Ajay Mathur - On his Investing Journey

Thanks for speaking to us. Can you tell us about what you do and where you grew up?

I currently work with Ericsson as a Telecom Engineer. I started my career in 2010 as a software engineer and then moved to Telecom industry in 2011. I have lived in Bombay and Delhi over these last 4-5 years with a short international stint in between.

I spent my childhood in Faridabad and am currently living in Delhi with my parents.

Why did you choose to be an engineer? Were you a good student?

Haha, no. I was miserable in Maths but I was still ok till about class 10th. In the years 2004-06, when I was in class 11th and 12th, I spent more time playing Basketball than with my books.

As a result there was no IIT, no NIT and all I got was a low rank in AIEEE. I got admitted to Electronics course at Manavrachna Engineering College, near Surajkund in Faridabad. 

You started working immediately after college?

Yes, I had taken an education loan for my engineering and hence when I graduated in 2010, getting a job was the only thing on my mind. Those were difficult times as economy was still feeling the pains of 2008-09 recession. Getting a job was also tough, but I finally got placed as a Software Engineer with an IT major in Noida.

How did the your investing journey begin?

I didn't really start investing until 2011. First few months went by in the awe and feel of seeing money in the bank. It also took some time to understand how tax deduction was calculated on the monthly payslips. 

I didn't enjoy Software Engineering and realized early that it's not my cup of tea. And to quit, I had to buy the company bond. I couldn't take it anymore so eventually I broke the bond (Rs 1 Lakh). It costed my my entire savings the first nine-month of my work-life.

At the end of 2011, I was back to ground-zero. I come from a modest background and on top I had the pressure of repaying education loan. This was a major shock that shook me and I was motivated more than ever to earn back that loss as quickly as possible.

Aah, recovery of that loss was your motivation to start investing?

Yes. But, I also always had an inkling for investments. Like many households in India, CNBC TV-18 was a favourite of my father. And for much of my college time, whenever I was with my father, I too was watching CNBC TV-18. So you could say besides the shock of loss, there was some excitement also to start investing.

It was at Ericsson where for the first time I heard about Mutual Funds. During a cab journey from home, I overheard a discussion amongst my colleagues and co-passengers. I inquired more and liked the concept.

I didn't have much knowledge then and I went ahead with recommendations I heard from people. And fortunately for me, those were good choices. 

How much were you earning when you first started investing?

When I started my job with Ericsson, I had already brought down my expenses to a bare-minimum since I was in a state of shock. Part of my salary was going towards education loan EMI and part for my expenses. 

I used to get Rs 28,000 in hand and 10,000 would go for loan EMI and 12,000 would go for expenses. The balance Rs 6,000 was going to Mutual Funds every month. Early on, I did face some difficulties with my savings and expenses equation but at no cost I stopped the Rs 6,000 every month in Mutual Funds. Now my salary has more than doubled and I am saving comfortably but I have still continued with my 4 year old investment of Rs 6,000 every month in mutual funds.

How does your portfolio look like now?

My salary has now more than doubled since 2011 and I invest about 25-30% of my income. Overall, my portfolio today is worth Rs 25 Lakhs against a total investment of Rs 8-10 lakhs. I have been able to make about 100% gains on my investment.

My savings and investments are spread across direct stocks, mutual funds, PPF and even some money in savings account. I feel mutual funds are a good way to create wealth as there is not much stress in that. Someone else manages your money for you and you don't need to take any load. I also like to keep some money in debt instruments like PPF. Now PPF has become less attractive because of reduced interest rate but still I keep some money in debt.

Wow, you started with just Rs 6,000, five years back. This is an amazing journey.

Well it was not a smooth ride at all-times. At one point in time, value of my mutual fund investments was lower than what I had invested. But then again, investment teaches you all this. Eventually, you overcome that feeling of short-term loss. And today, I am sitting on a good profit so that makes me believe that it was a good move that I didn't get impatient during those less days and continued investing.

I think it is similar to having a girlfriend. Market will have its moods just like your girlfriend. You have to be patient during those mood swings of market. 

That's interesting. You chose patience over excitement?

Yeah, but unfortunately get rich quick is strongly ingrained. And funny thing is that while people don't fundamentally believe in it, everybody at some point has lost money in trying to become rich with one shot. My father also lost money in futures and options. He lost money in Kali Mirch futures or something like that. 

What I have seen is that getting excited and losing money are directly proportional. People who stay glued to TV or news for that elusive tip, get slaughtered. Such people get absolutely slaughtered. I have seen that markets reward patience.

How did you learn that market rewards patience? Did someone whisper it into years or you learnt it by reading?

Well I learnt it by experience. In 2011, just after I started investing in Mutual Funds, I also got excited about the prospect of investing directly in stocks. I started cautiously, by buying 15-20 shares of large companies like Tata Motors, Dabur. Investment was growing but I didn't want to lose any money. I had already paid 1L to break the bond and I was playing absolutely safe. 

Then I researched a bit more and found a stock that I liked. I invested about Rs 50,000 in that particular stock when its price was about Rs 92. And in a week, it jumped to Rs 102. During that time I was in constant touch with my broker and she kept saying, Sir 103 ho gaya, bech do. I cound't understand that why was she so much worried about my money. So I took a decision that I won't sell it. 

I had bought it in 2012 and now it has crossed 500. That's the answer to your question that patience rewards. Market rewards patience more than excitement. It goes both ways. There are a few equities that create wealth and some destroy wealth. You cannot have an all-winning portfolio but a profitable portfolio is possible with patience.

I met a lot of brokers and even people who have been doing intra-day for last 10-15 years haven't made any money. All these things pushed me towards belief that patience is required to make money.

Interesting. And ofcourse, I am assuming you know that why broker was pushing you to sell?

Sabko apna ghar chalana hai and that's why broker was trying to get me to sell. If you have seen the Wolf of Wall Street then you know that a broker's job is to sell. The client may go to hell but you have to make sure that you complete the sale. Brokers make money in every transaction, whether you buy or sell. I still get calls from brokers and they suggest me to do intra-day trading. Nobody I know (and I know people who have been investing for last 20-30 years) has ever made any money in Intra-day trading. Only person who makes money is the broker and the more you trade the more money they make.

But all of us think that we are Superman and we know something that nobody else knows. How do we control that emotion?

Exactly, it boils down to that. It's very hard to stay disciplined. If you just go by tips on which stock is doing very well then you will end up losing. To find inspiration and convince yourself, one has to read books. One has to understand that how successful people have made money.

Patience is required. When I see my boss, I can see what Financial Freedom feels like. Only by virtue of patience, he has been able to reap compounding benefits.

So your boss is an influence on your investing style?

Yes, most definitely. I have always looked upto him. Today he is around 55 year old, and financially he is super comfortable. He has also just bought an Audi. He has a nice comfortable villa now in Gurgaon. He also started like me and over last 25-30 years, he has invested well. He also told me that you should every year read the annual statements of Berkshire Hathway. There is always a lot of wisdom for investors in those financial statements. 

Investing is 80-90% psychology and the balance is action. Controlling your actions is very important. I leant that from reading about successful people.

Have you been an influence on your friends?

Yes, two of them.

This friend of mine he earns about 7-8L and complains that he is not able to save. I asked him a simple question that do you atleast save Rs 500. He said more than Rs 500. I got him convinced that start with whatever you save, just don't wait to get started. He recently started a PPF account and now saves regularly.  Yes, it's a low-return choice but he has atleast started.

The second friend of mine was my room-mate and one day I caught him checking some technical graphs on his mobile app. He was doing intra-day trading and he pulled me also into it. I didn't believe in intra-day but I lost my discipline for a short time and started intra-day with a small sum of money. Those were the darkest days of my investing journey as both of us lost our money. 

My friend now has a strong belief now in long-term investing. It's very hard to explain to someone unless he / she personally experiences the outcome. In intra-day trading, he got the lesson of his life and I also got another reminder that intra-day doesn't work.

Final few questions. What is your mental state during the periods when your portfolio is in a loss?

I started investing in 2011-12 and it wasn't until around 2014 that I experienced loss. I didn't panic and didn't need much effort to convince myself. It was a long-term relationship with market and I was clear that I can't break myself off from this relationship. 

India and South-Asia are today one of the fastest growing economies in the world. I attended a lecture in 2015 where a professor said that Axis of power is again tilting towards India and South Asia and that's why these are the regions to live-in.  

I would like to add that have faith in yourself and invest for long-term with a strong belief in India story.

At 26, you've done exceedingly well. But a lot of us also complain about not being able to save enough?

Ofcourse, we keep hearing that I don't save enough. I feel that these are just excuses. If you are saying that you don't have enough money available to invest then I suggest that you take a cold hard look at your expenses and write it on a piece of paper. Once you write it down, you will be able to clearly identify un-necessary expenses. On a weekend, we spend Rs 2,000-3,000 without realizing that its gone. I am not saying don't eat property or cut down on necessities, but, just write down your expenses and you will be able to see worthless expenses.

To get started, all one needs to is cut expenses by Rs 1,500-2,000. The new two-thousand rupee note is much better off invested in mutual funds rather than in a mall.

Any compromises made in this journey?

In initial years, yes, I went out much less. I wouldn't say that it was a compromise. The only difference between 2011 and today is that I don't need to write down all my expenses. I don't need to focus a lot on controlling my expenses. I would try and save Rs 2,000-3,000 every time I had a chance but now I don't do that anymore.

What plans for future? Any targets you have set for yourself?

I don't like to have a very very long-term target. All my investments were geared towards saving enough for my MBA. I want to do my MBA from a good college somewhere in South-Asia

Money is a medium, it's not the destination. But having money helps you make your own experiences without any compromise on how you want to live your life.
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