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Economic & Investments Discussion w/ Manish Kataria

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Unknown Speaker  0:01   The purpose of wealth talk is to educate, inform and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.

Christian Rodwell  0:19  
Welcome to Episode 62 of wealth talk. My name is Christian Rodwell, the membership director of wealth builders and I'm joined today by our founder, Mr. Kevin Whalen. Hi, Kevin. Hello, Chris.

Unknown Speaker  0:28  
morning to you. What are we talking about today, sir?

Christian Rodwell  0:32  
Well, we're continuing on our theme, Kevin have just, I guess it's bounced back. So it's looking across the different pillars. And just seeing where we've been over the last few months. It's been a turbulent time for many people. And we're now starting to see those signs of recovery. So today we're focusing on the investment pillar, and we have a wonderful guest Manish Katara, who will be joining us very shortly. And yeah, just looking at a guess the ups and downs of the market. We know that there's never a straight line. And, and where we can expect, you know, the investment kind of pillar, I guess to, to kind of service moving forwards.

Unknown Speaker  1:12  
Yeah, so you know, the investment pillar is an interesting one because the investment market gives in the investment market takes away and nobody knows when it's going to give or take away. So the issue for the market is really it's important to get a sense of it, I guess, particularly as we're all coming out to something which has been really unprecedented and minissha is really well qualified to give a view and remember to view because nobody really knows what's going on. There is no crystal ball in stock market. And I'll add some points later, he makes some good points and as usual, I would say when you listen to anybody with the amount of expertise of people like munition, many of our guests is listened to what they have to say, which then have wider wealth implications, you know, wider wealth lessons flow from money issues observations in today's podcast, and I would say, listen out for those, and we'll draw the threads of those as usual, Chris, for that. So listen, I understand why people are worried about the stock market particularly is the magnitude of falls in the market can be very dramatic. And the reason for it is the very essence of its problem. And its liquidity. When you have something that's very, very liquid, then it's open to sentiment. And when you get unprecedented events like now, then the sentiment of the people who make the markets kicks in, and then the sentiment of the people following the market kicks in. And there's this magnitude, almost like a tidal wave effect. And therefore, you know, those people who perhaps have got large sums in the market can see 3040 percent losses, you know, that can be dramatic, that can be painful that can cause people literally to lose sleep at night. So there are things that you can do to not expose yourself to that degree of risk. And we'll touch on some of those, as we debrief malicious thoughts on where he thinks the markets will be in, let's say, in the near term, let's say in the sort of next six to 12 months, I think, important to at least listen to that, because we've all got a view. And it's good to listen to other people's views to to help shape your own. And one particular thing I think, he says, is, you know, just don't panic. And that's a key message. To make sure that everybody feels there's no reason to panic. The market should have a role to play in your life. It should not be your life, and you should not put too many of your investment eggs in that single pillar, but why don't we listen to what minister has to say and then we can do. Okay,

Christian Rodwell  4:04  
let's head over to today's interview with Manish kataya. Manish Welcome to our talk today. Hi, Chris, how you doing very well. Thank you. Great to have you on today. Now we're going to be looking at the investment pillar, and specifically really where the markets are headed, in your opinion over the coming months as we start to move out of the Coronavirus pandemic that we've all been in. But before we go into those details, would you mind just giving our listeners a little bit of background of yourself please?

Unknown Speaker  4:34  
Yeah, sure. Sure. So I'm a professional investor. So I've worked full time in the city. managing money professionally for for JPMorgan insight investment and and Russell investments. So I took client money and bank money Asset Management money and I ran funds for these organisations on a professional basis. Mainly global equities, and also did some fixed income property and private equity. So that's my sort of background. That's where I really cut my teeth professionally on, on due diligence, investment analysis, risk management, that sort of thing. And fast forward to today, I'm still involved in the city on a part time basis, but I'm increasingly doing, you know, more sort of due diligence investment analysis. for private investors, I run a private investor circle called invest like a pro and we co invest into, into property projects together. So you know, applying a lot of that due diligence capability into into what I'm doing today.

Unknown Speaker  5:39  
Wonderful.

Christian Rodwell  5:40  
I think it'd be helpful for our listeners, Manish if we just look at where we were pre COVID. So for anyone who maybe doesn't have their finger, you know, on the pulse every day of what's happening in the markets, would you mind just giving us an overview of how things were kind of, I guess, February time, and then what's happened over the last three months? In the markets globally, and then we can start to look at things moving forwards.

Unknown Speaker  6:05  
Sure. So, we've Yes, a pre COVID the markets, the markets, we're looking pretty good, pretty healthy across the world. Okay, so we're talking about global markets and in 2019 actually, we've had a very good year in the stock markets around the world the footsie was up close to 20% in the UK and in the US more so you know, things were looking really healthy what what what in them financial markets sometimes people describe this scenario as a sort of Goldilocks economy, so it wasn't too hot, wasn't too cold growth was you know, going at a decent clip. And at the same time, the central banks you know, that kept interest rates very low, there was no inflation so all the conditions were, you know, pretty much perfect for equity markets and then fast forward to February, March and Markets blew up as we saw because of Coronavirus.

Christian Rodwell  7:06  
And now we see ourselves entering well in a recession. And in fact, Robert Kiyosaki, author of rich dad has been prophesizing for many years that sort of 2016 plus or minus a few years we were going to enter, you know, the biggest crash of all time. Where do you see things Monet's, do you think we are about to enter the biggest recession we've ever seen?

Unknown Speaker  7:32  
Well, I'm always a little bit sceptical about these so called gurus you know, he's not the only one there's there's a load of other sort of high profile commentators out there who have been calling for the big recession, you know, ever since we we had the previous one. So I remember you know, they're, they're called perma bears. So they they've been calling for the, the big one for a long, long period of time. Okay, so you know, people are There'll be right at some point. And the problem is you can't be right on your timing, we know that there's going to be a big recession, big depression. In fact, we are going through one now. And it's not something anybody expected in terms of the cause. And the cause is, it was an unknown unknown, right, the virus came along and disrupted what was otherwise a pretty healthy economy. And so yes, we are going to have a very deep recession now, because of the virus. And that's pretty obvious. You just have to look around you were in lockdown, and 95% of the high street is closed. No one's actually doing any business at the moment. So it's pretty obvious that things are going to be bad are bad. And when the official GDP numbers come out, when unemployment numbers come out, when all the economic indicators are officially, you know, released, it's gonna be it's gonna look like the biggest day downturn we've had for a long, long period of time. And that's obvious. Okay? That's not necessarily. It's not necessarily a bad thing, if we imagine a situation where we have a bounce back. Okay, so you can have a deep downturn. But if that last output, last economic output is made up very quickly, then we have, then we have a reasonable prognosis for how the future is going to go. And remember, you know, we're investors, so we're not buying GDP, we're not buying economic activity. What we're buying are our hopefully financial assets, properties, and the picture is very different. So if you're an investor, it's really important to bear in mind that what happens to the economy doesn't necessarily translate into asset prices. Okay? So it's really clear to have that distinction in mind.

Christian Rodwell  10:00  
If we look back at history, and certainly closest to us is 2008, we had the financial crisis before that going back a number of years, obviously the the Great Depression and, and then you've got Japan as well, which I know, you lived in Japan. So you have experience of looking at the last, you know, 30 years there have what's been a pretty flat economy. And what happened there? And can we draw any kind of comparisons there and, and what caused those and yeah, be good to understand that a bit more as well. Minish?

Unknown Speaker  10:32  
Yeah, it's a really important question, Chris. Because, you know, we, we should always draw lessons from, you know, the situation's we've been through and, and the lessons we draw from historical cycles, gives us an idea as to you know, how bad this particular cycle might get. Okay. So, most recessions and the one in Japan included if you go back to 2008, if you go back to 19 29 which really was the big one, the big depression in 1929 they tend to have two things in common one or the other thing in common and that is an asset price bubble. So, either the property market or some other market was entering into an unsustainable bubble. Okay. Either that's in place or we have credit, a credit bubble. So I the banks are just lending like there's no tomorrow. Sometimes both happen at the same time, and sometimes it's one or the other. Okay, so 1929, if you go back to 2009, and look at what happened then there was a huge credit bubble in the run up to that. And then the banks got in trouble because they were lending so much money to people and people were taking on load of borrowing, and that led to asset prices going up and then that all crashed in 1929. If you look at the 2008 bubble 2000 Nate crash that was initially sparked by the US housing market, which, which collapsed initially, and at the same time, it became apparent that the banks were in a really poor state of health. Okay, they were over leveraged, they were lending like there was no tomorrow and between those two events that that bubble burst and because the health of the banking system was so poor, because asset prices collapsed, that led to an extended period of of recession in 2008, going up to 2009. and Japan, like you said, You know, I used to live there, and I spent a lot of time analysing that market. And it was the same. So we had the most enormous asset price Bubble Run in the run up to 1990. We had banks who were just overextended. So you can see you can hear what I'm saying right there is a recurring theme and aspiration bubble and the banking system bubble where credit was just being extended unsustainably. Now, if I compare all of those to what we're going through today, those conditions don't exist today didn't exist in 2019 did not exist in 2020. Before Coronavirus came along, you know, we were relatively healthy, right. And the banking system had just been through many years of rebuilding its balance sheet. So by the time we got to 2019, if you look at their capital adequacy ratios, which is a really good measure to look at, for banks, their capital adequacy ratios were, you know, at historically high levels, which means that, you know, they were very healthy and their ability and willingness to lend was was very strong. And if you if you invest in property like a lot of us do, we know how important the banks are and how important The lending markets are to the property market because property is a levered asset class. So, you know, that's one area of encouragement I have for how we are going, you know, what we're going through right now. And and my own view is that, yes, we'll have a very deep recession, there's no question about it. But we'll have a recovery in 2021. My base case is for us to recover, assuming, assuming and now this is the real sort of big thing, Chris, assuming that we don't have a second wave in the in the virus. If we do have a second wave, then all bets are off. And you know, if we have another lockdown, then it becomes really ugly, but let's just assume that the virus will get will fade away, we'll find out we'll find a vaccine

Unknown Speaker  14:52  
and you know, infection death rates will come down. In that scenario, we will make up a large part of that. Last output in 2021, and in 2022, will probably, you know, make a decent recovery on the back of that. So that's why, you know, all of that gives me hope. And I see a lot of investors who are astonished right now. And and, you know, I get that I get asked a lot of questions about why the market is so strong, you know, why has it bounced back so strongly. And and what I always say to people is that the market doesn't just look at today's headlines. It's not just looking at today's GDP, it's looking ahead, it's looking 12 1824 months ahead to to what is the light at the end of that tunnel? Okay, so that's, you know, a long winded answer to your to your question, but, you know, in general, I have assumed both for the property market and for the stock markets that if we don't get a second wave in the virus, you know, those conditions, the starting point, our starting point, is not Not the same as in oh eight or in Japan or in 1929

Christian Rodwell  16:05  
that is very useful. Thank you for that and he shouldn't I know you you presented a mastermind session for our our members just a week or so back and you went 10 investment principles and I think it'd be interesting just to look at the investor mindset now, because you talk there about having a long term view and of course, over the last three months, there will have been a lot of emotion amongst investors and you know, people will have been riding this roller coaster and and many people will have acted, you know, with quite a short term, you know, reactive state of mind and and may have obviously crystallised some loss and and what are some important lessons that someone can learn obviously, about when you're kind of in the thick of it when there is a crisis like we've had and, and to stay cool enough to make sure you're making the right investment decisions.

Unknown Speaker  16:59  
Yeah, it's I mean, you just nailed it there when you said stay cool, because the worst thing you could be doing is panicking. You know, it doesn't take much to panic in this environment, you know, apart from the health which touchwood you know, hopefully everybody is unaffected and staying healthy. But you know, you just look at the headlines all around you and that, that there was a huge media frenzy all around us about what was going on. And the markets were collapsing partly as a result of that. And it would have been the worst possible time to be panicking, in the in the heat of the moment, and in the eye of the storm. So, you know, if I, if I cast my mind back to, you know, when the lockdown was announced when the markets were at their worst, you know, the media was just going nuts. You could have been forgiven for thinking the world's about to end, but actually, the day the lockdown was announced Boris Johnson, or whoever is, whoever is running our country at the moment, him or his advisers, when they decided to lock down, actually, that was the day that very day that the markets decided to turn around and that's when they bottomed and and markets have, you know, put on a very, very strong rally since then. So since then, if I look at market performance as the you know, the footsie has bounced 22% the US and the NASDAQ is up 35% since then, so, you know, we've had a very strong bounce back some stocks, which were, you know, big casualties that bounced back 50 60%. So, I remember sending out an email to investors on March the 19th, saying, okay, things are looking really bad, but don't panic, you know, look at this as a potential opportunity. But most importantly, you know, we should all be investing for the long term and we should really be investing with our kind of key long term objectives in And as long as we do that, you know, we can ride out this short term volatility. And we will achieve our long term objectives by sort of sticking to your knitting and sticking to the plan, which, you know, hopefully you've put put together at the outset. It's when people start sort of doing short term trading or panicking. That's when they start losing money. Hmm.

Christian Rodwell  19:22  
Now, let's touch on inflation Manisha. I'm sure you've got something to say about this. There's this concern out there. What are your thoughts?

Unknown Speaker  19:32  
Yeah, there's

Unknown Speaker  19:35  
there's a couple of misconceptions, which I hear all the time. And they're kind of related. So, you know, we've had the government come out and they've implemented, you know, the furlough schemes that put a lot of money out this thrown a lot of money at this crisis. The Bank of England has come out and announced QE, quantitative easing which is basically printing lots of money and There are a couple of misconceptions out there. One is that inflation, as you've just pointed out, is going to rise as a result, people think, hey, it must do, right, all this money that's being printed, it's bound to result in inflation. That's not necessarily the case. Okay. In fact, I would argue, again, looking back at history, looking what Japan has been through, looking at all the QE that we did in, you know, in the last recession 2008 onwards. The major problem since that QE, since QE has been deflation, or disinflation, not inflation, and for Japan, their biggest issue has been trying to battle deflation. So, you know, in my view, and and it's this is borne out by experience, QE does not lead to inflation. And and the reason that's the case is because, you know, if you if you think about what QE does, the Bank of England comes out, creates a load of new money, and then it buys government bonds with that money, okay? So that money doesn't necessarily end up in our pockets. for inflation to be created, it needs to a end up in our pockets. And B, once it's in our pockets, we need to be confident enough to go out and spend money on, you know, rolexes or shoes or new gadgets or whatever. So, you know, that's that's not happening only if we are spending lots of money will will demand exceeds supply and inflation occur. But that's not going to happen. In fact, all of this QE most of this QE is going to just end up in the financial system so we probably get inflation for asset prices so that stock markets or or the housing markets, but I'm I'm pretty confident that all of this new money creation will not lead to inflation in the in the sense we know it Okay, and as I said, That's borne out by history and recent experience as well.

Christian Rodwell  22:06  
I guess the next question on people's minds is the effect on the interest rates. And do you see these rising anytime soon?

Unknown Speaker  22:14  
Again, no, I I don't see interest rates rising. And and again, I draw upon the experience we've had in our in the recent recession. Oh 809. I draw upon what Japan has been through and and you know, in both of those instances, inflation state have very, very, very low levels. In fact, in Japan, they've had almost 20 years of zero interest rates. In the UK, we, you know, we reduced interest rates down to I think it was half a percent of lows. And then it rose. I can't remember where it rose to, but it rose to very low levels, and then we've just had it cut again, down to 0.1%. So you know, Interest rates have been very, very low for a long period of time. And for interest rates to for interest rates to rise, there are two conditions. And this is all very publicly sort of open by the Central Bank for the central bank to raise interest rates, they need to see either economic growth at above trend levels. Okay, so that means GDP has to be growing by what three 4% consistently over time for them to consider raising interest rates or, and or inflation has to be above target. So their target inflation from memories 2% and again, you know, we're very far off from both of those conditions, both economic growth and inflation, so I just don't see it. I don't see interest rates rising meaningfully for you know, many, many years, okay, if not decades.

Christian Rodwell  24:00  
Now, looking at the property market, I know obviously you did a lot of work with with property investors as well. mination you know, how do you see the the correlation between the property market the stock market and and what areas of property, you know, do you see bouncing back stronger or how will they be different residential, commercial all those areas?

Unknown Speaker  24:21  
Yeah, great question.

Unknown Speaker  24:25  
Historically, residential property has been more defensive than stock markets. Okay. So in a recession, equity, equity stock markets do decline in overweight, it declined, equities declined from peak to trough by just over 40%. Whereas, UK residential property declined by 19%. From peak to trough. This is nationwide, you know, nationwide in terms of the source of data is a nationwide building society, but also nationwide in terms of what the data covers. For the whole country, so, you know, residential property is always more defensive and it will be the same this time around. Okay, so I expect residential property when the crisis began, I was expecting residential property to decline, you know, anywhere between 10 to 20%, from peak to trough. And as time has gone by, I see, you know, investor appetite still being quite strong out there for now. Okay. And there's lots of money sitting around, as I said, the banks are still very healthy, they're still they're still lending low loads of money, we've got interest rates are historically low levels. So the conditions are better compared to last time. So we're probably, in my view, very likely not going to get a 19% decline in residential prices again, you know, I think we'll probably be a high single digits at worst. So between five to 10% declines, at worst, and then we and then we, you know, hopefully we get a bounce back from those levels. In terms of property, in a vanilla residential, family homes, suburban areas, in a first time buyer market, all of these areas I think will be pretty resilient. Okay. They'll do better. The the sort of high end, you know, if we're looking at Central London, the prime central London markets, if you're looking at sort of high end prices, high end types of properties, they probably will underperform. In terms of commercial, I think commercial property will have a pretty rough time, certainly in comparison to residential. So big office blocks, I think will come under some pressure. You know, if you think about big employers, big companies, they might take this opportunity to think actually, all of our staff have been working from home and you know, productivity level have been okay. And people can work from home. So do we actually need all of this office space and you know, maybe a lot of these employers will decide to ask more people, more employees to work from home. And so a lot of these office buildings may be redundant, certainly the spaces, they won't need as much space. Retail was in a lot of trouble already before the virus came along. And I just see the pressures on the high street, increasing accelerating from here. So you know, there'll be opportunities for opportunistic investors to pick up retail or office at big discounts. You know, that could present opportunities for for people going forward if they're looking to do commercial to residential conversions. For example, High Street might be a little bit more tricky in terms of conversions. But, you know, if you're creative enough, you could find opportunities there. But You know, your bog standard residential first time buyers, you know, three bed semies. You know, they'll probably be okay as a result of this.

Christian Rodwell  28:09  
Yeah. Now, previous guests on the last couple of weeks episodes, sweater and guy Bartlett, we're both in agreement that cash is king right now. And certainly businesses, they, you know, they need to be prudent with cash but as an investor having cash and being ready for the opportunities. Would you be in agreement with that? Manish?

Unknown Speaker  28:29  
Yeah, absolutely, absolutely. I mean, cash is always an advantage. You know, there's sometimes there's a bit of a trade off because, you know, you don't want to keep cash. You know, you don't want to have too much cash sitting around for an extended period of time. Because although earlier I said inflation is not likely to accelerate. What people should also know is that the level of inflation is probably higher than the government tells us it is okay. So It's, in reality, it's not really 0.8% where it is now. It's very possibly higher than that, you know, four or 5% even. So, if you think about that your cash levels are eroding on an annual basis by, you know, anywhere between three to 5%. So it's, you know, there's always a balance, but at the same time, it's good to have liquidity and cash around because when you have a downturn in the market, it's really important to be able to capitalise on those opportunities. And the best way to capitalise is by having cash making cash offers in most downturns, the banks are they kind of tighten up and they're reluctant to to extend too much leverage. This time, as I said, the banks are are in a better position but they're still they still did tighten up before and at the same time. There are lots of distressed sellers out there. All will be on once lockdown lockdown ends. And you know what distressed sellers need more than anything else is a quick transaction. And the way to get a quick transaction is to is to have cash and to be a cash buyer So, so completely agree cash will be cash will be king in this environment.

Christian Rodwell  30:20  
And if someone is sitting on you know, some some smaller pots of cash 20,000, let's say 20 30,000 or something like that, they they want to put it into the markets for a short term and get the best, you know, the best rate they can, what are some of the places that you would advise them looking at?

Unknown Speaker  30:39  
Yeah, so

Unknown Speaker  30:40  
these I mean two things spring to mind. So one is stock markets. So you know, with equity markets, it's very easy to get exposure. Very quick to put your money to to use you have to be careful because there's always volatility, we've had a very strong run. You know, I have no idea what's going to happen over the The next week or two, I can tell you what's going to happen over the next five years, three to five years, or even, you know, one to five years, but over the next 234 weeks it's anyone's guess. It depends on how the virus turns out, you know, kind of news flow lockdowns, that sort of thing. But, you know, having said that, if you if you want to put money to use absolutely, equity markets are great. One area which I've been very, sort of closely involved in and focusing more of my time in is, you know, providing secured property loans. So there's a, you know, you can lend to other developers in a passive way, and you can get 810 12% returns, taking on strong security. Alright, so I've been putting a lot of my own personal money into these opportunities. You've got to do the due diligence, you've got to make sure that these opportunities are safe. But you know, That's a really good way to get safe returns consistent returns and, you know, with the benefit of that security. So, you know, those are the two things I would suggest to people that they could have a look at. Right

Christian Rodwell  32:14  
now in summary money. And looking at the investment pillar, obviously one of the Seven Pillars of wealth, you're very familiar with all seven. I know, and just a summary word for our listeners who perhaps, you know, have have are building their wealth in the investment pillar, and just some some words to leave people on in terms of the outlook over the coming months and years ahead.

Unknown Speaker  32:38  
Yeah, so, you know, pretty much what I said earlier, you know, don't panic. You know, for anyone who is looking to invest. The most important thing is always to have your objectives in front of you. That's the first thing you know, are you looking to multiply your capital by x and by what time period and then You know, that's a very simple way to set your objectives. Okay? So somebody might want to, might have a plan to double their capital in, say, five years time. And then once you've got that basic amount of information, work backwards and see how you're going to get there. Okay, so have that plan, have a longer term time horizon, do your due diligence, you know, I'm forever banging on about due diligence and people should invest, not based on the opportunities that are presented to them not based on you know, sort of marketing spin and, and, you know, various other ways that people sort of find to enhance their credibility these days. But you've got to do your due diligence and look under the bonnet and make sure that what you're getting fits into with, you know, fits into your sort of long term objectives and your long term plans. So those are the main things really, you know, there's a load of other things that you talked about my 10 sort of core investment principles which I talked about So minimising fees being diversified, you know, reinvesting compounding. You know, there's, there's a load of other things, which I can talk about, but those are the main things really. Yeah. So have had that long term plan and sort of stick to those principles.

Christian Rodwell  34:16  
That's great. And I know you send out regular updates as well, many. So someone wants to get on that list. Where should they go to?

Unknown Speaker  34:25  
Yeah, so the best place to, to register is is on my website. So it's invest like a pro.co.uk you can just leave your email address and, you know, I send out emails around once a month, based on kind of investment principles and and my outlook so you know, that's where people can receive updates in terms of markets and investment opportunities.

Christian Rodwell  34:51  
Brilliant. Thank you so much for sharing with us today, man. Ah, that's been really, really insightful.

Unknown Speaker  34:55  
You're welcome. Thanks, Chris.

Christian Rodwell  34:58  
So we know that market naturally have a tendency to to be volatile. And we've seen recently Kevin, that very case, and this is why it's important to have a long term view, isn't it? And not to react but more to respond in a with a call level headed

Unknown Speaker  35:16  
manner. Oh, absolutely. Right. I mean, there's a huge difference between reacting and responding, you know, so, reaction is stimulus. And, you know, you get a sort of an instant reaction to that, and people do that with the stock market yet. Like the world has told us countless times how volatile it is. And we know in uncertain events, we know this thing's happens, right? We've seen it repeated at seven 2000 2008 2019. we've, we've seen how many times this happened, it's gonna happen again, it's going to happen again, it's going to happen again. in our lifetime, these things just happen. So the important thing to recognise about The market is you choose a response, you don't need to react, and the response should fit into a plan. In other words, wealth is about building assets in seven different ways of which investing in the stock market is one. And when you choose the amount of money that you want to have in the market and how you access that market, for example, when you've got something that's very volatile, and the stock market is one of those because the sentiment I mentioned earlier on, then the best thing to do if you're looking at the market, when it's you feel, intuitively that it's a lower level, is just to buy into the market on the drip, you know, put in money monthly, or quarterly, you know, drip into the market so you're not worried about a big injection of capital. With a sudden timing problem, you know, week or two weeks after you've invested the money, so volatility works best. When volatility works best in your favour when you're putting money into the market on a regular basis. We call it a pound cost averaging, Americans call $1 cost averaging. And it basically means that, let's say you put a couple hundred pounds a month into the market, and the price of a unit in a fund is is a pound. And if the market falls, so it's 50 p today in the 50% fall, then you're just buying more units for the second of the two depends gonna buy you 400 units instead of 200.

Unknown Speaker  37:45  
And then when the market picks up, again, you're carrying forward all of those units that you bought at a much lower price. So it doesn't devastate you. So I would say if you're kind of nervous, and you know that through your own love dynamic or your own reaction has You feel do you react Do you panic is to do is to put money into the market. If however, you've already got a lot of money into the market, then although Manish doesn't specifically talk about strategies here, although he knows how Of course he does, how to reduce the impact of falls in the market. There are many strategies, Chris, that if we want to do another webinar sometime on the use of stop losses, for example, so if the market collapses, you know, you've already put a ceiling on the amount of the fall that you could have. So, you know, if the market goes down by 10%, but you put a stop loss at 5%, then you're out of the market on the way down so you don't, you don't get caught in that. Another strategy I call is the I think I've done this before you What I call gold strategy. I don't mean by gold, but but when you identify gains, which is the G, you know, if you've made money, then you identify that. So in other words, you're aware of the gains, you, oh, take them off the table. So you have a strategy that says, Well, I've made 20%. So I'll take 10% off the table. In this example, I'm just using random numbers. And then you lock in those gains, which is the L somewhere else. To build a further diversified portfolio, see God, you know, so gains off the table, lock them in, diversify, so that you don't wait for the market to dramatically fall before you enter into a thinking process or an actual process, which actually the reverse of that, you know, when you're making gains, you lock in gains. And by taking them off the table, what I mean is you don't leave them in the same market. So You're not just adding to the same complexity and the same, not complexity, the same volatility. So you what I call counter correlate, which means well what, what works in a different pattern to stock market and take money off the stock market and put it somewhere else. Now, some people will use gold because that's a hedge, or silver or platinum or some other metal. Now we know that doesn't generate income, but it's a hedge. So you know, you've got something else or you can put that money that you make as a gain and help you live somewhere else. So you could repay some debt, for example, pay down a mortgage so that you are you become less leveraged in a property portfolio. So there are many ways that you can take a reaction, you know, when markets go up when markets go down, there are different key strategies that you can follow, to take advantage but always knowing what your objective is, and I think he mentioned one, which is You want to accumulate so much capital and nothing wrong with that. But deep down, you know, we know what wealth builders that for the most part, capital accumulation is not the only game in, in wealth, it should be cash flow. Because cash flow you can spend accumulation is difficult to spend because you can lose it as fast as you get it. So, you know, I would say try and reinvest gains into something that generates cash flow, as opposed to simply, you know, accumulate more capital. So anyway, I hope that's at least a little bit more helpful. So respond with a set of principles with a key objective, understanding what you're going to do when markets rise, what's going to be your response. When market falls, what's going to be your response, don't just add I feel at the time, plan your responses, well ahead of time, you see what I'm saying? It's gonna happen, right? So you might as well know what's going on. And choose your best strategy on the up and choose your best strategy on

Christian Rodwell  42:04  
the den hmm and interesting again the Minish talks about cash being king and that's something we've heard in previous weeks as well sweater and talking about that guy Barlow talking about that and I believe Susie Carter, you know, with the property market so so yes really is about being prudent at the moment with cash.

Unknown Speaker  42:27  
Well, you know, having cash available and managed makes a good point. You know, you don't you don't want cash available permanently long, large sums of cash Anyway, you only cash for emergencies and for that rainy day or black swan events like COVID we need cash. But he's not saying that he's saying and I think the other experts are saying the same, having an amount of cash. When lots of things are volatile when lots of things are uncertain, is good because it Prime's you ready for opportunities. That will be presented. And those opportunities certainly will be presented in property certainly will be presented in business, and certainly will be presented in joint ventures. Because as if you're cool and level headed, as you mentioned earlier on Chris, you can you can see the challenges that are the people who are not being, you know, and this isn't to take advantage at all this is to say, if somebody, you know, has got a business or got a property or an opportunity, but they're panicking about it or they don't have they're tired now, you know, they're exhausted by these changes, you know, there's lots of things that will happen. Then you can collaborate with people and bring that level headedness and bring some cash and bring your skill to share in an opportunity for something that's still a good opportunity, particularly in property in business. But you know, You wouldn't have necessarily owned that opportunity yourself, but somebody else is looking for a partner to work with, or looking to divest themselves of an asset, that, frankly, they don't want to hold anymore. And I think that's going to happen across all assets in the coming months. And that's why me and many of the people who work with me, you know, we're priming our pump for cash in the next six to 12 months and just not be nervous about it not being in certainly I would never choose to invest in the stock market. For a short term play, you know, I've got money that I'm priming for the next six to 12 months. It never goes into the stock market, because you can never predict which direction is going to go and when they fall, they often fall very quickly. And that quick four can mean you know, you've primed a pump with whatever level of money you want, and then you could have it Have it in a few months, so definitely not a good idea to be investing in the market. But you know, minissha smart man you know, he believes in due diligence he believes in widening his own skill set. And like the way we speak to many bar welcome while building members, Chris, we talked about building your wealth, using the existing knowledge and skills you already have, you know, don't put them to one side because below many, obviously was trained and worked in the city, but he's bringing those same skills now into property. You know, he's bringing a diversification is bringing due diligence is bringing a systemized process of being able to find and work with other property experts on what he calls his kind of secured loans, which is really acknowledging that properties less volatile generally than the stock market. If you have cash, you can essentially be a bank. If the banks are lending in a more unpredictable way, you know, we've definitely seen in the current environment banks withdrawing offers that they've made, you know, so the more creativity you have around sources of funding, and I think what Manish is doing well as identifying that others are gravitating towards property to So, and I think that's a big opportunity as well. So moving money from the stock market into the property market, in a more organised due diligence and less volatile way, could be a good diversifier for many people.

Christian Rodwell  46:40  
And while it's not directly linked to the investment pillar per se, the opportunity now of having been working from home for several months is a great, you know, way to maybe look at, can you free up some time now and can you negotiate or have that conversation with your employer and look at now at different way moving forwards.

Unknown Speaker  47:01  
Yeah, I mean, Manish talked about, some businesses will look at the cost base and say, Well, why are we paying, you know, thousands and thousands of thousand rent when we're getting productive staff working from home. And this is a big theme, isn't it in at the moment. And if that happens, then you know, that's that's going to dramatically change the market for commercial property. And also would remove a big cost base from firms, which should increase profitability, which is a good thing. But it also means though, that you could be ahead of the game and you could be suggesting to an employer, hey, you know, I'm enjoying working from home, I'm being productive at home. I've got myself set up from home. You know, I've got all the materials necessary for me to be you know, as productive for your employer, but at the same time, because you don't have the commute time. You don't have You know, all of that downtime, then that frees the time. That's the leverage of time, which we know, is a challenge for many people, particularly those who are unemployment. You know, then, if you've got that time, you can use that time to create more wealth. And similarly, if you've got a business, and you decide as the business owner, well, why do I need to have staff here, then you've done the same thing. If you've improved your profitability, then you can take those extra profits and stop building other assets in your business. So it doesn't matter which way you look at it. There are, you know, this bounce back, this language of bounce back is going to create many, many opportunities. And I think it's about you know, that response that we talked about, which is different from reacting, is really about thinking and not just knee jerking, you know, and thinking, Well, where's the opportunity for me? Where's the opportunity that I could see that other people are waiting The challenge for the people? And can I help solve their challenges to become a solution provider for somebody else. And I think that will definitely happen. In the joint venture side of the market, I think there'll be more people collaborating together. And there'll be more business owners looking to have someone help them. Because they're no longer there, that they're not going to be wealthy anymore. They're going to be quite weary around their business. And this is true, I think of all assets, including the stock market, but not to deviate away too much from the stock market itself. It's, it's definitely an important place to have money, it's important asset. And the long term trend of the market is always up. However, it's very volatile. So you just have to choose your own balance very well.

Christian Rodwell  49:52  
At all times, keeping your costs as low as possible

Unknown Speaker  49:56  
at all times. I mean, that's a great Thanks, Chris. That's a really, really good Great point. And I know it's important to finish, you know, as well that, look, we know you can't control the market, but what you can control is your costs of being in the market. And increasingly with technology, we're seeing individuals being able to asset access rather, the stock market at a fraction of the cost of a decade ago. So for many people, if they've had funds, or pensions, or investments for a long period, like, you know, even probably even five years or more, they're probably paying more in costs and they shouldn't do. Bearing in mind, you can now dramatically cut cost of holding money from typically one and a half to 2% to around less than half a percent now. So if you can cut your costs by two thirds, and you don't know that then it's definitely something to be aware of, because the net return is what you spend, right. So your life is Net returns because wolves pay tax, which is an important thing. But also fees that are taken from our life is money that goes to somebody else and not to us. So if you're paying a financial services industry, say 2%, and you're getting 6%, then your net return is four, where that's like a third of your profit. So if you can reduce that to a fraction of that, then you're going to stand yourself in good stead. And I know that isn't something Manish covered in detail on the particular call with you, Chris, but absolutely, I know which one of his key principles which is to always when you invest money, invest at the lowest possible cost that gives you the holdings that you want.

Christian Rodwell  51:44  
So we'll be taking some of the lessons from today and including those in our bounce back Guide, which we'll be releasing to our community and everyone listening right now, within the next couple of weeks and the very best place to find out first when that is available is inside the wealth builders Facebook group. So if you're not already a member, head over to Facebook, and in fact, you can go direct by going to wealth builders co.uk, forward slash Facebook that will take you straight to our community there. And we'll be continuing the theme in the next couple of weeks. And I think pensions will be one of the pillars that we'll be touching on.

Unknown Speaker  52:20  
Yeah, well, pensions, you know, probably, you know, I think I've said it before Chris, the most overlooked, undervalued asset of all and the size of the pension pot in the UK is trillions. You know, that's, that's just too many nords to even contemplate. It's massive, but most people just don't not have the strongest level of relationship and connection and due diligence and all of the robust things we teach in wealth builders, how to build and manage assets. Most people's relationship with their pension is to get the statement. Look at it, wish it were better. Put it in a filing cabinet or a drawer And move on for the next six months. I mean, it's a tragic, tragic, tragic place for many people. So we hope to dispel some of the myths on pensions and, and give people some optimism for how their pensions can be dramatically changed. For those who are interested in that in the future. And I think it's my colleague, Paul Brooks. He'll be on in the next podcast. Is that right? Look out for that one. Right. So that's going to be really interesting one.

Christian Rodwell  53:28  
Yeah, good stuff. Thanks. As always, today, Kevin enjoyed that. And I'll catch up with you on the next episode of wealth talk.

Unknown Speaker  53:34  
We'll do krysia

Unknown Speaker  53:38  
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders co.uk slash membership right now for free access. That's wealth builders.co.uk slash membership.

Episode summary

In today's episode we joined by Manish Kataria, a CFA-qualified professional investor with 18 years experience. Make sure to tune in if you want to know how to avoid making impulsive reactions based on emotions, rather than sticking to a predetermined, long term investment plan.

Episode notes

Investments, alongside pensions and their home, are where the majority of people in the UK build their wealth. However, as has been seen during the Covid19 pandemic, the markets can be extremely volatile leaving people worried about and often uncertain about what is the best action to take. This can lead to impulsive reaction based on emotion as opposed to following a pre-determined, longer-term investment plan.

Our guest today is Manish Kataria. Manish is a CFA-qualified professional investor with 18 years’ experience in fund management and UK property investment. He has managed investment portfolios for JPMorgan and other blue chip investment houses. Within property, he invests in and owns a range of assets including developments, HMOs, BTLs and serviced accommodation.

Resources mentioned in this episode