October 12, 2021

Letter To My 2019 Self

Mohini Mahadevia

Founder at SOLUFIN

Dear Mohini,

Hope this letter finds you in a stable headspace. Why am I using such words? You will know soon. Just remember to keep that bottle of hand sanitizer that has been lying sealed on your dresser with you all the time. Keep washing your hands more often. You may not realize it now, but we don’t wash our hands frequently enough. Try and materialize those plans with all your friends, possibly before the second week of March 2020. What about those clients who have not started executing their redemptions for the money they need by mid-next year? Maybe, try and make sure they redeem their equity funds before March 2020. I know you have been following up diligently with them, but try a little harder, trust me.

Ah…in hindsight, there are so many things that seem like such a natural way of doing things, such a logical series of actions and very simple choices. But, the most important keyword in this sentence is “HINDSIGHT”. It is something that we gain almost always too late. If only we all knew the outcomes of our actions today. If we knew, even with good probability, that our actions are on the right course, or if we only knew how soon things will become alright…if only…

But, I am assuming there could be some time-traveling possibility that would somehow make this letter reach you before things change drastically. It would better prepare you for what is to come. If not, I will revisit this letter for when the next big change takes place. So, what if I were to tell you that within the next few months, the majority of the world’s population will be stuck at home, with minimal in-person interaction, working from home, no school/college, no socializing, no domestic help(what!), countless hours of watching content online(I know you won’t mind this). Basically, the world that we have lived in will change in ways we never imagined.

What if I told you that in a few months, we will see a huge crash in the stock market, combined with job losses, employment uncertainty, a big hit to most businesses, unprecedented medical issues, thousands of families facing major medical expenses, countless financial hardships and a lot of stress?

Mohini, you have to brace yourself to be there for your clients in some very trying situations. There will be times, where you will question everything you have studied, doubt everything you have been practicing at work. This is going to be your first experience at such a major market event in your independent professional life. And this is going to be an event like no one alive on this planet has ever seen before. Know that the fundamental principles of investing that you have always followed for you and your clients will hold true eventually, once the tide settles.

It will be difficult for you to believe in this at times. But, from the part of the timeline that I am writing to you, trust me, the fundamentals, if followed diligently, will help your clients to not only stay afloat but stay the course towards their financial goals.

There will be a time when investments of clients accumulated over many, many years will show big losses. Clients who had understood the concept of long-term investing with great difficulty will question the concept of long-term and investments both. Your senior client (the one who always addresses you as beta) will show a lack of trust because of what his portfolio will reflect. For a short period of time, you won’t know what to tell him because things will look so uncertain.

I beg you, come what may, unless there is any client who has a cash crunch, DO NOT let anyone sell at a loss and covert their notional losses to real losses. I was successful in stopping most clients from doing so. But, a handful that was too scared to wait further and sold off anyway, regretted their decision very soon after. All of those who I had to very painstakingly convince to not sell, understood my viewpoint and appreciated my guidance a few months later.

It seemed like a tough time when there was pessimism and uncertainty all around. But, I followed my instincts for keeping the course of the fundamental rules that we have always attempted to stick to, and it paid off. I hope this letter reaches you somehow because I want you to be able to take those same decisions with more certainty.

Remember those few clients who had started investing in gold earlier this year? They will all be so happy that you were able to convince them to start diversifying their investments. Some will want to sell off equity at a loss and shift the money to gold, the prices of which would have already shot up a lot by then. And guess what? The situation would be such that you would see why they would think so. But, don’t lose your conviction in the asset allocation strategies that have been put in place for all clients. Remember that client who always wants to try out new things when it comes to investments? He is going to want to execute some really crazy ideas. At the same time, you will see the conservative side to his nature that you did not even know existed.

If you think you know all your clients very well, wait for a few months.

If you have any spare cash, don’t hesitate to invest it in extremely good quality stocks and the mutual fund schemes from our list when the market crashes. There was actually some amount lying idle that completely forgot about. Had I made sure I invested that a little earlier, that phone you have been eyeing for a month, we could have bought just from the profits. Don’t wonder how much more the market could further drop and keep waiting endlessly. However, please listen to your gut when it tells you to not jeopardize any asset allocation for any clients just because the stocks are available for cheap and fund NAVs are down.

You are going to be asked the question, “What will happen to the market now?” a lot. You will be expected to know what rises and drops will take place and when. And trust me, you will obviously not know. You will feel terrible when you will not have an answer. this is the time suited best for learning to say, I don’t know about the market, but I do know about this client’s financial goals, suitable asset allocation strategy, and risk-taking capacity.

You are going to have to speak to clients who will at least momentarily equate your skills with your ability to predict the market movement. Please do not fall into the trap of trying to make these predictions. We are in the business of money management, not fortune-telling, now, are we?

It is okay to tell your clients, “I do not know about the market.”, if you don’t. Don’t let market fluctuations deter you or your clients from changing how SIPs should continue/discontinue. Maybe try and modify the rate at which STPs happen if you feel you want to slow down the exposure to equity at high levels. When I say high, I mean really HIGH and overvalued. It may not seem possible for a few months but oh boy, you’re going to witness something!

There is going to be a lot of liquidity in the market which will get absorbed eventually and factored into the stock market levels. You will have clients coming in at SENSEX levels of *****(haha, I am not going to reveal everything to you now. Take a wild guess about this figure when the markets crash, guessing how far up will the markets go within the following year and a half). Thinking the previous year’s returns are truly reflective of stock market returns at any point in time? For new clients, especially… Please do show them the reality and rein in their enthusiasm. In the absence of that, you will see even FDs being broken for shifting lumpsum amounts at super-high market levels.

It is going to be tough, telling new business to come in slowly into the equity segment and turning down over-enthusiastic first-timers because they insist that no measures need to be taken for cost averaging and diversification, and asset allocation. Trust me, you will sleep sounder if you take these steps and stick by your conviction. Both, the highs and lows will test your skills in different ways and you know what? The test is going to have little to do with your technical knowledge and most to do with how you handle investor behavior.

Having said all of this, I want you to know that you have been blessed with an amazing client base that will question you, of course (as they should!), and keep you on your toes. But, they will show the kind of faith you would expect them to have in you. I do really hope you and I both do enough justice to that.

Enough gyaan for now… I do hope this letter somehow reaches you in the year 2019 itself. And hey, try to stock up on some hand sanitizer, face masks, and a LOT of Maggi!

Much love,

Your 2021 Self.