do not chase the mirage of alpha; Do not use complex products; Do not retire too early; Save half of your post-tax salary; Do not completely outsource personal finance to anyone; Learn about personal finance; Teach your family about personal finance.


How to select an Hourly-Fee Financial Planner

Hourly-Fees are how lawyers and doctors charge their clients

Published in Mint in March 2021; Cached copy of the print version of the article ; Full version of the article with links and more context, posted on LinkedIn 

Excerpt: Fee-Only (Advice-Only) i.e. Hourly-Fee Financial Planners themselves differ significantly in three important ways. First, a few RIAs focus on high net-worth individuals who are willing to pay a higher fee to go into more details and to learn the nuances of personal investing. While other RIAs focus on relatively lower net-worth clients who want a low total-fee and hence the number of hours of effort by the RIA have to be minimized. Second, a few RIAs spend more time on research allowing them to focus on clients that are knowledgeable about personal investing. While other RIAs have the patience to guide clients that are less knowledgeable about personal investing. Third, a few RIAs are open to additionally engaging with clients in the US etc where taxation limits the set of suitable Indian investment products. Read the RIA’s website and articles to shortlist three that you will speak to. (Note: This is the correct version of the last sentence. An editing error happened in the version that was published.) Then go with your gut-feeling about the one RIA that you will formally engage with.


Emotional arguments against Index Funds

It is rational to use index funds and irrational not to

Published in Mint in November 2020; Cached copy of the print version of the article

Excerpt: Rationality dictates that we use index funds instead of active MFs in India. There are no robust rational arguments in favour of active MFs. Hence, beneficiaries of active MFs are forced to either use statistically incorrect arguments or emotional arguments such as: Using your ego against you; The social proof argument; and the lottery ticket argument


It is arrogant to assume that you have the skill to pick stocks and beat the index

You may significantly underperform the index and jeopardize your retirement

Published on FreeFinCal in November 2020

Excerpt: None of us expect that we can do the job of a competent brain surgeon without dedicating our life to it. Similarly, it is extremely arrogant to assume that we have the skill to pick stocks and beat the index. If you don’t have the skill to beat or match the index, then your direct equity investments could massively underperform the index and hence jeopardize your retirement.


Video: Why I have not recommended gold

Instead investors can use the US S&P 500 Index Fund to hold US dollar assets

Video discussion at Bloomberg Quint in October 2020; My video connection is very poor in this discussion; Link to the article version of the same discussion 

Excerpt: Gold is quite risky and it is even more difficult to forecast than equity; The price of gold fell 60% and in inflation adjusted terms it fell by 83% over 21 years from 1980 to 2001; And as of today, gold is yet to reach its inflation adjusted price from 1980 i.e. 40 years later; I prefer the US S&P500 index fund to get exposure to US dollar assets and partially mitigate the risk of unexpected high inflation in India


Minimize investment costs to maximize investment returns

Fees of 1% p.a. means losing 26% over 30 years

Published in Mint in September 2020; Cached copy of the print version of the article

Excerpt: Not minimizing investment costs is likely to result in: Sacrificing 30% of investment over 30 years; Cutting your budget by 30% after retiring; Delaying your retirement by 5-10 years; Zero real returns could become negative


Video: Why I don't recommend Smart Beta / Factor Investing / Quant Funds

Discussion with Mutual Fund managers

Video discussion at Bloomberg Quint in June 2020; Link to the article version of the same discussion

Excerpt: It is a myth that 'Smart beta or factor investing (example, investing in small-cap index funds) allows you to beat the index on a risk-adjusted basis'. Nobel prize winner Eugene Fama, who is the brain behind the smart-beta strategy, has himself said that any additional expected return from a smart-beta strategy comes from higher expected risk.


How much money do you need to retire?

This simple formula provides the answer

Published in Mint in March 2020; This article elaborates on an earlier article from July 2018; Cached copy of the print version of the article

Excerpt: Retirement calculators are complex, and their complexity is causing problems. These black-box retirement calculators are too complex for most people to understand. More importantly, the complexity in these calculators hides their inbuilt optimistic and wrong assumptions. As a result, people are saving too little for retirement; retiring earlier than their finances allow them to; and overspending during the early years of their retirement. Those looking for a clearer picture should instead, use this one simple formula.

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Finally, a way for resident Indians to invest abroad

...with the Motilal Oswal S&P 500 Index Fund

Published on Indexheads in April 2020

Excerpt: I [subjectively] prefer the Motilal Oswal S&P 500 Index Fund to all other Indian mutual funds which allow you to invest outside of India

Paisa Vaisa logo 2

Podcast: The Boglehead approach to investing in India

Almost everything you have heard about financial planning and investing is wrong

Episode on Paisa Vaisa released in January 2020 and was recorded in November 2019

Excerpt: Putting 80% of your net worth in equity is irrational!; People have forgotten how risky equity is in the short term and they do not understand how risky it is even in the long term; The right approach to Debt Mutual Funds; What is Advice-Only Financial Planning; How you can find an Advice-Only Financial Planner; I specialize in the most mature clients e.g. a few of my clients are Fund Managers

Business Standard 2

Beware of claims that contradict finance theory

A lot of propaganda in personal finance contradicts the fundamental law that there are no free lunches

Published in Business Standard in January 2020; Cached copy of the article which will download in PDF format

Excerpt: Some of the false claims include back-testing, smart-beta, 'long-duration bonds are not risky' and 'rebalancing reduces risk'


The battle for 1% p.a. will determine whether you will survive retirement

Learn to spot the tactics that your opponents are using

Published on FreeFinCal in November 2019

Excerpt: Dalal Street's (i.e. the financial services industry's) primary focus is to transfer wealth from the client to Dalal Street. Dalal Street does this by transfering 1% of the client's net worth each year from the client to Dalal Street. Let’s look at five tactics that Dalal Street uses to achieve this. This may help you identify such tactics and protect yourself against them.

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Second order thinking explains why you should invest in index funds and also the most suitable index fund products

All your domestic MF investment should be in index funds and index-like funds with fees of less than 0.20% p.a.

Published on Indexheads in November 2019

Excerpt: The Boglehead approach to investing results in investing in the Nifty 50 Index Fund and Overnight Funds

Business Standard 2

The average Indian active mutual fund does not beat the index

Ignore false arguments against index funds

Published in Business Standard in October 2019; Cached copy of the article which will download in PDF format

Excerpt: The active mutual fund industry use these deceptive arguments to support their claim that they beat the index -- Focusing on best-performing survivor funds; Using ambiguous data; Asking you to pick the right schemes


Why individual investors should avoid Alternative Investment Funds

You should invest in a PE / VC / Hedge Fund only if you can manage such a fund

Published in Mint in October 2019; Cached copy of the print version of the article

Excerpt: If you can successfully manage a Private Equity , Venture Capital or Hedge Fund, then you have a tiny chance of being able to identify a suitable fund to invest in. Otherwise, you have no hope in hell of knowing which fund to invest in. Instead, invest in an index fund such as the Nifty 50 index fund with the lowest fees

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YouTube: Misconceptions about Early Retirement

Business Standard 2

PMS investment is too risky, opt only if you have a large portfolio

Only those who have a large portfolio and the ability to select the right fund managers should opt for it

Published in Business Standard in August 2019; Subsequently, SEBI increased the minimum investment in PMS to Rs 50 lakhs so please read the article with that context in mind; Cached copy of the article which will download in PDF format

Excerpt: The poor quality of publicly-available data makes it very difficult to identify a top investor among the 200-plus PMS managers; Almost all investors are likely to be better off investing in mutual funds, particularly index funds, instead of investing in PMS

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Three things aspiring entrepreneurs must evaluate before starting up

‘The ability to cope with failure’, ‘the willingness to make less money than in a job’ and ‘is there more than a 50% probability of moderate success?’

Published on VCCircle in July 2019

Excerpt: Let’s assume that you are 40 years old and you are the primary breadwinner in the house...Before you begin a startup, your net worth minus any investment in the startup (over the next five years), should be equal to at least 25 times your annual family expenses in your first year as an entrepreneur.


Why it’s a myth to say that equity is safe in long term

Often, people take too much risk believing the myth that equity is safe in the long term

Published in Mint in July 2019; Cached copy of the print version of the article

Excerpt: Believing the myth that equity is safe in the long term is one of the key reasons that people take too much equity risk. Data, theory and principles of finance all disagree with this myth. The reality is that over a 5-10[-20-30] year horizon, there is a higher probability that equity will at least match inflation but there is also a material probability that it will generate returns that are lower than inflation

MoneyControl logo

Three blind spots to avoid in your money matters

Not saving enough, taking too much risk and buying high-cost investment products are common mistakes that can wreck your personal finance

Published on MoneyControl in June 2019

Excerpt: The worst financial products pay the highest commissions. And salesmen push the products that have the highest commissions. So, if a salesman is pushing you to buy a product, it is probably a bad product—insurance investment policies, structured products and credit risk funds. The best products are usually not pushed by anyone. You have to make the effort to find out about their features and buy the most suitable products.


Reading the S&P Index Versus Active Funds India report will change the way you invest

Indian mutual funds, as a whole, do not beat the index

Published on FreeFinCal in June 2019

Excerpt: Since the first S&P Indices Versus Active funds (SPIVA) India report for year-end 2009, it has been saying that Indian active mutual funds do not beat the index. But very few investors have read the SPIVA report and most people who read it, find it difficult to understand it. This article aims to simplify the SPIVA report to help you understand it


How should you select a Registered Investment Adviser (RIA) to engage with?

Your RIA's fees should be proportional to the RIA’s time/effort. Fees should not be primarily proportional to the client’s assets under management nor net worth nor income

Published on FreeFinCal in May 2019

Excerpt: 'Advice-Only is the sub-set of Fee-Only that is best for investors'; 'Fee-Only (Advice-Only)' means that (a) The RIA should not explicitly / implicitly earn any referral fee from a Distributor or anyone else; (b) The RIA’s fees should be proportional to the RIA’s time/effort. The RIA’s fees should not primarily be a function of the client’s assets under management nor net worth nor income; (c) The RIA should ensure that the client is not dependent on the RIA

Business Standard 2

Private Equity lessons for Personal Investing

Evaluate each investment as if your life depends on it—because it does 

Published in Business Standard on 6th April 2019; Cached copy of the article which will download in PDF format 

Excerpt: Questions that private equity investors ask themselves may help you avoid bad investments such as Credit Risk Funds etc


The mature approach to personal finance

The golden rules of investing are to diversify and minimize investment costs

Published on FreeFinCal's YouTube channel in March 2019; This link takes you to the same content in the form of an article

Excerpt: William Sharpe's golden rules of investing are to diversify and keep investment costs low


How even DIY investors can benefit from a registered Investment Adviser

Such a discussion may address issues, answer questions or at least, provide a second opinion

Published on in February 2019; The second-half of the article also covers 'Why you should avoid Structured Products'

Excerpt: The discussion between the client and the RIA should identify a critical problem or answer a critical question e.g. "Stop investing in complex, high-fee and risky experimental investments such as Structured Products"

The Ken

The two-headed Goliath—Mutual Funds and their distributors

Exorbitant annual fees and commissions to distributors are hurting Indian mutual fund investors. There is a solution, but don’t expect your local distributor to tell you about it

Published on The Ken on 10th January 2019; In this article, I am recommending zero-commission plans / Direct Plans and index funds / ETFs; The article is behind a paywall, but free registration at The Ken provides access to a 200-word summary of all their articles;

Excerpt from the summary:

'Investors have been pushed to take too much risk because equity funds have the highest fees/commissions; Indian mutual funds, as a whole, do not beat the index; distributors use ambiguity in the regulations to push schemes with the highest fees/commissions and mutual funds like this arrangement; no one can predict which mutual fund schemes will have the best performance even over a 10 year period. In addition, Indian MF fees and commissions are some of the highest in the world.'

Excerpts from the article:

'Unnecessarily high fees of [Mutual Fund] AMCs and unnecessarily high commissions of distributors force investors to pay fees of an estimated 2% per annum as opposed to a more reasonable 1%. This 1% of excess fees eats up 1% of an investor’s investment each year. While the exact amount is debatable, the long-term impact is clear from simple arithmetic. If an investor surrenders 1% of her investment each year, then cumulated over 30 years, she has lost 26% of her investment.'

'Sanjiv Shah [former CEO of Goldman Sachs’ Indian MF and co-founder of Benchmark MF] offers a damning verdict of this arrangement [between Mutual Funds and their Distributors]. “Due to a distributor’s skewed incentives, in many cases, a distributor’s value to an investor may not just be zero, but may actually be negative—the distributor may be subtracting value from an investor.” Shah gives the example of equity funds versus debt funds. Since the former pay higher commissions, he says, distributors push investors to invest more in equity funds, even if this could be harmful to the investor. A visible sign of this is that two-thirds of MF investments by individuals are in equity schemes, despite the vulnerability of these schemes to stock market crashes.'


Are you taking too much equity risk?

Decide equity allocation based on your need, capacity and temperament for risk

Published in Mint in November 2018; Cached copy of the print version of the article which will download in PDF format

Excerpt: India does not have financial products that are available in developed  countries. Hence the amount of risk that you should take is a subjective function of your need, capacity and temperament for risk

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YouTube: Webinar on Financial Planning & Investing...

...conduced for IIM Bangalore alumni

Published on the IIM Bangalore Alumni YouTube channel; Recorded in November 2018

Except: How much should I save for retirement? How much can I spend during retirement? Principles of Investing

Business Standard

You can mitigate domestic risks by investing abroad, here's how

Open a low-cost international broking account and invest in low-cost international exchange-traded funds

Published in Business Standard in September 2018; Cached copy of the article which will download in PDF format; Note: The correct date of publication of the academic paper referred to in this article is June 1999

Excerpt: The primary reason one should invest in international equities (via an international index fund) is to diversify one’s risk by not putting 100 per cent of one’s net worth in one country, India, which contributes just 3.3 per cent of world nominal GDP. None of us would be willing to put 100 per cent of our net worth in Italy, which is an economy of a comparable size. This is despite Italy’s S&P sovereign credit rating being one notch higher than India’s. India’s credit rating incidentally is one notch above junk


Turn no-free-lunch from an opponent to an ally

Don’t waste your energy fighting the law of no-free-lunch. Instead use it as a tool for thinking, to avoid mistakes and also minimize costs through index funds.

Published on in September 2018

Excerpt: Overnight Funds and extremely low credit-risk Liquid Funds like Quantum Liquid Fund are the only Debt Funds that, can be relied upon to consistently beat high-quality Fixed Deposit post-tax returns (assuming that one stays invested for 3+ years and a marginal income tax rate of around 30%)


Satisficing around financial products that almost do not exist

Some risks can’t be mitigated by products as such products almost don’t exist in India

Published in Mint in September 2018;  Cached copy of the print version of the article which will download in PDF format

Excerpt: India does not have suitable Life Annuities, Disability & Critical illness insurance and CPI-inflation indexed bonds; So how do you mitigate this?


Living with Zero Real Returns

Real returns, after-tax, across one’s entire portfolio and across one’s lifetime, will be in the ballpark of zero per cent. This dramatically changes how one should invest and save.

Published on in July 2018

Excerpt: For most people the corpus that you require to retire is 30 years of expenses; You should save half of your lifetime salary; Investment returns cannot compensate for inadequate savings (i.e. if you desperately need high returns, then you are likely to generate poor returns); Even small costs kill; There is no room for unforced-errors / blunders


Quoted in:

Note: Brief quotes may not cover various nuances or the language may not be precise. Occasionally they misquote what I actually said. So please take them with a pinch of salt

[Investors must reconsider how much equity allocation they should have. They should decide how much drawdown they are prepared to accept. During the 2008 financial crisis, equities fell [59] per cent from peak to bottom. Let us assume a similar drawdown occurs again. For simplicity, let us say you have a portfolio of Rs 1 crore. Assume equities fall by 50 per cent and the value of the rest of the portfolio remains unchanged (though gold would provide some upside). If 50 per cent of your portfolio is in equities, the portfolio value will come down to Rs 75 lakh. Broadly, this is how you should think when trying to arrive at your equity allocation.]...Avinash Luthria, a Sebi-registered investment advisor and founder of Fiduciaries, says investors should not have an equity exposure of more than 50 per cent. He suggests a simple, low-cost portfolio with 50 per cent allocation to equities and 50 per cent to debt. On the equity side, he suggests 50 per cent exposure to a Nifty50 index fund and 50 per cent to an international index fund based on the S&P 500 index. On the debt side, he suggests overnight funds. “Since the portfolio would already be taking high risk on the equity side, why expose it to credit or duration risk on the debt side?” he says. He does not recommend exposure to gold since it can have prolonged periods of underperformance.

Published in Business Standard in January 2022; This article is behind a pay-wall


One reason for selecting passive funds is that actively managed large-cap funds have struggled to beat their benchmarks, as successive SPIVA (S&P Indices versus Active) reports have shown. “The June 2021 report shows 66 per cent of large-cap funds underperformed the S&P BSE 100 index over 10 years,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... According to Luthria, most retail investors should opt for a Nifty 50 index fund rather than an exchange-traded fund (ETF). “Go for the direct plan of a Nifty 50 index fund having an expense ratio of up to 0.2 per cent and belonging to one of the bigger fund houses,” he says.

Published in Business Standard in January 2022; This article is behind a pay-wall


“Diversifying internationally helps investors safeguard themselves against the risks that arise due to exposure to a single market,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... However, financial planners feel gold is an imperfect hedge [against currency depreciation and inflation] as it can witness prolonged downturns. “The price of gold in dollar terms fell 60 per cent between 1980 and 2001,” says Luthria.

Published in Business Standard in December 2021; This article is behind a pay-wall


Locking in returns [in Life Annuity] can work against the investor. “If inflation is high and stays so for a while, interest rates could rise. An investor who locks into current rates will not be able to benefit from this increase,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. A savvy investor, or one with an advisor, could also earn a higher rate of return during the accumulation phase by investing in mutual funds. The entire income received from an annuity after retirement gets taxed at slab rate. “The return from a without return of purchase price (RoPP) annuity would be a mix of interest income and a part of your principal being returned to you. The taxman doesn’t distinguish between the two and taxes the entire amount,” says Luthria. Taxation at slab rate is problematic for investors in the higher tax brackets.

Published in Business Standard in November 2021; This article is behind a pay-wall


What to look for [in a Robo-Adviser]? Since a platform is only as good as the people behind it, understanding the pedigree of the founders who are building the robo-advisory platform is important. Says Avinash Luthria, an advice-only financial planner and Sebi-registered investment adviser (RIA) at Fiduciaries. “Intelligence, integrity and value for money are the ways one should evaluate both an individual RIA as well as a robo-adviser." “The Securities and Exchange Board of India (Sebi) regulations say that the managing director of a (specific) robo-adviser entity is responsible for all investment advice that it gives. So, clients could check the credentials and reputation of the managing director before they formally engage with a robo-adviser," he adds.

Published in Mint in October 2021; This article is behind a pay-wall


[About midcap-smallcap active funds vs index funds...] "The SPIVA report (for mid-2019, when it last had a data point on style consistency) showed that 74 per cent of midcap-smallcap mutual funds either got merged into other funds or had changed their categorisation over the past 10 years. Hence, there is insufficient statistically significant data to draw robust conclusions,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... If you go with a passive fund in the mid- and small-cap space, stick to an index fund and avoid ETFs. “Most of the mid-/small-cap ETFs have small AUMs and are unlikely to have adequate liquidity,” says Luthria. Lack of liquidity can result in issues like deviation of the ETF’s market price from its net asset value (NAV), which can cause losses to the investor...Also, watch out for fee hikes in the future. “In categories where competition is low, there is the risk of the fund house hiking the fee in the future. This is unlikely to happen in the Nifty 50 category where there is immense competition,” adds Luthria.

Published in Business Standard in October 2021; This article is behind a pay-wall


[A written agreement must be signed between the RIA and the client. Get one clause inserted into the standard agreement.] “It should state that the advisor cannot earn a fee [i.e. commission] on any product suggested by him,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. [This will help plug any regulatory loophole.] “Sebi's rules only mandate that the advisor shouldn’t earn a commission from Sebi-regulated products. An unscrupulous RIA could try to earn commissions on products under other regulators,” adds Luthria... “Ensure there is a connection between the quantum of effort put in by the RIA and the fee,” says Luthria... “The RIA wouldn't want to lose a high networth client paying 0.75-1 per cent of AUA each year, so he may suggest complex products. Since the client wouldn't understand them, he will continue to pay the high fee and stick to the RIA. Whether such products add value to the client is questionable at best,” adds Luthria.

Published in Business Standard in October 2021; This article is behind a pay-wall


[Most experts advise investors to use passive funds for their US exposure. With this market becoming very efficient, active fund managers have found it hard to beat their benchmarks. Around 94 per cent of US large-cap active funds have failed to beat the S&P500 over the past 20 years, according to the 2020 year-end SPIVA (S&P Indices Versus Active) report.] “ the US the consensus overwhelmingly favours passive funds on account of data such as this,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... US indices have outperformed the Nifty50 over the past 10 years. “Indian investors should, however, not enter US funds with the expectation that they will continue to outperform in the future as well... The primary reason for investing in the US market should be diversification,” says Luthria.

Published in Business Standard in September 2021; This article is behind a pay-wall


“An individual RIA cannot be both an RIA and mutual fund distributor. A corporate RIA has the option to be both an RIA and MF distributor (some may use the option, while others don’t). Sebi regulations are silent about insurance products, including insurance investment products," says Avinash Luthria, advice-only financial planner and Sebi-RIA at Fiduciaries. So, an individual RIA can also be a distributor for insurance products...“Also, from 1 April 2021, corporate RIAs cannot charge fees for investment advice from and also distribute fresh MF units to the same client. They can do it to different clients," adds Luthria.

Published in Mint in August 2021; This article is behind a pay-wall


[Opt for exchange-traded funds with low-impact cost -- To avoid the challenge of buying ETFs at the right price, choose index funds.] If you understand the issues outlined above [about Bid-Ask spread etc], identify the most liquid ETF in the category you wish to invest in. “The ETF should have a transaction volume of at least Rs 1 crore on every single day of the previous month,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. Alternatively, he suggests looking for the ETF with the lowest impact cost (visit the NSE website, enter the name of the ETF, scroll down to 'trade information'). For choosing an ETF from a category (equity or gold), Luthria suggests giving 80-90 per cent weight to the impact cost and 10-20 per cent to the expense ratio. Another option is to invest in a fund of fund (FoF). “If the ETF is illiquid, the fund management team will also face the same problem. Since they are professionals, they are likely to execute trades at better prices,” says Luthria. [Finally, invest in ETFs through a low-cost brokerage and avoid trading in them.]

Published in Business Standard in July 2021; This article is behind a pay-wall


[Buy a house for self-use if you can fulfil a few preconditions.] "There must be certainty that you will live in a particular city and locality for at least 10 years, otherwise defer the purchase and invest your savings elsewhere,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. Explaining this thumb rule, he says: “You would incur expenses equal to 8-10 per cent of the price of the house in one round of purchase and sale. So, you should live in it for that long to justify this cost." [A single-income household, in addition to having money for the down payment (around 20 per cent of cost), must have a corpus equal to 24 months of expenses plus equated monthly instalments (EMIs) as a hedge against the risk of job loss. In a double-income household, a corpus equal to 24 months of EMIs would suffice (assuming the spouse can take care of household expenses).]

Published in Business Standard in July 2021; This article is behind a pay-wall


[Due to high inflation and negative real returns on fixed income investments] some investors may be tempted to increase their equity allocation. This is not advisable. “If you have been advised a 50 per cent equity and 50 per cent debt allocation, stick to it. Someone who is at 20 per cent equity exposure may increase it to 40-50 per cent, provided he has the risk appetite,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. International equities: If inflation remains high for long, the rupee would correct. A foreign currency-denominated investment would then provide a hedge. “Though the US too is facing inflation, in the long run one can expect it to be lower in a developed market like the US than in India,” says Luthria. He suggests investing in a passive fund based on the S&P 500 or the Nasdaq 100.

Published in Business Standard in June 2021; This article is behind a pay-wall


In index funds, competition drove expense ratios to unsustainably low levels. “Fund houses were probably losing money by charging expense ratios in the range of 5-10 basis points (bps). Raising it to a more sustainable 15-20 bps level is fine,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. An investor need not switch out of a direct index fund, he says, unless its expense ratio has risen far above 20 bps... A steep hike in a fund’s expense ratio poses a problem for investors who need to shift. To reduce the tax impact, he must complete one year in an equity fund and three years in a debt fund. “To minimise the chances of fund houses hiking the expense ratio, stick to dominant fund categories. These are Nifty50 funds on the equity side and overnight funds in the debt space. Competition will ensure fund houses avoid high fee hikes in these categories,” says Luthria, who advocates building minimalist portfolios with just a few essential categories.

Published in Business Standard in May 2021; This article is behind a pay-wall


"[How to neutralise the impact of rupee weakening against the dollar?] The best way to deal with this issue is to have a geographically diversified portfolio, that is, hold dollar assets. Build a simple [equity] portfolio comprised 50:50 of a Nifty index fund and an S&P 500 index fund. Not only will investing abroad give you the benefit of geographical diversification (India-specific negative developments will not hurt your investments in the US), holding such dollar-based assets will also make your portfolio less susceptible to currency risk."

Published in Business Standard in April 2021; This article is behind a pay-wall


"Since [COVID] patients may have to foot a portion of the bill themselves, building an emergency [liquid] corpus is a must. First, your spouse and you should each be able to access at least 1 per cent of your combined net worth across savings account balance, single-name fixed deposits, and unused credit card limit. Second, each of you should be able to access at least 5 per cent of your combined net worth within a week."

Published in Business Standard in April 2021; This article is behind a pay-wall


"Ideally, you should try to save 50 per cent of your take-home salary... To assess whether you are saving enough for your retirement, follow this simple rule of thumb. At the age of 60, you should have a corpus equivalent to 30 years of annual expenses. If your current expense is Rs 10 lakh in a year, then you need Rs 3 crore. By the age of 40, you should have saved an amount equivalent to 10 times your annual expense; by age 50, 20 times your annual expense; and so on."

Published in Business Standard in April 2021; This article is behind a pay-wall


"I only suggest pure passive, market cap-based index funds. A Nifty50 index fund via a direct plan with fees of 0.1 per cent (10 basis points) is the only domestic equity mutual fund that investors require. A Nifty50-based fund offers exposure to a diversified basket of stocks at a very low fee. The benefit of low fee, adds up over the long term, making such a fund difficult to beat. The expense ratios of factor-based funds are higher than that of a low-cost Nifty-based fund. Also, it is impossible to predict which factor fund will outperform a Nifty50 fund."

Published in Business Standard in April 2021; This article is behind a pay-wall


"You can use both an [US] S&P 500 based fund and a Nasdaq 100 based fund for overseas exposure"

Published in Business Standard in February 2021; This article is behind a pay-wall


"The Indian market is efficient. Indian MF managers are hard-working, competent, and driven, and have access to the best data and information. If, despite all this, they are finding it difficult to beat the market net of costs, what chance does an individual investor have of doing so consistently over a long span? Investors... should invest in a passive fund.

Since April 1, [2020,] dividend from stocks has become taxable in the hands of investors at the slab rate. Investors in the higher tax brackets will be better off investing in the growth option of MFs, where they will have to pay 10 per cent on long-term capital gains.

[Investors may have become overweight on equities due to the run-up in the past few months...] If the overweight position in equities is marginal, correct the skew by directing future investments towards the asset classes where you are below target. This approach will enable you to avoid both tax and exit load."

Published in Business Standard in December 2020; This article is behind a pay-wall


"[A few children’s mutual funds are available. Most financial planners are of the view that you can manage with normal equity mutual funds instead of opting for such branded products. Many of these funds have small assets under management (AUM) and hence you may have to pay an unnecessarily high expense ratio in them.] These plans are only for people who lack the discipline to save regularly or those who may withdraw from that corpus for other purposes. Such labelled products may prevent such behaviour.
[Many child insurance plans are also available. Financial advisors say that they, too, may be avoided as they make pay-outs of specific sums at specific points of time. If your plans change, the inflexibility in pay-outs could cause problems.] Buy sufficient term insurance so that the portion of the goal not covered by the parents’ net worth gets covered by the insurance plan.
If parents cannot afford to pay the entire cost of international education, they should let the child take a loan or try to get a scholarship, even if it means going to a lower-ranked college. It should not happen that you overspend on an international education and then depend on your child to support you during your retirement.
[Additionally from the print version of the article: Some financial planners suggest a mix of passive funds]. You can build an equity portfolio using a Nifty 50 Exchange Traded Fund [ / Index Fund] and an S&P 500-based index fund. On the debt side, Public Provident Fund and [Overnight Funds and a subset of] liquid funds (to minimise duration and credit risk)."

Published in Business Standard in November 2020; This article is behind a pay-wall


"[Let us examine the main criteria investors need to take into account while selecting an ETF:] Liquidity: Besides low cost, investors need to give equal, or perhaps even greater, weight to liquidity. Purchase one that is more liquid. An ETF’s liquidity can be evaluated by tracking the trading volume data on the stock exchanges... Liquidity is an extremely important criterion. Suppose that an ETF’s NAV is Rs 100. If it is illiquid, you could end up buying at Rs 102 or Rs 103. And at the time you exit, you could end up selling at Rs 98 or Rs 99. Any advantage that you may have gained by investing in a low-cost ETF could be lost due to poor liquidity. Expense ratio: Since ETFs are commoditised products, cost should be an important consideration. When investing in ETFs, be very conscious about cost. Buy a low-cost ETF through a discount broker who charges a very low or zero brokerage fee so that the total cost of an ETF is less than on a similar index fund."

Published in Business Standard in September 2020; This article is behind a pay-wall


"You should be extremely conservative about whom you invest with [for fixed income instruments]. You should only bank with the most blue-chip of public- or private-sector banks. With returns on safe investments falling to low levels (post-tax and post-inflation), investors are [unfortunately] constantly on the lookout for avenues that will give them slightly higher returns. But in this quest, they should not get tempted into investing in what could turn out to be fraudulent products. Stay away from grey areas. Once you venture into that area, you will have to wrestle with the question of what is riskier and what is less so. And in today’s world even financial professionals struggle to answer that question. For example Yes Bank’s AT-1 bonds. Many knowledgeable people invested in them thinking that the risks were manageable and ended up losing their entire corpus. I also suggest to people who are falling short of their investment goals that instead of trying to earn a higher return by investing in riskier products, they should focus on enhancing their rate [ / quantum] of saving."

Published in Business Standard in September 2020; This article is behind a pay-wall


"Investors should use expense ratio as an elimination criterion. Expense ratio is critically important. But you cannot use it as a selection criterion [for Active Funds]. You can’t say that I will choose [Active] Fund A over Fund B because the former has a lower expense ratio since you have no control over the expense ratio. Fund houses are free to raise it anytime—within the limits stipulated by the regulator. Expense ratio can serve investors better as an elimination criterion. If, for instance, they see a sector fund that has an egregiously high expense ratio, they should steer clear of it.

In debt funds that have a high fee, fund managers tend to take more risks. Moreover, the three-year limit before your capital gains are treated as long-term means that you should exercise even more caution while selecting these funds, since you may have to stick to these funds for a longer period.

When investing in passive funds, give primacy to expense ratio. It’s a commodity product, so one should be hyper-conscious about costs there. Also, in such commodity products, competition works in the investor’s favour, so there is less chance of a fund house hiking the expense ratio."

Published in Business Standard in August 2020; This article is behind a pay-wall


"It is natural for someone who has lost his job to experience a reduction in his risk appetite. If the economic situation worsens, such a person may not find another job for a long time. And the value of his equity portfolio may diminish further. Someone who has been hit by one type of risk will experience diminished appetite for another type of risk. Such people, should not try to make up for lost income by taking added risk in the equity markets.

When the going is good, investors convince themselves they have the appetite for a 70-80 per cent allocation to equities, and that they can handle a 50 per cent drop. But problems often come bunched together. Today there is insecurity on the jobs front and about our health situation. Over and above that, equity holdings have declined in value. When investors are hit on so many fronts simultaneously, they realise they may have over-estimated their risk-taking ability.

But, do not swing to the other extreme of lowering equity allocation to excessively low levels. Though it appears improbable today, we could have high inflation in the future. Equities have much better inflation-fighting capability than fixed-income instruments.”

Published in Business Standard in May 2020; This article is behind a pay-wall


"The correction [in the stock market, probably] means you would have fallen behind on your goals. You will have to either save and invest at an accelerated pace, or push your goals back by a couple of years”

Published in Business Standard in April 2020; This article is behind a pay-wall


"[When selecting an international fund-of-fund... Take into consideration the expense ratio of the feeder fund and the mother fund]. At present, when the US market is doing well, expense ratios may not [seem to] matter. But they will matter a great deal once returns normalise”

Published in Business Standard in December 2019; This article is behind a pay-wall


"[Instead of PMS] it is good to be in mutual funds, where the quality of data available for making investment decisions is much better. [I] prefer low-cost financial products, including ETFs [and index funds]. Mutual funds are also more tax efficient and expense ratios are low...There is less than seven years of aggregate performance data for each PMS in the public domain and no robust strategy-wise (e.g. large cap vs. small cap) performance data in the public domain. So, it is almost impossible for clients to figure out whether a PMS manager has the skills or was just lucky over a few years. Investors should stay with [more] regulated products rather than unregulated [i.e. less regulated] products... [e.g. investment newsletters]”

Published in ET Prime on 4th December 2019; This article is behind a pay-wall


"[Not prepaying a loan and instead deploying the money in equities is also not advisable.] That you will have to repay part of your loan over the next year is certain, while equity returns over the next year are by no means certain, so you cannot compare the two. And it is not possible for any liquid, low-risk investment to generate higher post-tax returns than the cost of a loan”

Published in Business Standard in October 2019; In this article, I am recommending that you should focus on repaying / prepaying loans; This article is behind a pay-wall


"[One positive feature of the Indian market is that retail and institutional investors have access to the same funds. The latter watch expense ratios very closely.] In categories where institutional investors invest, like Nifty50 exchange traded fund (ETF), [Overnight funds,] liquid funds, etc investors can take the advantage of the low fee, which fund houses offer primarily to attract big institutional money”

Published in Business Standard in October 2019; In this article, I am discussing that you should minimize fees that you pay to mutual funds; This article is behind a pay-wall


"[Do not tie up the bulk of your investment in products from which it is impossible to withdraw money when needed] Structured products, fractional property investments, and even insurance-cum-investment should be avoided for this reason"

Published in Business Standard in September 2019; In this article, I am discussing how to mitigating the impact of being laid-off; This article is behind a pay-wall


"Any business scheme that is opaque is likely to be risky"

Published in Business Standard in June 2019; In this article, I am discussing how one can spot Ponzi schemes; This article is behind a pay-wall


“My approach to financial planning primarily focuses on mitigating the downside instead of focusing on maximizing the upside. The reason is that maximizing the upside will require taking an irrational level of risk. And there is no predictable low-risk way to get rich through investing...”

Excerpt from 'My List of popular Fee-only Financial Planners in India (Part-2)' published on in March 2019 


"...[New SEBI norms] will prevent the launch of passive funds that take concentrated exposure to illiquid counters"

Published in Business Standard in January 2019; In this article, I am recommending against exotic index funds / ETFs; This article is behind a pay-wall


"...Even if some (say, 37 per cent) of funds outperform, it is difficult to pick in advance which ones will outperform over the next 10 years...”

Published in Business Standard in January 2019; In this article, I am recommending index funds; This article is behind a pay-wall


“In active funds, try to limit the expense ratio you pay because that is the only variable you can control”

Published in Business Standard in November 2018; In this article I am not recommending active funds but I am responding to a specific question about active funds; This article is behind a pay-wall

Mentioned in:

Mentioned in an article by Swapnil Kendhe, Fee-Only Financial Planner & SEBI RIA,

Published on in January 2019; The article mentions us collaborating on learning from each other's best practices


Professor Pattabiraman M, IIT Madras and he runs

"I respect Avinash’s realistic views on investment risk and reward and I especially agree with his point here..."

"Avinash Luthria from Bangalore is also a super competent advisor, part of my fee-only list."

Published on in January & February 2019




Ten secrets that Dalal Street does not want you to know

Posted on LinkedIn in November 2021; Also cached on Facebook


I am not aware of even one PMS manager in India with a fair fee structure. They all charge fees even if they do not really beat the index... By definition, there are precisely zero Active Mutual Fund managers in India with a fair fee structure..

Posted on LinkedIn in October 2021


There are only 25 Financial Planning Professionals in India. The rest are all businessmen. These are 10 simple steps to select a Financial Planning Professional to engage with

Posted on LinkedIn in October 2021


Active MF Managers tell themselves that they are at least not as bad as Registered Investment Advisers (RIAs) that charge 0.75 – 1.5% p.a. of Assets Under Management (AUM). At least the Active MF Managers don’t have to look their clients in the eye while conning them. 0.75 – 1.5% p.a. of AUM RIAs tell themselves that they are at least not as bad as...

Posted on LinkedIn in October 2021


Warren Buffett calls Charlie Munger the wisest investor in the world. And Charlie Munger says that “[Bitcoin / crypto] is disgusting and contrary to the interests of civilization… I don't welcome a currency that's so useful to kidnappers and extortionists”. Unfortunately, 15 million (1.5 crore) Indians have decided not to listen to the wisest investors in the world. And they have instead decided to believe Influencers who do not disclose that they are getting paid by crypto exchanges to push crypto.
This is naturally not a forecast about the price of any cryptocurrency because (a) no one can predict how long it takes for an insane crowd to regain its sanity and (b) the crowd could always become even more insane before it regains its sanity.

Posted on LinkedIn on 8th September 2021


There are only two Financial Planners & SEBI Registered Investment Advisers (RIAs) in India who explicitly disclose their hourly fees...One reason why there are only two such RIAs in India is that the hourly fee that the client sees appears high. While the hourly fee that the RIA gets is very low. Based on the model of the specific RIA, the hourly fee that the RIA gets is between one-sixth and one-tenth of the hourly fee that the client sees...India is stuck in a bad and persistent equilibrium where any RIA who is transparent about his / her hourly fees will suffer a penalty for the transparency...clients only thinking about total fees and not hourly fees drives many RIAs to focus primarily on minimizing the typically invisible number of hours of effort per client i.e. a race to the bottom...As a very tiny step towards solving this chicken-and-egg problem in India, I hope to update this post as and when I become aware of new information

Posted on LinkedIn in July 2021


SEBI bats for individual investors -- But ‘buyer beware’ will always be true

Posted on FreeFinCal in July 2020


The Boglehead approach to investment advice depends on Fixed-Fee-Only [Advice-Only] Financial Planning. And Fixed-Fee-Only [Advice-Only] Financial Planning will depend on the Boglehead approach to investing. Since Fixed-Fee-Only [Advice-Only] Financial Planning is still nascent in India, this link is not apparent. But it is very apparent in the US and it will become more apparent in India also...I was the first RIA and currently the only RIA to recommend only index funds in the Boglehead approach to index funds both for Equity MFs and Debt MFs (there may be others who claim that they can generate alpha using index funds but that is just active investing while disguising it as passive investing)...36% (4 out of 11) of these [established Fee-Only (Advice-Only)] RIAs recommend index funds to varying degrees. I expect that in a few years, more than half of these RIAs will primarily recommend index funds.

Posted on FreeFinCal in January 2020


My (and a few other people's) tribute to Jack Bogle (and CB Bhave)

Posted on IndexHeads in January 2020


Should I invest in index funds in India? Yes, because Indian active mutual funds (as a whole) do not beat the index

Posted on Quora in March 2019


Why it is important to rely only on the professional analysis that is put together by S&P in its S&P Indices Versus Active Funds (SPIVA) reports for India. The SPIVA report adjusts for poor performing mutual funds that shut down etc. The SPIVA report shows that there is no proof that Indian active mutual funds (as a whole) beat the index

Posted on LinkedIn in February 2019

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