Q&A with Ashutosh Bishnoi

Ashutosh Bishnoi is the Managing Director and CEO of Mahindra Asset Management Company Private Limited, India’s youngest mutual fund house

I would love to invest in the stock market online to make quick money. What is your advice?

When investing your savings emotion is needed to set a goal. It could be your children’s future, your retirement plan, your intent to buy a home… these are all emotional decisions and must be made with passion.

However, when it comes to investing money, to help you reach these goals, you should throw emotions out of the window. It pays to be simply rational. The best approach is to rely on numerical data.

So how do I ensure that I am investing correctly?

When investing in a financial instrument such as equities, bonds or mutual funds, there are four questions you should ask yourself. These are: Are you investing in securities of the right business? Are you investing at the right value of the securities? Are you investing at the right time? And finally, what is the probability that your investment will deliver the desired returns?

All these questions can be answered using numbers and data. And you should use common sense to look for data. Looking at past performance is not good sense. Looking at where others, such as popular faces on TV screens, are investing is even worse. Investing and disinvesting in panic is an example of poor sense.

And if you don’t want to do all this rational analysis and numerical number crunching yourself, you should call someone at Mahindra Mutual Fund.

I just love buying gold. Isn’t gold the best investment?

There are a lot of beliefs, myths and traditions in India around investing your savings in gold. As a nation it is our obsession to invest in gold. Did you know that India is the world’s largest consumer of gold since anyone can remember?

This is mostly because of our age-old belief that gold is safe. Besides, of course, when it comes to weddings it is a necessary purchase. And we Indians love to celebrate marriages!

So you agree? That investing in gold is the best thing?

I am not saying gold is not good, but please think about a few important facts:

1. Gold is very difficult to keep safe, although it captures value safely. 2. Gold is also very difficult to acquire or liquidate. Try to sell a small coin and you’ll find out that only jewelers are interested in buying gold and they will offer anything between 8% to 12% less than the market value. That is a big loss! And when you buy it from them too you could end up paying the same 8% to 12% more.

So, what is the correct approach to investing in Gold?

Other investment avenues generate returns—real estate offers rent, equities give dividends, bonds and deposits give interest; gold yields no natural income. It is a dead investment.

Gold is actually the highest quality of money or cash that there is. It is money by human choice for over 3,000 years. It is money in any part of the world and it can be exchanged for any commodity. It needs no government’s sanction to be called money.

So, you should hold as much gold as you need to keep as safe cash. In individual portfolios that could mean anywhere between 5% to 25%. And one of the best ways to hold Gold is in the form of a highly liquid gold instrument–a Gold Mutual Fund. One can buy or sell gold at its Net Asset Value anytime on the stock exchange or from the Mutual Fund.

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