PM Modi’s investment portfolio

[Value Research Editor's Note]( 18th May, 2024 --------------------------------------------------------------- Dear {NAME}, Every Saturday, I share my perspectives on a topic investors need to understand. This week, let’s look at the savings portfolio that the PM revealed while filing his nomination has been quite interesting: Slow and steady? One of the mildly interesting sideshows of India’s General Elections is the asset declarations the candidates must make while filing their nominations. Most of the time, there are no real surprises in these declarations. Most candidates are roughly as prosperous as one would expect. As an investment analyst, I’m a little more interested in the type of assets that politicians hold. Even though I haven’t tracked anyone’s portfolios over the years, I have a clear impression that there is an expected shift. Once upon a time, we had a preponderance of real estate and gold with a fraction in bank deposits. That was the standard asset portfolio of the prosperous Indian in those days. As time has gone by, we have seen a higher proportion of stocks and even some mutual funds. So, who is the most radical departure from this pattern? As one might expect, it is Prime Minister Narendra Modi himself. Practically, his entire asset base of Rs 3.02 crore is in State Bank of India fixed deposits, with some in NSC and a negligible amount in the form of gold rings. He has no real estate or any other immovable asset. That is it. I must say that any personal finance advisor would be alarmed by this portfolio. Of course, one could say that he has a pensionable job with excellent post-retirement benefits and no family to speak of. On top of that, retirement, too, seems a long time away. Therefore it doesn't really matter if all his money is concentrated in an asset type that’s not great at fighting inflation. One could also argue that if his own government keeps inflation under check, then his savings portfolio will turn out to be the right choice. So in that sense, this is very much a skin-in-the-game portfolio. However, for anyone who does not have the same kind of job and circumstances as Mr Modi, this is not a portfolio that should be emulated. Investing all (or nearly all) of your savings in fixed-income deposits is a mistake only slightly better than not saving at all or not saving enough. I have frequently written about the advantages of fixed-income mutual funds over bank fixed deposits for many years. While this topic may not be particularly exciting, it's crucial for savers to understand its importance. Unfortunately, we must navigate this less-than-ideal situation. India has traditionally been a ‘fixed income country,’ with generations of savers instinctively opting for savings instruments like PPF, bank deposits, and post office deposits to meet all their savings needs. Investing in some equity-based assets, especially in equity-based mutual funds, is the obvious choice. Depending on one’s circumstances, this could be a small part of savings or a large part, but having zero exposure to equity should be a no-no. Whether you are the Prime Minister or not, you must reap the benefits of India’s economic growth by growing some of your money in equity-based investments. Still, there will be many who will stick to fixed income simply because the beliefs and habits of many decades don’t go away easily. While the fixed-income approach may not be optimal, even within the fixed-income space, many fail to consider their options carefully, often making poorer choices. At first glance, the difference between the best and worst fixed-income choices might seem insignificant—perhaps 1.5 to 2 per cent. However, this seemingly small difference becomes significant over time. Over a couple of decades, a 2 per cent annual differential can result in a more than 50 per cent difference in the total amount earned. You might think that no one invests for 20 years, but that's not true. While individual investments may only last two or three years, most savers maintain a substantial portion of their savings in fixed-income options for decades. Consequently, this loss of opportunity is common and affects nearly every saver. Therefore, as India shifts from a fixed-income country to one that is more equity—and growth-centric, even the biggest fixed-income fans should consider a shift within that space. Thank you for being a Value Research Insider. I hope you found this note useful and interesting. What did you think of today’s note? [Let me know](mailto:dhirendra@valueresearch.in). If you know anyone who would enjoy it, please forward this email. They can sign up for free [here](. You can also subscribe to the Hindi version [here](. Regards, Dhirendra Kumar CEO Value Research [vro-logo]( Copyright © Value Research India Private Limited 2024. All rights reserved. C-103, Sector 65 Noida, 201301. [Manage Newsletters]( [Unsubscribe]( [Privacy Policy]( Follow us [twitter-icon]( [facebook-icon]( [youtube-icon]( [linkedIn-icon]( [instagram-icon](