Our objectives for our investors are three fold:
- Protect our clients’ capital.
- Beat the risk free rate of return.
- Beat the Equity Index rate of return.
Protecting capital: Our first objective is easy to understand and appreciate: should you invest with us, please know that our most important goal for you is to ensure that you do not lose money.
Can we guarantee that? No. While your investments with us are subject to the fluctuations of the market, our philosophy of buying into high quality businesses at a reasonable price helps to ensure that the underlying business value of the companies we buy increases over time. So, while in the short term, stock prices can go below the underlying business value, over the long term stock prices tend to catch up with intrinsic value.
Beat the risk free rate of return: The risk free rate of return is what you would earn from a safe investment such as a fixed deposit with a bank. Our aim is to ensure that your investment with us earns you a higher return than the interest earned on a fixed deposit.
Fixed deposits are perfectly safe – the size of your fixed deposit will never come down. The biggest danger to these ‘safe’ investments is, however, inflation. Inflation can wipe out any gains you made from interest earned on your deposit and its real (inflation adjusted) value may stagnate, or even fall. If your fixed deposit earns 8%, and inflation is 10%, you lose 2% of your capital every year.
Beat the Equity Index rate of return. As an investor, you have the option of investing in a low cost index fund – from this flows our objective to beat the market – we measure our out-performance over the market over the entire stock market cycle rather than only in a bullish phase or a bearish phase.
Keeping the safety of your portfolio as the supreme and overriding objective means that we are cautious, diligent and disciplined with our choice of investments.
- We look for high quality companies which have a track record of weathering difficult economic conditions. This limits the company specific risk.
- We buy stocks when they are at a discount to the underlying business value so that we always have a margin of safety. This reduces the price risk in our investments.
- We explain our Investment Philosophy here.
Has our Safety First approach to investing worked for our clients? You can see our track record on Page 8 of our disclosure document which is attached here. We have met our objectives for our clients – ensured that they do not lose money, and over a long term period, beaten both the risk free rate of return and the index rate of return. Our assets under management (AUM) have grown to Rs. 2,329 crores, and our list of clients has grown to 1,403 (as of Sep 2020). More importantly, very few clients have left us.
Can we guarantee that we will repeat this performance in the future? No. But we are confident enough to offer a fee structure that ensures that we make money only when our client makes money. You can read about our fee structure here.