Drawing upon our successful experience with Portfolio Management Service, launched in December 2019, we have launched Assisted Portfolio, which will offer a filtered list of high quality stocks. AP will be similar to Portfolio Management Service; the only difference is you will have to do the transactions yourself and the assets stay with you unlike PMS where we execute the transactions and assets are held by the custodian. The AP process is as follows:
Step 1. Risk Profiling: As a first step you would be required to fill up a new risk profile. This risk score will be stored in our system and in your profile for you to view it. Click here to fill up the risk profile
Step 2. Share your holdings: We would require you to share / update and save your holdings, cash balance and SIP amount (if any), which you would want us to consider as your Assets under Advice (AUA) along with and your Demat statement, supporting the holdings that you have shared with us.
Step 3. KYC Check: Please share with us your PAN and Date of Birth, for verifying your latest KYC.
Step 4. Agreement: We would be couriering you the Franked Agreement along with the CKYC form to your address on our records. You would be required to fill up the same and send it back to us along with the self-attested copies of your KYC documents.
Step 5. Payment: Once we receive the duly signed Agreement, we will raise an appropriate invoice which will be billed on a pro rata basis, based on the value of your Assets, from the date of the receipt of the agreement, till the end of the appropriate billing cycle period. The Billing cycle periods are from 1st Jan to 30th June and thereafter from 1st July to 31st Dec.
GST at 18% will be additional.
Step 6. Recommendations: We will share our recommendations by email and SMS alerts.
Step 7. Implement: You can start implementing the recommendations and upload the transaction details in our portal.
Step 8. Tracking and Monitoring: We will suggest changes to your portfolio as and when needed.
The reasons we have launched AP is:
1. Clients have bought multiple stockletters and found it hard to implement the many recommendations
2. We have no control over what they do and so we cannot actually “deliver” the results of our recommendations.
3. To make it effective, we can offer execution and tracking for stockletter subscribers. But even after this, the two points above will not be addressed.
4. Hence, the recommendations were not executed in practice.
Background: On 3rd July 2020, Securities & Exchange Board of India released amendments to Investment Advisory regulations, following a discussion paper earlier this year. Subsequently, on 23rd September, it has come with even more changes, which deeply impact all advisors. This will mean changes to our business model. We are planning to split our service into two: Assisted Portfolio (AP) for stocks and Do-It-Yourself Portfolio (DIYP), to be renamed as Moneylife Advice, for stocks and equity funds, through automated tools. The changes to the existing model to DIYP will take some time We will alert you when we have finalised the changes. The stockletters will continue as before.
With these changes, we will have four offerings to suit any investor: AP, Moneylife Advice, Stockletters and PMS. The following table explains the differences between the various services we are offering:
If you are interested in exploring this further, please do email us at [email protected]with “Interested in AP” as the subject line. Before engaging with us, please do read the FAQ in detail and also AP Guidelines.
This service is meant for those who are investing for capital appreciation and are familiar with the significant upside and downward risks, associated with investing in stocks. It is suitable for aggressive investors, who are ready to take such risks while aiming for long-term capital growth and can tolerate substantial fluctuations in the short-term.
Why have you launched this service?
In our interaction with clients, we noticed that many subscribers go for multiple subscriptions of stockletters and end up making the following mistakes:
- Selecting stocks according to their fancy, especially avoiding high-growth, high valuation stocks
- Not buying all the stocks we have recommended
- Buying in the wrong proportion
- Not selling at the right time.
So, their investment results diverge widely from the optimum. Hence, our recommendations remain on paper, not what is executed in practice. This is why, despite getting the same recommendation, every subscriber gets a different return. Assisted Portfolio (AP) will try to remove the lacuna. If you are confident of following our Stockletter recommendations with the correct weights / exposure, entries and exits you will not need this service.
The two most important features of AP are:
- We will alert you about execution. This is being done manually now but will be automated.
- Offer a filtered and specially selected model portfolio from the stock selections across our stockletters, with cash calls.
Is there a difference in the model stock recommendations and returns for an NRI Client and a Resident Client? Which would offer better returns?
There is no difference. One or two stocks are banned for NRIs. We will recommend alternatives.
How will you deliver the recommendations?
It will be through the Ask Us forum. When we post a recommendation, you will get an email alert with a link to the site.
Why do we prefer recommending stocks and not funds?
Because we have control over our actions. Hence, returns from stocks are likely to be higher. We have no control over the actions of mutual funds.
How will you periodically review client portfolio?
We know what stocks we have recommended. We keep a watch on them. The need act on your portfolio will be based on external events and buy and sell signals generated on individual stocks. There is no fixed periodicity for the same. It can be in the middle of the week or there may be no recommendations for weeks.
Will the recommendations be in one go or would it be gradually?
Stocks that can be currently bought, would be recommended now. Others gradually.
What would be the format in which the model recommendations will be shared?
The format would be as under.,
Please buy the following stocks in the proportion suggested
After acting on the model recommendations, please share with us the details of the transactions
What is the automatic process in future, you are referring to?
Currently, we are sending these mail alerts to each person one by one. Later when all subscribers are to buy or sell a stock, we will be sending an automated alert. We are also going to have an app for the same.
Will all the services, such as the common package and other MAS services like Insurance, Equity MF, Investools, Stock letters etc. be included in the new service?
- Moneylife weekly online magazine: Not included
- Insurance: Not included.
- Equity MF: No, we prefer recommending stocks.
- Investools: Not included.
- Stockletters: These will remain separate, servicing those who don’t want to come to AP or PMS.
In fact, each of these four services — Assisted Portfolio, Moneylife Advice, Stockletters and PMS — serve four different kinds of investors.
Do I get access to the stock letters as well, as part of the AP service?
No. You will have to subscribe separately. But why would you? You should choose between AP and SL.
Will the current weekly stockletters be discontinued?
No, they will continue for those who would not like to opt for AP or PMS.
If I opt for AP , then there won't be any use in subscribing to stock letters
No. It can be discontinued. In fact, we would expect you not to subscribe to stockletters, to avoid confusion in strategies.
Will the stock investment contain recommendations only from the stock letters or would it be different?
Some stocks will be common. However, it is not relevant whether the stocks will be same or not. While it may seem that knowing the names of companies to invest in, is everything, we have observed that:
- Many subscribers don't invest according to the process we have laid down. They buy 4 stockletters and pick and choose, selectively
- They buy in different weights, not equal weight as advised
- They buy at different times and often at a higher price.
- Many don't sell when a sell recommendation is given.
The end result is that EVERY subscriber has a DIFFERENT RETURN EVEN WHEN THEY HAVE ARE SUPPOSED TO HAVE THE SAME RECOMMENDED STOCKS.
Will the investment in stocks be in a similar direction as in PMS service? Would the returns in both cases be comparable?
Some stocks may be common. Again, common names mean nothing. It is timing and exposure that determines returns. Returns could also be similar. Fees and costs of AP will be lower.
What kind of interactions is allowed?
If you wish you can ask questions about model portfolio construction such as sector exposure, high or low weights of individual stocks, high or low cash positions, market trend etc. You can clarify any doubts in the process relating to buying/selling processes
What kind of interactions is not allowed?
We will not have interactions about stock ideas you may have, our opinion on third-party information, non-financial matters or financial products that you have not bought and have an interest in.
Are any sell/ buy calls explained to customers?
This service is somewhat like PMS, where the portfolio manager takes decisions on behalf of the clients, and clients have to trust the portfolio manager and does not get to to know the rationale behind the buying and selling. It is the same here except the decision to execute is left to you. Of course, you can decide not to implement our recommendations. We would like our performance to speak.
Will AP cover fixed income?
We will prefer recommending on Stocks. Recommendations on fixed income can be made on an infrequent basis for free.
Can you give us some estimate of growth expected from implementing this plan?
We think we will do better than the best mutual funds. You can see the performance of our PMS here https://advisor.moneylife.in/pms
Will it be a short term, long term investment strategy or will there be any intra-day trading? Will you recommend derivatives?
It will be investments in good quality stocks depending on the price trends. No intraday or derivatives trading.
Can I be involved in the stock selection process so that I can have stocks selected according to certain preferences?
This will not be possible. We will recommend our selections and you have the choice to execute or not to execute them. If you don’t like certain stocks, we will not be able to provide alternate choices. As explained here, we use a formula to select stocks, a formula to time our entry and a formula to time our exit. From time to time, our stock selections can be concentrated in certain sectors, smaller or larger cap sizes. If no stocks fit our criteria, we may remain in cash for a long time. Selection and timing is the value of this service.
Will my portfolio be customised?
No, but it will be customised in the only manner that matters - which is timing. If you start at a time when there are fewer stocks to buy, we will stay more in cash for you and invest, as and when the opportunity comes rather than pushing the same stocks in the same proportion, as we have done for others. To repeat, selection and timing is the value of this service.
Does the stock advise vary depending on the value of investment? Lets say if my portfolio is 25Lacs, will the basket of equities suggested be different from, if the value was 50 lacs?
On the current value of the Assets as per the table below:
GST at 18% will be additional.
Is there a minimum amount for availing the AP services?
Yes. It is Rs 20 lakhs
Is the fee linked to performance?
If fee is not performance-linked then is there any justification for the fee charged?
If you can handle everything yourself easily, then you don’t need this service.
Is the fee levied per quarter or per month?
It is an annual fee, payable every 2 quarters at a time, levied on the basis of your current value of the Assets, at the time of raising the invoice.
What will happen to the fees already paid for stockletter. Will they be adjusted towards this?
Yes, we will close and deactivate it and refund the unutilised amount (prorata) to you.
Fee is given as a range. How do you decide regarding the actual fee? Will the fee be payable at the start of each year?
As per SEBI rules, we can charge fees under the ‘Assets under advice’ (AUA) mechanism of fees, only for 2 quarters in Advance.
To simplify things and make it more convenient for you as well as for us, we are moving to a fixed - 2 quarters (half yearly) billing cycle periods i.e from 1st Jan to 30th June and thereafter from 1st July to 31st Dec, as explained below:
For all New subscriptions received and Renewals falling between 1st Jan to 30th June, the initial invoice would be raised ( based on the value of Assets), on a pro rata basis, from the date of subscription / renewal, till the end of the Fixed billing cycle period., i.e till 30th June. The subsequent renewal/s, would thereafter automatically fall in line with the half yearly billing cycle period, which would be for the subsequent 2 quarter period from 1st July to 31st Dec
For Ex: Subscription/Renewals on 15th Jan, the initial invoice would raised from 15th Jan to 30th June, which would be subsequently renewed for another 2 quarters, from 1st July to 31st Dec
Can AP be started with existing stock holding/MF?
We prefer recommending stocks over Mutual Funds. You can share your Stock investment portfolio with us. We will analyse your portfolio for free and suggest what to sell and what to hold. Once you have implemented the sell advice, you are ready to onboard with your remaining stocks and or cash.
In future if I want to discontinue the AP services, what is the process?
Your assets stay with you. Nothing to be done.
If we have a monthly surplus to be invested like SIP, how will the fee be calculated?
This has to be disclosed and will be computed in advance.
Are the Assets based on the holdings on a given date?
Holding value at time of subscribing and then at the time of renewal.
How shall the fee be determined, if I add incremental investment over the period of time?
The fees are charged on the basis of the current value of the Assets, adding cash will increase the Assets and will have to be billed separately, to coincide with your the expiry date of your current plan.
To avoid raising small invoices, which is quite taxing and cumbersome on both sides, we would like to keep the minimum threshold for infusing such cash at an aggregate of Rs 3 lakhs.
1. Stocks or Mutual Funds?
A lot of AP investors have invested in both stocks and funds. But often they are confused whether they should stay invested in both. New investors too often face this dilemma. How should you decide? Here are some thoughts that may help.
While both stocks and equity mutual funds (which buy stocks) help you create wealth over the long-term if bought judiciously, as investors we react to them differently in the short-term. There is an important difference between investing in stocks and investing in equity funds. The key difference is that you will never know the specific mistakes a fund manager makes in buying and selling individual stocks and it will not affect you. You will only know of the net result (NAV).
On the other hand, if you buy stocks, you will be aware of the gains and losses in every single stock. This plays on our minds. Gains will lift your mood and losses will depress you. But not to the same extent. There is a difference in the way our mind reacts to gains and losses. It is well-established that we feel worse about losses than we feel good about our gains. We are biologically hardwired that way. No wonder one of our AP subscribers was worried about the short-term loss in one stock and but was not asking us about the handsome gains he was sitting on in almost all the other stocks we recommended.
This problem will not arise if you invest in an equity fund. Do you check what kind of returns a fund has made in each of the stocks it has put your money in? You don’t because you cannot even find that out, even if you wanted to. This is simply because funds don’t report when they have bought a stock and when they have sold it and whether they have made a profit or loss and how much. But you will know that about every stock you buy and sell.
Also, funds often buy and sell a small amount of stock within their overall larger holding in it. That makes it even more difficult to calculate returns. So, you don’t see the losses and gains from individual stocks. All you see is the progress of the overall portfolio – in the form of change in NAV. The lesson is, if you buy stocks you should ignore losses and gains from individual stocks and be focused on the change in portfolio -– just like you do for funds – and that too over the long-term. This will help you deal with the volatility of individual stocks. If you agree with this approach, we would recommend you to invest in stocks.
2. Stocks: How to ignore volatility but not ignore risk
There is a strong misconception that stocks are risky because they are volatile, being traded assets. But volatility is not always risk. Volatility can certainly inflict a short-term loss. But the same stock that goes down sharply in the short-term can go up a lot more in the long-term. (In such cases volatility is an opportunity.) However, in some cases, a stock may not go up even over the long-term. You will then have a permanent loss of capital. That is the real risk of stocks. How to reduce this risk -- of long-term or permanent loss? By buying quality stocks for the long-term. If you compromise on quality you will risk a permanent loss of capital. If you buy for the short-term, again you risk a permanent loss of capital.
3. What we buy
Our strategy is not ‘buy and hold’ a large number of high quality stocks for the long-term. We follow a simple process of 1. Prelisting high quality stocks 2. Recommending them when they are on an uptrend. We identify quality companies (which are generating strong cash flows or on the verge of it) and then suggest a buy when they are rising. Both these conditions have to be present for a stock to be recommended. We have arrived at this process after more than a decade of research of what works in investing. There is nothing more we can share about our stock selections. We wish to be judged by our results. We will benchmark our performance with the best mutual funds and popular indices like Nifty 50 and Nifty 500.
On occasions, depending on market situations, we will have high sector concentrations.
While identifying which stocks to buy we are not tempted by turnarounds, glamorous names, mega themes or stories and narratives that may or may not come true. They usually don’t come true and / or have no correlation with what happens to stock prices. We prefer to look for a company’s annual and quarterly financial data, which will normally tell you all you need to know.
4. When we sell
We usually have a predefined formula that determines the price of our exits. That targeted exit price keeps changing. If the stock goes below that level, we pull the trigger. The only time we may not pull the trigger is a sudden sharp decline caused by external shocks, which may impulsively push the price of a stock. Good quality stocks usually bounce back from such impulsive selling.
5. Executing trades:
When should you buy and sell? Act immediately because it is impossible to fine tune the actual buying and selling. Usually you should be the best buyer after the market settles down in about 30 minutes from the start. Don’t try to scale your buying on declines or wait to sell on rallies unless you have a tested formula that works for you.
6. Periods of holding cash:
Since the core of our strategy is to buy good quality stocks but only when they are trending higher,, it could well be that in a market downturn, we may recommend more exits and very few stocks to buy. In those periods, which can last for 2-6 months, we would suggest you stay in cash. This is a normal situation every year and you need not feel perturbed that we have gone silent. We would be monitoring our shortlist closely and the moment we find stocks in an uptrend we would recommend a buy.
7. Market / stocks are too expensive:
- “Expensive” markets are not correlated to returns from individual stocks over the medium to long term. Even in an expensive market, many stocks will continue to do well. It is a common fallacy to confuse between market valuation and valuation of individual stocks.
- “Expensive” markets and stocks are known only with hindsight. Also, after a shock decline, stocks and overall market will always look expensive because they are based on recent low earnings.
- High quality stocks decline along with the market only in severe bear markets. In normal market declines of 10-20%, many high quality stocks may fall a bit, move sideways and go up again. We shortlist high quality stocks available at reasonable valuation. Having said that stocks may go down any time after your purchase, whether they have already run up or not. That is the nature of stocks.
- Nobody knows in advance, the kind of returns a stock will fetch. But a company which keeps growing its revenues and profits, is an exceptional opportunity. Its stock will be a buy at all levels. To stay away from such a stock based on conventional notions of valuation will be mistake. This is why we don’t have target prices for stocks. Nor do we let valuation dictate our exits.
8. Losses/fall in individual stocks:
As mentioned above, even in an otherwise bull market, many high quality stocks may fall by 10-20%, move sideways and go up again. Do not get perturbed by such temporary declines. The performance of your portfolio has to be seen as a whole and over 2-3 years. Not one stock that is falling over the short-term. We are tracking each stock and when you need to sell a specific stock, we will inform you.
9. Risk profiling:
We do risk profiling but in a broad way, not in a narrow way. Risk profiling is not a very scientific process. Science is about establishing objective truth. But your risk profile is determined by you subjectively by answering a financial quiz. Read what Jason Zweig, one of the finest writers on Personal Finance, writes in his book, The Little Book of Safe Money. One of the chapters is titled ‘Financial Planning Fakery’ subtitled, ‘What Is Your Risk Tolerance? No One Knows!’ where Zweig writes: “Its a conventional wisdom among financial planners that every investor has a distinctive appetite for risk. Most financial advisers will subject you to a risk-tolerance questionnaire, a series of between a half-dozen and a hundred questions supposedly designed to determine whether you are a spineless wimp or a wild-eyed thrill seeker…”
“If you get a high score, you are a master of Wall Street minutiae. But that doesn't mean you have a high tolerance for taking financial risk; it means only that you could go to a cocktail party and bore everyone to death… Some of the questions simply make no sense: If the stock market fell 20 percent, you would: (a) buy, (b) sell, (c) do nothing. But if you knew the answer to that kind of question, then you would already understand your own risk tolerance! And in that case, there would be no point in sitting through such a cockamamie quiz.”
Zweig goes on to expose the truth about risk profile, risk appetite or risk tolerance. ‘Risk tolerance’ is a myth, says Zweig. No one has a fixed attitude toward investing risk. Your willingness to take chances with your money will depend on a large number of factors, which keep changing. At MAS we believe risk profiling is an American idea to push decision-making onto investors and absolve market intermediaries of their responsibility. We believe advisors must take responsibility to guard investors against long-term risks, not save themselves by pointing to a risk score that the investor was forced to arrived at. After all a doctor does not prescribe different medicines for different patients depending on their risk profiles. Because patients, like investors, are not supposed to know the risks. It is the doctors, and investment advisors, who are supposed to know and be responsible for what they advise. That is our philosophy.
Moneylife Advisory Services Private Limited is a SEBI-registered Investment Advisor (INA000003429) with BSE Administration & Supervision Ltd. (BASL) Membership no BASL1460.
Moneylife Advisory Services Private Limited
Unit No. 316, 3rd Floor,
Hind Service Industries,
Off. Veer Savarkar Marg,
Dadar (W), Mumbai 400 028
Telephone: (022) 24441058-59
Email id: [email protected]
Corresponding SEBI regional/local office address:
SEBI Bhavan BKC
Address : Plot No.C4-A, 'G' Block
Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra
Tel : +91-22-26449000 / 40459000
Fax : +91-22-26449019-22 / 40459019-22
E-mail : [email protected]
Toll Free Investor Helpline: 1800 22 7575
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