Vishal Khandelwal, founder of ‘Safal Niveshak’—a popular blog on investing that is now into its fourteenth year—is one such investor. Khandelwal says Munger’s words struck a chord with him and he has since made it his life motto—to try and be useful, through his own writing and everything else that he does. “While I have been following both Buffett and Munger for several years, Munger’s teachings hold a very special place in my life,” he says.
In an interaction with Mint for the Guru Portfolio series, Khandelwal shares how he has applied Buffett and Munger’s investing lessons to his personal investment portfolio. In this series, leaders in the financial services industry share how they are handling their finances and investments.
Asset Mix
Khandelwal says Indian equities comprise 90% of his asset allocation. The remaining is invested in other financial products, including liquid funds, public provident funds and gold jewellery. While a bulk of his equity investments—60% of the equity portfolio—are held in direct stock holdings, 20% is held in equity mutual fund (Parag Parikh Flexicap Fund). The remaining 20% is in two portfolio management services (PMSes).
Khandelwal, whose portfolio delivered a 35% return in the past year, says he tries to make sure that there are not more than 15-16 stocks in his portfolio at any given point in time. When it comes to investing in stocks, he likes to look for high-quality businesses available at reasonable valuations.
Khandelwal adds that once he buys a high-quality business, he likes to stick with it for the long-term. “I have become much more empathizing of the business managers now and that has made me a long-term owner of the businesses. I have shifted to being a ‘buy-and-never sell’ investor now. Never sell doesn’t mean buy and forget; it means buy and keep reviewing. But don’t do anything till the business managers are not doing anything wrong, till the business is doing fine,” he says.
Learnings from Munger
Khandelwal says Buffett was in the initial years a lot more quantitative in his analysis. “It was Munger’s influence that pulled him more in the direction of quality. I also had the same focus on numbers when I started my career as an analyst. Reading more of Munger’s writings helped me appreciate the importance of a high-quality business and finding the right balance between valuations and quality,” he says.
He adds that value and growth investing should not be looked as contrasting styles, but as parameters that need to co-exist in identifying a good investment. “There is a lot of confusion between value investing and growth investing, if people were to use that differentiation. But I have learnt from Munger and Buffett and also practised in my own stock analysis—you only find value where there is growth. If the business is not going to grow in the future, if the business doesn’t have a long runway of growth, then cheap price does not mean that you should go and buy it,” Khandewal explains.
“I am conscious of the valuations at which I am willing to buy the stock, but also highly conscious of the quality of the business. I may still pay what might appear to be expensive but that is only for very high-quality businesses,” he adds.
Life lessons
“From Munger’s writings, I have not only learnt about investing but about life as well. I have learnt about the idea of not doing what can kill me, the idea of communicating my ideas in the simplest manner, the idea of also focusing on what really makes you happy,” he says.
“Both Buffett and Munger have led long lives, well into their 90s despite certain negative traits such as eating junk food; simply because they have led their lives on their own terms. Buffett says they used to tap dance to work. I have also sort of tap danced to work for the last 13 years, which has helped me immensely,” he says.
“Munger had to deal with a lot more tragedies in his life. Early in his life, he had to go through a messy divorce, which wiped away almost all his savings. He lost his son to leukemia. A botched surgery also led to blindness in one of his eyes. In spite of all this, he has never given into self-pity. Had Munger delved into self-pity, he would not have risen to such heights,” Khandelwal points out.
Beyond stocks
Taking a leaf out of Munger’s book, Khandelwal says that he, too, does not look at stocks as a full-time activity. “As he grew older, Munger spent much of his time on things unrelated to investing or stock-picking. That’s something which I also want to do gradually. Stock-picking is still going to be a part of what I am because it is something that I have done for the last 20 years. But I have a very limited universe. I have never tried to increase my circle of competence. I don’t go to complex industries, complex businesses or complex investment strategies,” he says.
“I am going to keep 10-15 stocks. I have one mutual fund and I can go up to a maximum of three. I have term insurance and health insurance. That’s the entire personal finance I have, and I have maintained that for a few years now,” he says.
He says people should avoid becoming full-time investors. “This is not a full-time activity. The less time you give to it, the better off you are because then you are not taking action all the time and you are not focusing on stock price fluctuations and companies all the time. I don’t see myself as a full-time investor. I see myself as more of an educator, blogger and an illustrator and then an investor. Investing is what I do when I have money from all other things I do,” Khandelwal says.
Career check
Khandelwal began his career as a stock market analyst in 2003. In, 2008 when the stock market crashed, he saw many of his distant family members and friends losing a lot of their money as they were wrongly advised by brokers and advisers.
He felt that his calling was to teach people how not to lose their money when investing. But he did not start in 2008 as he still had a home loan. In 2011, he completely repaid his home loan with the help of his stock portfolio, quit his then job and started Safal Niveshak.
Today, he has enough dividends coming from his stock holdings that can take care of 75% of his household expenses. “All household expenses may be taken care of by dividends in the next 4-5 years. I bought a house which I am not using anymore. Once I sell it, I will invest that money in equities as well,” Khandelwal says.
“I lost the fear of money the day I quit my job. Thankfully, my writing, my blog and teaching has helped run the house,” he says.
Insurance
Khandelwal has ₹1.5 crore of term life cover, which is spread across three policies of ₹50 lakh each, with different maturities. This arrangement, he says, gives him more flexibility as he can gradually bring down his coverage over the years.
Apart from this, he has health cover of ₹30 lakh for himself and a ₹20 lakh family floater cover.
All in the family
Khandelwal says he doesn’t talk to his two children (a 19-year-old daughter and a 13-year-old son) a lot about finance. “As a family, we have focused on certain simple and bigger principles in the past 18-19 years. We have ensured that we practice what we are teaching our kids. For example, in the idea of compounding, delaying some gratification is important. So, we keep talking about that. I don’t see my children becoming a part of the finance industry. My daughter is more focused on her creative side and inclined towards dance and design. My son seems more interested in technology. I also don’t see myself as part of the finance industry. I see myself more of a teacher and educator. Maybe, hopefully, if not investors, they will become teachers and that would be a very proud moment for me,” he says.
