Must Watch for Every 20 to 45 Year Old | How to Escape Rat Race | Ep 35

someone like uh Mukesh Amani how does he manage his wealth if you be patient enough and you've made your first Cod first Cod will turn into your second Crow only in next 8 years from fifth Crow onward Sharon you start adding a crow every year 40% of Indian parents still think that their children will take care of them India still isn't realizing enough the cost and the nightmares of healthcare like for example today a heart surgery might cost 5 laks in 20 years from now how much do you think it will cost take a 10%

inflation so which means 20 lakhs in 7 years and in 14 years 40 lakhs I think what we are soon realizing is that India doesn't have a investing problem the bigger problem is that India has a spending problem don't go into exotic stuff don't jump into newer products don't jump into direct stock trading don't jump into those Futures and options unless you have a on today's episode of the one person Club show we have Mohit gang founder of money front an ultra hni investment firm in this episode we'll dwell into the road map of becoming

a millionaire how the ultr rich invest and how Healthcare can make you go [Music] broke hi moit hi Sharon very very excited to have you because you're somebody who manages money for a lot of rich people so I want to ask you before we begin this podcast what is the last salary you were drawing before starting out your own company uh my fixed comp when I quit uh in 2016 June was around 65 odd lakhs 65 lakhs fixed this is 2017 2016 2016 yeah okay and then and obviously there were some chunks of bonuses and

other things so let's say I'm 25 years old I'm making 50k per month I come to you and I say I want to become a millionaire what kind of financial planning Journey would you show me okay look I think for someone who's starting his career starting his investment Journey it's extremely important to catch one road and just stick to it and keep it as simple as possible don't go into exotic stuff don't jump into newer products don't jump into direct stock trading don't jump into those Futures and options unless you have a huge pot which

you have created the definition of huge pot again can vary from Individual to individual but my sense is from 25 age till 35 age which is the first 10 years of your life if you can keep this formula very simple and stick to basic mutual funds and keep allocating that 20% and more as your salary permits as your financial conditions permit if you can keep doing that regularly right know which ways that you will not attain Financial Freedom I'll try and give some mathematical numbers behind it if you save 15,000 rupes a month for 15

years put together and if you assume a 15% rate of return 15% can be a slightly higher rate of return to assume for sake of computation so you would have made your first one CR right if you be patient enough and you've made your first Cod that first Cod will turn into your second COD only in next 8 years and that second Cod will turn into your third Crow only in 3 years from there on which means the first one is the tougher one to get is the tougher one to crack if you're are patient

enough and if you stay your course for that 15 years the second one comes much earlier because of the sheer power of compounding and the third one is then only at the third year and from fifth CR onward Sharon you start adding a CR every year uh so reaching a CR stick to normal mutual funds stick to normal mutual funds stick to Basics stick to simpler things in life then if you really want to go perhaps start building a direct stock portfolio if you've learned enough in the market if you have gained enough experience after

10 years how markets move if you've seen one or two volatile phases correction phases what kind of stocks then you decide your category that okay I will only go into Blue Chips perhaps and I'll do mid or small caps through M mutual funds or maybe let's say I will I am convinced and I can research enough and I will go into some midcaps or small caps and I will do other forms through but to each one is own right so then you go into that maybe and after you have earned considerable amount of wealth I

would still say least what is the considerable amount of my sense is at least half a million dollar so about four crores about four crores or perhaps let's say at around three crores and above right you can then start looking into some PMS options or other options if at all you want so it's like a more riskier mutual fund absolutely with a minimum regulatory ticket size of 50 lakhs to be into a after three you're saying you can explore some PMS yes tell me that Journey 3 I would say a million dollar then then perhaps

you have that leeway and knowledge and experience both as an investor that you can try and explore aif options which is alternate investment funds which comes at a ticket size of about a so okay so after 8 CR then what should I Target before exploring other things okay look there's no the of financial products which are there uh this just humor me I just want to see how that journey goes let's say 8 next next after you've attained that uh crazy wealth which is which could be anything to anyone it could be a 2 million

number or a 5 million number let's look at people living in Metro cities dep so let's assume 5 million 5 million May then you go then you go for unlisted Investments private Equity Investments so startup investing startup investing private Equity investing credit investing you invest into VC funds through some vehicles or through some routs and and participate in the private Equity Market or the private investment Market which which is becom a f b you're going into companies which are very small and which are unknown unexplored Uncharted territories binary results also the problem Sharon today is

that the first guy who makes makes the 10 20 LH portfolio he comes to us and he says unlisted investment hdb Financial mil hero Financial Corporation boss you've made 10 lakh Rupees in mutual fund portfolio 20 lakh you don't even understand the volatility in the financial markets you don't even understand the pricing of those Shares are they rightly priced not rightly priced just thinking that someone will go to IPO and you will make huge amount of money is the biggest fallacy on the street today and I see so many of these retail investors getting lured

into that unlisted investment space and there are so many firms which are mushrooming around which are offering those unlisted shares in kilos and dozens and whatever quantity you want to right B that's crazy that's absolutely risky one day this Bubble Burst and people will be wondering what happened to their money and it's stuck forever sometimes if markets turn bad companies can take ages to get listed so that that until we covered 40 cres and then beyond that what happens Beyond you keep you hire a private wealth manager People starts uh fancying those ideas that I

will pay a private wealth manager I'll have my own reporting structures my own family offices my own proprietary desks right and you can have then multiple things you will then go into structuring of your family wealth and maybe forming some trusts and trying International Investments that also becomes a fat at a a fairly early thresholds at times so if somebody comes to you like let's say they come came to you for advice and they're like hellbent on buying a house but you know that if they buy that house they will get into Financial ruin how

do you convince that person not to buy the house I have got so many of such people who have invested and taken wrong property calls in their lives because at a point in time then you also realize your kids are going abroad for Education parents are getting old they can't manage so many properties right what will you do what will you do with those 5 10 different properties one in Pune one in chandigar one in NOA how do you manage it and then do in Mumbai right so how do you manage it all and so

you're now in that process of liquidating it everything and then trying and accumulating again into Financial assets very few of them I really see coming and saying okay this property investment of mine was a huge success it's turned into mega bucks and it's giving me some huge returns and I'm very happy with it or whatever but all I'm saying is few of these calls I think people go through experiences and then learn for people who learn it early in lives and believe in the power of financial assets are the real ones I've seen actually creating

a lot of wealth for themselves look finally the definition of being rich and a lot of people use that as a measure of being rich is when your passive income is higher than your active income which means you've accumulated enough that it can it can word passive income a lot of people you know get ANM and they hear passive income passive income right and they make a lot of mistakes because they're like okay I'll buy a house and get rent that is the mistake they make they make like I'll buy a 2 BK house I'll

give it for rent I'll get the rental income so that is passive income I've made a good decision right before putting into financial markets they do this absolutely right so this and that is just what 2% passive income they're getting I I honestly I think if that's the definition which people perceive then it's a fairly wrong definition the way of looking at it is let's say if you've built a 5 CR portfolio right and you assume an FD rate of return on that which could be 7 to 8% depending on whatever you want to do

let's assume in 8% which means 40 lakhs a year so if you have a copper which can sustain or give you 40 lakhs a year right and that's good enough for your expenses that takes care of all your lifestyle or whatever right and if you're comfortable with that means you've attained first level of Financial Freedom in life which means you are you are good enough basically right so that's that's one measure which quite a lot of people use so I just I was just looking at the stats in India out of 140 CR people in

the country there are barely about 8 lakh people who who are millionaires millionaires are also called h i High net worth individuals and the next stage is ultra high net worth individuals and there are about 20,000 people right I want to know like what what is something that only an ultra hni can invest in like what are these Innovative things that you know the ultra Rich of the country invest in which is not accessible to middle class Indians uh so let's say structured notes are extremely popular instruments in the ultra hni bracket where I'll just

give you an example uh let's say if there is a construct that in 3 years whatever Nifty does you get a particip ation rate of 2x the Nifty or 3x the Nifty and your downside is protected which means your downside won't be 80% of the starting level of nifty let's say if you start today your downside will be hedged at 80% or will be protected at 80% it's more like uh sophisticated version of of playing uh op just to summarize you're saying that there are products out there that let's say if I put 100 rupes

my upside will be and and if the Nifty gave let's say 10% returns I'm going to get 20% returns yes on the upside double of what Nifty is giving yes most of the times there is a higher cap which means let's say if Nifty goes beyond 25% then the max you can make is 50% you won't get beyond that even if Nifty goes to 40 50 100% then you will be capped at uh potentially double of whatever uh at 50% level and what is the minimum investment that these kind of products require now these products

typically start with a 1 CR ticket size but if you're getting it customized to yourself let's say if you have an idea if I have a conviction around four stocks and I want to cap a color structure around them or if I have a conviction around let's say Bank Nifty or if I have conviction around some other kind of product then I will get it made one for myself and when I get it constructed then perhaps the ticket size could be 10 crores or a 20 CR kind of a ticket size and a lot of

rich people do this quite a lot of them like what is the you know the biggest um uh concern that these hni and Ultra hni have because they already have money they already have more money than they know what to spend maybe for the next five generations so what are they really worried about like when you talk to these people what are the problems in their life uh I think it gets complicated to a level that a you don't want to pay too much of taxes right so you have to you have to try and

manage too much of chop and churn in your portfolio because the tax amounts could be fairly large depending on the size of your portfolio B obviously you want to preserve your Capital that instinct of preservation becomes extremely strong as compared to Instinct of creation so basically their problem is how do I not pay enough taxes save my money as much as possible most of these guys Sharon also deploy legal firms it's not just about uh deploying a private wealth adviser they also have legal firms to help them legally in terms of uh how to construct

these uh Vehicles basically so they will have larger law firms advising them but like someone like mukes Amani how does he manage his we I wish I I I wish I had an answer to that I was one of the parties managing something uh but so he'll probably give his money to multiple advisers multiple Financial I think for him his business itself is so huge that for him investments into his businesses is also something of a financial call only let's say if he's going out and shopping for a company or acquiring a company or delisting

one of his own so many of unlisted properties that in itself is an event for him my sense is for at that level perhaps the focus is more on how you are running and consolidating and expanding your own business Empire is there an opportunity overseas to acquire a different company to expand your business to unlist and unlock value of some of your existing businesses I think those are the calls which he's taking so let's say spending 7,000 crores is he like breaking an FD and paying for that marriage or like how do they spend money

actually that's a very good learning for all the Indians out there in the market right even if he spent a billion dollar he's not spent more than 4% of his net worth on that marriage of his son an average Indian family has to take out learning and say to himself or herself that boss in my daughter's wedding or in my son's wedding I'm not going to spend more than that 1% 2% I see so many families again as I said I come from a town where marriages and buying houses is a fad people are born

for that and they die with that I think what we are soon realizing is that India doesn't have a investing problem right A lot of people say people are not investing financial literacy low the bigger problem is that India has a spending problem right we don't know how to spend our money and what to spend on right money most people just keep the money in the savings account and that's not savings because money gets spent the fastest in your savings account only absolutely so it should be called spending account money finds ways to go out

and dissipate if it is kept in savings account right you have to you have to quickly be able to lock it up lock it up in a manner that you invest it into some kind of a financial wherever you are comfortable one more one more thing a lot of people today are very confident and not caring enough and I'll tell you why because they are like my parents have not invested in mutual fund stock market they have invested their entire life in fds they're chilling they're comfortable they're not worried about money why should I worry

about money so what is your answer for that there's a very important and very interesting stat huh Sharon which says that 40% of Indian parents still think that their children will take care of them at the age of retirement and they are still living in that uh that zone perhaps that's true for Our Generation right incrementally this number honestly won't stand that kind of uh percentages or that higher percentages as Generations move by so people have to provision and work for themselves still 40% believe that that will happen uh 60% still don't believe that that

will happen I don't know what is the true number of how much does it actually happen right but finally uh the generation which is getting older is a hugely dependent generation the US of today perhaps might be India of Tomorrow 30 years down the line yeah where children once they get independent they'll just move out on their own zones and everyone uh fetches for themselves yeah so at that point in time the generation which is now working when it retires it will have to provision for itself there will be no children to give monthly expenses

or take care of their healthare healthare is something which is going to balloon out of proportion right India still isn't realizing enough the cost and uh the night nightmares of Healthcare in this country medical is something which will go through crazy inflation crazy inflation in next 10 15 20 years as as expert medication uh or private medication will become dearer and dearer right so people will have to provision like for example today a heart surgery might cost 5 lakhs in 20 years from now how much do you think it'll it'll cost take a 10% inflation

on the Lesser side on a lesser side 10% inflation every year 10% inflation will mean you double every seven years of cost right so which means 20 lakhs in 7 years and in 14 years 40 lakhs from here on so you are assuming that today if it's 10 lakhs in 14 years it'll be 40 lakhs No in fact medical inflation in all the big big cities most of the audiences living in Bangalore Mumbai and Delhi their medical inflation is actually 15% that's the I don't even want to Hazard a guess where the number will go

at 15% 15% is doubling every four years absolutely absolutely so doubling every four years if it is 5 lakhs today it becomes 10 and four and it becomes 28 and it becomes 14 16 years wow yeah that's going to be that can actually wipe out your portfolio right lifelong savings can just go down the TR you SE have you seen many examples like this in your experience not many but I have seen people withdrawing huge chunks of their savings because of medical emergencies and everything if you're not very well uh provisioned on health insurance and

everything right but not too many cases as of now as I said India is still a place where you can afford good Healthcare at very very reasonable prices so to maybe end this conversation I want to ask you would you say you have you personally reached the stage where your passive income has exceeded your uh requirements if I see myself as a nuclear person then perhaps I would have reached that stage but if I see myself as a family person with my daughter my wife my parents and everyone then obviously the thresholds are a little

higher because you have to provision for quite a lot of things thankfully my wife works so quite a number of things are taken care of but if I were to assume ourselves as a family then obviously the thresholds are higher cool anything else you want to end the conversation with no I think look honestly uh there are no quick fixes in life Sharon Ive realized it the hard way the only Secret Sauce out there is you go every day do your drill and just keep building slowly and steadily I think there's no which ways that

you don't win the long game and people should be bothered more about the long game not about that next one year three year 5 years as long as you're playing 15 years as long as as long as you have a good a you speak English and you in a big city of India I think those three are good enough ingredients the bare minimum ingredients for you to be successful depending on how much you have of that you might success might be lesser or more I think I tend to agree on that cool guys I hope

you guys learned a little bit about money in this conversation this intensely deep conversation understanding how money works and how the rich live their life and how you can be rich as well all right guys on that note I'll see you guys in the next one