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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. Also I may or may not agree with the entire article

 

"Inflation is a hidden and blunt tax imposed by the government on people. It is blunt because though the government causes it, the government cannot precisely control it"... “This is caused by people not understanding the difference between nominal returns (for example, FDs pay seven per cent pre-tax interest) and real returns (after subtracting six per cent inflation, FDs pay one per cent pre-tax interest). Applying a 30 per cent tax rate, the nominal returns on FDs drops to 4.9 per cent and after subtracting six per cent inflation, the real returns are negative 1.1 per cent,” says AvinashLuthria, SEBI registered investment advisor (RIA), Fiduciaries.in, an investment management firm.

Published in Business World in June 2024; The online version of the article is an excerpt from the full print version of the article 

 

Says Avinash Luthria, SEBI RIA at Fiduciaries, "Futures and Options and stock trading by retail investors is a harmful addiction that is identical to gambling in a casino. Instead, sensible investing uses simple products like Fixed Deposits and Nifty 50 Index Funds - Direct Plan-Growth Options for the long term. To control emotions, it is best for the Mutual Fund investments to be via a SIP and for the performance of the portfolio to be checked only once a year."

Published in Outlook - Business + Money in June 2024

 

Avinash Luthria, SEBI RIA at Fiduciaries highlights the thumb rule to follow when deciding the number of funds you should invest in. "After the total investment in the first MF house crosses 15 per cent of your portfolio (including FDs etc), then stop investing in that MF house and start investing in a second MF house. This is to mitigate the risk of poor performance by one Chief Investment Officer and anyone MF house facing some temporary technology issue," Luthria said.

Published in Outlook - Business + Money in May 2024

 

The SPIVA report makes a strong case for going passive. “Investors should just stick to a single market cap weighted passive index fund based on the Nifty 50 index,” says Avinash Luthria, a Securities and Exchange Board of India (Sebi) registered investment advisor (RIA) and founder, Fiduciaries. He does not recommend midcap and smallcap funds due to their potential for high volatility... Most advisors favour index funds for retail investors, as they are simpler. “Go with any Nifty 50-based fund having an expense ratio of 20 basis points or less,” says Luthria... In an ETF, investors need to (in addition to the criteria mentioned above) check liquidity on the exchanges. “The ETF should have maintained a trading volume of at least 1 crore every day in the recent past and should not pay out dividends,” says Luthria.

Published in Business Standard in April 2024; This article is behind a pay-wall

 

Another aspect to heed is that one can rebalance the portfolio and bring it back to the original level either by selling a portion of the outperforming asset class or by buying more of the underperforming asset class. Experts increasingly suggest rebalancing by buying more of the underperforming asset class. “When you sell an asset class, it could give rise to tax incidence. In my view, investors must try and delay triggering taxation for as long as possible,” says Avinash Luthria, a Sebi-RIA and founder, Fiduciaries... With debt mutual funds becoming taxable at slab rates, many investors, especially those in the higher tax brackets, have become reluctant to invest in them as their post-tax returns would not be attractive. “Investing in arbitrage funds, which receive equity tax treatment, partially addresses this issue,” says Luthria.

Published in Business Standard in April 2024; This article is behind a pay-wall

 

Maintain a sensible asset allocation in your postretirement portfolio,” says Avinash Luthria, a Sebi RIA and founder, Fiduciaries... With this SWR, there is a 5 per cent chance that individuals could deplete their funds within their lifetime. “ You don´t want to be in that 5 per cent, so it would be advisable to err on the side of caution,” says Luthria. The study analysed 24 years of data. “Investors must allow for the possibility that future returns from various assets in India, primarily equities, may not match past performance,” says Luthria... Retirees may also engage in belt tightening in the years when the market is down. Luthria recommends the following alternative approach. “Every year, divide your remaining corpus by 90 minus your age. For example, at 60, divide the corpus by 30 years and spend that amount. The next year, divide whatever corpus you have by 29, and so on. This method ensures you spend less whenever the market crashes,” he says.

Published in Business Standard in March 2024; This article is behind a pay-wall

 

Avinash Luthria, Sebi Registered Investment Advisor (RIA) at Fiduciaries said, "If more than 50 per cent of your total portfolio including Provident fund or Fixed deposit is in equity, you might be taking on too much risk. Additionally, if you invest one-third of your equity portfolio (i.e. more than their free-float weight in the stock market), is in mid and small-caps, then it is excessively risky. You should fix those two errors in your portfolio at the earliest." Free float weight of mid and small-caps in the stock market refers to the percentage representation of publicly available mid and small-cap stocks in the overall stock market. If you allocate more than 33 per cent of your equity in mid and small caps, exceeding the free-float weight representation, it means you are overweighing them in your portfolio vis-a-vis their representation in the broader market.

Published in Outlook - Business + Money in March 2024

 

Says Avinash Luthria, Sebi RIA at Fiduciaries: “It is not possible to figure out whether the Indian market is overvalued. Instead, always limit the equity allocation to 50 per cent of the portfolio and use the largecap Nifty 50 index fund.” Reflecting on past market crashes, he highlighted the importance of managing risk in your portfolio. “In 2008-09, Rs 1 crore in the largecap Nifty 100 [TRI] crashed to Rs 39 lakh, and the same amount in Midcap 150 [TRI] crashed to Rs 27 lakh. Further, due to the 25 per cent fall in rupee, $1 lakh in Midcap 150 [TRI] fell to $20,000,” says Luthria.

Published in Outlook - Business + Money in January 2024

 

Avinash Luthria, SEBI RIA at Fiduciaries, notes gold's volatility, tax efficiency and illiquidity. Luthria says "Gold in the international market in US dollars lost 83 per cent of its purchasing power between 1980 and 2001 and is yet to reach its inflation-adjusted price from early 1980, that is, 43 years later. Gold has done much better in Rupees due to the significant depreciation of the Rupee and the import duty on gold. So, investors in gold should accept that they are investing in a risky asset which is as volatile as equity. Naturally, people would like to protect themselves against a large depreciation of the Rupee. However, the RBI and the Income Tax department have made it very difficult for resident Indians to invest outside India. So resident Indians have been pushed to invest in gold." "SGBs are the most tax-efficient way to invest in gold. Investors should accept that SGBs are relatively illiquid and that they should be willing to hold the SGBs for 5 to 8 years," he added.

Published in Outlook - Business + Money in November 2023

 

Distributors push sector funds because they offer higher commissions. “About 79 per cent of retail investors and 74 per cent of high net worth investors invest in mutual funds via distributors. The commission paid by some of these schemes is 10 times higher compared to others. Schemes that pay higher commissions get pushed,” says Avinash Luthria, a RIA registered with Sebi and founder, Fiduciaries... Some investors may invest in sector-thematic offerings because they align with their religious beliefs. Says Luthria: “The only use case for sectoral or thematic funds is if the investor’s values or religion forces them to use funds that avoid the sin sectors. Such investors may invest in a Shariah fund or an ethical fund.”... Luthria points to the high total expense ratio (TER) of these funds (which weigh down their net return). “Additionally, the tendency among investors to chase the latest investment fad can result in higher tax liabilities due to frequent portfolio reshuffling,” he says. 

Published in Business Standard in September 2023; This article is behind a pay-wall

 

Avinash Luthria, a Sebi Registered Investment Advisor (RIA) and Founder of Fiduciaries, also suggests investing with caution. He says Sebi’s definition of small-cap includes a wide range of companies staring from the 251st, ranked by market capitalisation. “Sebi’s official definition has only large-cap, mid-cap and small-cap. So, a company ranked 251 is a small-cap and a company ranked 501 is also a small-cap as is a company ranked 2,000. Within these companies, 501 onwards could be called micro-caps,” Luthria adds. Luthria cautions against investing heavily in micro-cap companies (those ranked 501st and beyond) due to their weak disclosure practices. “Retail investors should only allocate less than 4 per cent of their portfolio to them, which is their market weight (their market capitalisation in listed stocks),” he says.

Published on Outlook Business + Money in September 2023

 

Adds Avinash Luthria, a Securities and Exchange Board of India or Sebi-registered investment advisor (RIA) and founder, Fiduciaries: “Mid- and small-cap funds have outperformed large-cap funds across time horizons. Investors find this very attractive. Mutual fund distributors, too, get a great sales narrative in this data.”... Many mid-cap and small-cap funds are smaller in size than their large-cap peers. Funds with smaller asset sizes can charge a higher expense ratio and hence pay higher commissions to distributors. “Distributors have an incentive to push these funds,” says Luthria... While mid-cap and small-cap funds have outperformed their large-cap peers, those returns have come with higher volatility. “In 2008-09, the Nifty Large-cap 100 total return index (TRI) fell 61 per cent, Nifty Midcap 150 TRI fell 73 per cent, and Nifty Smallcap 250 TRI fell 76 per cent. Similarly, in 2020, large-cap fell 38 per cent, mid-cap fell 38 per cent, and small-cap fell 43 per cent,” says Luthria... Luthria believes investors should stick to a Nifty 50 index fund in their equity portfolios. “Mid, small-cap and micro-cap stocks comprise around one-fifth of the market. If at all one invests in them, the allocation should not exceed 20 per cent of the equity portfolio,” he says.

Published in Business Standard in August 2023; This article is behind a pay-wall

 

When a fund’s expense ratio depends on the size of its asset under management (AUM), distributors at times push non-vigilant clients into smaller-sized funds, including the riskier thematic and sectoral offerings, so that they can earn a higher commission. “Investors need to be vigilant about overpaying in such an environment,” says Avinash Luthria, a Sebi-registered investment advisor (RIA) and founder, Fiduciaries... Fund houses sometimes increase the expense ratio of a fund. One category where this could happen is passive funds. “While I would like to prescribe a fund based on the Nifty 500 index to my clients, I don’t. I stick to Nifty 50 based funds. This is to guard against the risk of fund houses hiking the expense ratio in the future. There is greater certainty they won’t do so in a Nifty 50 based fund due to the high competition in this category,” says Luthria.

Published in Business Standard in May 2023; This article is behind a pay-wall

 

“Research done by S&P some time ago has also shown that past data doesn’t provide any indication regarding which funds will outperform over the next five years,” says Avinash Luthria, a Sebi-registered investment advisor (RIA) and founder, Fiduciaries. These two points — underperformance by a significant number of active funds and difficulty in predicting future winners — creates a case for investing in passive funds... According to Luthria, investors who opted for active large-cap funds and happened to be in the bottom quartile in terms of performance over the past 10 years would have cumulatively underperformed the index (BSE 100 Total Return Index) by 17 per cent or 1.8 per cent annually. “That is the kind of risk investors potentially run when they opt for active funds,” he says.

Published in Business Standard in April 2023; This article is behind a pay-wall

 

Arbitrage funds have become attractive. “These funds are less volatile except under extreme market conditions and get the tax treatment of equity funds,” says Luthria. Their returns could fall if too much money floods the category.

Published in Business Standard in March 2023; This article is behind a pay-wall

 

“When these mutual funds [that invest outside of India] stop accepting fresh investments, direct investments outside of India via LRS will be the only route available to invest outside of India. That route will make sense for only a very tiny minority of HNIs ( high-networth individuals) and UHNIs (ultra high-networth individuals),” says Avinash Luthria, a financial planner & SEBI registered investment advisor

Published in BusinessInsider in February 2023

 

Avoid spending excessively on rent as doing so will affect your savings. “For a middle-aged couple, rental expense as a proportion of post-tax salary should be around 15 per cent in a city like Bengaluru or Gurgaon, and 20 per cent in the exceptional case, that is, if you work in a central locality in Mumbai or Delhi,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. He adds that while some may find that the rental expense he has suggested is low, this stems from his view that one should save around 50 per cent of post-tax salary in a city like Bengaluru and at least 40 per cent in a city like Mumbai.

Published in Business Standard in January 2023; This article is behind a pay-wall

 

Says Avinash Luthria, Sebi RIA, and founder, Fiduciaries: “I would recommend the passive ELSS option because I prefer low-fee products.”...[According to the SPIVA (S&P Indices Versus Active) India mid-2022 report, which compared the performance of ELSS funds with the S&P BSE 200 Index, 64 per cent of active ELSS funds underperformed this index (36 per cent outperformed) over a 10-year horizon.] “Given these low odds of outperformance, I would prefer a passive approach,” says Luthria.

Published in Business Standard in January 2023; This article is behind a pay-wall

 

The annual commission MFDs get on some schemes is ten times more than others. So, MFDs could recommend products that give them the highest commission. Avinash Luthria, founder, and hourly-fee financial planner & SEBI-RIA, Fiduciaries.in says, "But such products also have the highest fees and often the highest risk, e.g., equity funds over debt MFs, active MFs over passive index funds, sector funds over flexicap funds, small cap funds over largcap funds, credit risk funds over liquid funds, and funds of MF houses that have an aggressive sales approach and a high commission."... RIAs charging fees linked to AUM might be tempted to prevent you from reducing AUM. For instance, they might advise you to not liquidate your MFs to pay high interest debt, as his fee are per cent of AUM.

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

 

[The question was 'What should SEBI do about finfluencers?'. Only a fragment of my original quote is in the article so the quote lacks context:] Speaking about the prompt actions needed from the regulatory board, Sebi RIA Avinash Luthria said, “For example, shutting down unregistered investment advisers and research analysts who collect fees from clients. And also changing the regulation to stop most stockbrokers from making reckless recommendations about futures and options and micro-cap stocks." Hence practically SEBI may be forced to first try to persuade the Advertising Standards Council of India (ASCI) to be stricter with finfluencers, advertisers and traditional/social media platforms. Further, from ASCI’s list of non-compliant entities, SEBI could publicise the subset that relate to securities, he says.

Published in Mint in November 2022; This article is behind a pay-wall

 

SEBI RIA Avinash Luthria explained that this [The fund has an average maturity of 5.59 years and a modified duration of only 0.78Y.] could be because of the dominant presence of floating-rate bonds and some interest-rate swaps in the portfolio. For example, GOI FRB 22-Sep-2033. Although this is a long term bond, since it is a floating rate bond, its price will not fluctuate as much because of interest rate changes because of its variable coupon rate. The interest rate swaps also render a portion of bonds as effectively floating-rate. These have allowed the fund to buy long-term bonds while keeping the modified duration low.

Published in FreeFinCal.com in November 2022

 

[Excerpts from a long quote] "Hence, there is no way to forecast how much returns it [gold] can provide in the coming years," asserts Avinash Luthria, also a Sebi registered investment advisor... Luthria says, “The key reason to own [physical] gold is for a once-in-a-generation or two generations catastrophe like a civil war..." Luthria, however, points out that “digital gold lacks regulatory oversight", which makes it a risky bet.

Published in Mint in November 2022; This article is behind a pay-wall

 

[Almost the entire article is a quote by me] 5 simple ways you can adopt to become a better saver: Business Standard spoke with expert Avinash Luthria, a Sebi-registered investment advisor and founder of Fiduciaries, to know how salaried people can increase their savings easily and efficiently. Here are five tips that you can follow: For youngsters who have just started their career or those in the middle of their career, experts recommend that they aspire to save 50 per cent of their post-tax salary. "For example, if your CTC (Cost To Company) is Rs 100 per month, out of which Rs 20 is the tax, then out of the remaining Rs 80, target to keep Rs 40 aside for your savings. These savings may also include your provident funds, insurance and paying off loans such as education loans. Use the other Rs 40 for meeting your needs," said Luthria. Experts also suggest that those who have just started earning should start with a smaller goal and gradually work towards achieving the target of 50 per cent... "Once you have identified your goal, figure out how much you need to put aside for achieving that goal and then manage your expenses with what is left. Work backwards," advised Luthria... "There is no shame in saying no to things your peers might be into and are ready to spend their money on. You'll be thanking yourself in the long run because the reverse story is scarier."... Visualising oneself 20-30 years from now helps motivate one to identify savings goals and stick to them. "You can even try the easily available apps that show you how you will look in the next 30 years. It acts like a good reminder that you are going to get old and should prepare for it. 

Published in Business Standard in November 2022; This article is behind a pay-wall; Cached copy of the article

 

Returns from sector/thematic funds are lumpier. “The behaviour gap tends to be higher in categories that are more prone to excitement,” says Avinash Luthria, a Securities and Exchange Board of India or Sebi-registered investment advisor and founder, Fiduciaries. In sector/thematic funds, investors have a greater need to switch. This raises their timing (of entry and exit) risk and transaction costs... “A buy-and-hold approach that lowers transaction cost can reduce the behaviour gap,” says Luthria.

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

 

[Excerpts from a long quote] "From the point of view of an individual active MF manager in an established MF house, it is rational to be a closet indexer or index hugger, i.e. ‘claiming to manage the fund actively when in reality the fund is very similar to the index... Zero active MF managers in India have the skill to beat the index (due to randomness, a minority of active MF managers would have beaten the index in the past, and a minority of active MF managers will beat the index in the future)..."

Published in FreeFinCal.com in October 2022

 

A 60-year-old in India, especially one belonging to the middle class or above, can easily expect to live for 20 years or more. “Most people tend to underestimate the extent to which inflation will erode the purchasing power of their accumulated corpus over a couple of decades or more,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... [How much will you need in retirement?] Luthria suggests a simple rule of thumb. “A 60-year-old, who expects to live for another 30 years, will require a net worth equivalent to 30 times his current annual household expense,” he says. This applies to someone who lives on rent. So, if that person’s annual expense at 60 is Rs 7 lakh, he will require Rs 2.1 crore to maintain his lifestyle for the next 30 years. For someone living in his own house, his financial investments (in other words, net worth minus value of house) should be 30x his annual expenses. Suppose a 50-year-old has a retirement corpus of Rs 2 crore and an annual expense of Rs 10 lakh. “If this person retires today, he should have enough to survive for 20 years,” says Luthria.

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

 

The primary reason for investing in US funds should not be to earn high returns but to get the benefit of geographic diversification. “There is no guarantee that international funds like those focused on the US will offer higher returns. Nonetheless, investors must take exposure to them to guard against country-specific risk—the very small possibility of the Indian economy and markets underperforming massively over the long term,” says Avinash Luthria, a Sebi-registered investment advisor and founder of Fiduciaries.

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

 

Small-cap companies tend to be less resilient than their large- and mega- cap peers. “Within the small market cap segment, you have small but healthy companies, and also those struggling to survive. During an economic slowdown, companies that were struggling to survive earlier are more likely to go bankrupt,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. This is one reason, according to him, why overall small-caps tend to fall more than large-caps during a market downturn... The Nifty Smallcap 250 index makes up around 6.7 per cent of the Nifty 500 Index. Says Luthria: “Most retail investors should invest in small caps in that proportion in their equity portfolios.” According to him, only ultra-high net worth individuals have the financial strength to have a higher allocation than 6.7 per cent of their equity portfolio to small caps in the hope of getting a higher return. During the market downturn of 2008-09, the Nifty 100 TRI (large-cap) fell by 61.1 per cent while the Nifty Small-cap 250 TRI fell by 75.6 per cent from peak to bottom. Luthria says only ultra-high net worth individuals are likely to have the financial strength to live through that kind of a downturn (with a high allocation to small caps) without selling at the bottom.

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

 

Once you start investing in foreign equities or debt products [via the LRS route], the tax filing becomes more onerous. “You may no longer be able to file using the Sahaj form, and will instead have to use one of the longer, more elaborate forms. Each investment will have to be disclosed,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. He adds that the Income-Tax Department treats foreign investments very seriously and even an accidental mistake on the taxpayer’s part could land him in a soup. Markets like the US levy withholding tax. To avoid double taxation, investors will have to follow a procedure that will add to their compliance burden. In case of the investor’s demise, some countries impose an estate tax (if the investor’s corpus is above a threshold limit). This will affect the returns that accrue to the investor’s family... Given the complexity of the task, make sure you hire a high-quality chartered accountant (CA) who can help you deal with all this complexity... Understand all the fees of the platform or broker. Some deduct $10 per month from the accounts of customers who don’t trade... The decision to take the LRS route must not be made lightly. “Think deep and hard and consult your chartered accountant before taking this route. Avoid it if the amount that you intend to invest is small,” says Luthria... “Two good products that the... investor may go for are the Vanguard S&P 500 ETF and the Vanguard Total World Stock ETF,” says Luthria... If the amount available to you for investing is small, stick to domestic equities and to funds available in India that invest in foreign ETFs. If you intend to take the LRS route for access to individual overseas stocks, think again. “Investing directly in a highly efficient market such as the US is not advisable. When the bulk of active fund managers based in the US fail to beat the benchmarks, the chances of a retail investor based in India being able to do so are minuscule,” says Luthria.

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

 

When equity markets were doing well, many flavour-of-the-month products were also launched. “Many such narrowly focused funds have taken a beating,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries... “[Within international funds] Stick to the broadest possible indexes, such as funds based on the S&P 500 index and the US Total Stock Market index,” says Luthria. In the US market, the majority of active funds have underperformed the indexes. “According to the SPIVA report, 94 per cent of active, large-cap US funds have underperformed the S&P 500 over the past 20 years. With such numbers, there is no point investing in active funds,” adds Luthria... Finally, according to Luthria, investors need to be mindful of cost when selecting an international fund, especially an active, regular plan. “Some fund houses disclose the total fee, while some disclose only the India fee and separately reveal the international fund’s fee in a footnote. Watch out for this.”

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

 

Intraday trading in stocks or trading in futures and options is risky and can cause large losses due to the element of leverage. “There is also the risk of getting addicted to such high-risk trading as it offers a similar adrenaline or dopamine rush as gambling,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. Luthria adds that in the financial world, a higher-cost product is often not better than a lower-cost product. The former just tend to be hard-sold more because they offer higher commissions to intermediaries. On the other hand, investors need to reach out themselves for lower-cost products based on their own knowledge, or based on good advice.

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

 

When choosing an ETF, besides tracking difference, liquidity is important. “Go for an ETF that has maintained a traded value of at least Rs 1 crore every day over the past month,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries (this data is available on the National Stock Exchange website. Search for an ETF, on its page, click on Historical Data, then look at the value.) Go for an ETF that is tax efficient. “Avoid one that pays dividends,” says Luthria. Rein in cost by opting for a low-cost broker.

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

 

“In 2008, the Nifty50 Total Returns Index had declined 59 per cent. That is the kind of volatility you need to be prepared for [if one holds equity at any point in time],” says Avinash Luthria, a Securities and Exchange Board of India-registered investment advisor and founder, Fiduciaries. He adds that investors who feel they have overestimated their tolerance for volatility should reduce their equity allocation (including to foreign equities). Passive [developed market] funds based on the Nasdaq-100 Index were the first to become available; so many investors took exposure to them. “The Nasdaq-100 is a more volatile index than the S&P 500. Your primary [international] holding should be a fund based on a more diversified index like the S&P 500,” says Luthria. [Navi MF’s Navi US Total Stock Market Fund of Fund, whose new fund offer is on at present, is another diversified option that may be considered. Investors who desire broader developed-market exposure may consider the HDFC Developed World Indexes Fund of Funds.]

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

 

[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.] “...in 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 ReLakhs.com 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

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