34.11 Time to take high level of risk

This is going to be an insightful posts based on my experiences of travelling/living across different countries.
Since, I am running my Hedge Fund, I also get to speak with many HNIs (100Cr+ ticket sized folks), who are deeply insightful.

Here are a few quick points I will summarise: it will make you think (that's my goal):-

[1] Asset price appreciation in India will be high. Real Estate, Stocks -- and 'growth' options will GROW. Why? it is quite simple: India's population will peak in 2065.

This puts India at a massive advantage (during this same time, most countries are shrinking in terms of their population).

[2] Africa is another region which will witness massive growth (same trend will play out there)

[3] If you are a buy and hold investor: buy prime solid things, stay put and build generation wealth

[4] This brings us to an interesting topic: you actually get rich, if you lower your tax liabilities. You can make 100% returns on your investment-- but if you are taxed 50% on it, you ain't getting rich (much!)

Unfortunately, in India taxes are draconian. And, this is NOT coming down.
In fact this will go up.
The sooner you see this -- the better it will be for you.

We are slowly moving towards a 20% LTCG on all capital gains (in fact, some assets like Debt, now have even higher rates on capital gains)

(How to save taxes LEGALLY, is a 10 hour topic in itself)

[5] In India, it is really difficult to make cash flows: eg. if you buy an apartment, put it on rent (if it is NOT on debt), this is taxed as income.

Personal income tax is very high.

Same applies to dividend income on stocks: your taxes are crazy.
In short, making dividend (cash flow) income is very very tough in India.

[6] So what's the game in India: it is simple right now-- don't do trading of stocks, properties (just not worth it--taxes will kill you).

[7] Do 3x-4x plays: this means that buy at X, grow it fast to 3x-4x. India has a lot of asymmetric opportunities here.

Let me give you an example

[8] Private markets in India: the game that is happening here is: that firms like let's say OYO will go to private markets raise a lot of money. Their goal is get a high P/E multiple. And, then exit on public markets.

If the game fails, they go back to the drawing board: keep reworking till the time, they can exit to public at high rates.

It is going to be exceptionally rate: that a good firm will give you a decent valuation in Public Markets.
This game is played everywhere: but in India, this is going to boom like anything.

Why? because we have a lot of PE/VC funds showing interest in India: the IPO requirements are NOT that stringent.
So yeah, real money will be made here.

Private markets are just 1 example: the same theory applies in Real Estate (good ones, again not all real estate is great), etc.

[9] So my personal takeaway from this is: that private markets are much more discounted: and overtime, I should at least shift 20-30% of my portfolio here.

[10] Summary: India is a great growth market. But, it is going to be highly selective growth. As normal folks: to grow wealth, I don't see an option but to take high levels of risk (b/c the tax adjusted returns + currency depreciation kills most of the returns).


Thoughts 🤔 by Soumendra Kumar Sahoo is licensed under CC BY 4.0