From The Horse’s Mouth: Pratik Oswal

Pratik takes care of all passive funds – 7 index funds and 3 ETF’s at Motilal Oswal AMC. An alumnus of London Business School, Pratik worked with both Goldman Sachs and Citi before joining Motilal Oswal as their Corporate Strategy Head. Today, he is the Sr. Executive Vice President at Motilal Oswal AMC. Pratik is also a trustee of RoadCare, a Technology-driven non-profit JV with IIT Bombay to build data layer on India’s infrastructure. He believes in the power of compounding and is fully invested in India’s growth story.

So, without further ado,

Tell us a little bit about yourself.

Grew up in Mumbai – left for boarding school when I was sixteen and since then have worked and lived in multiple continents (I’ve moved houses 8 times in the just last 5 years). Realized that it’s time to settle down and so moved back to India 14 months ago. I was an average student in school and attribute books to be the source of my formal education. 

How did you start your investing journey? When were you first introduced to the markets?

One summer, after my 10th board exams, I was forced to stay at home due to an injury. I decided to use that time to do an internship in equity markets. First thing I realized that learning about equity markets is like learning how to swim. You can’t get it in books. The only way is to jump in the pool. 

I did some trading during my first internship and at the end lost money. I realized that trading was fun, and despite my high self-confidence then – I would always lose money trading. I never traded after that. 

The first stock you bought, first loss, and what did you learn from it?  

My first stock purchase on my own name was Dena Bank in 2009. It was my first job, and I was working in equity research. We came out with this thematic report titled “Below Book Banks” (referring Price/Book Value) which talked about the number of PSU banks available cheap. It’s been over a decade since then, and most banks are still trading at the same valuations. My learning was that sometimes stocks are cheap for a reason. Even though I sold Dena Bank for a small profit – the holding period was long enough for it to be a poor investment. 

What are the basic metrics you look at a business when you are valuing or looking at it to invest?

I don’t buy stocks, to be honest. But anyone looking to know more should read two books. Intelligent Investor by Benjamin Graham and Common Stock Uncommon Profits by Phil Fisher. Its timeless wisdom. 

In your investing journey so far – one thing you did which you think you did great and one thing you regret doing?

I don’t regret anything. Mistakes are opportunities to learn. In terms of things, I did great – I have all my money invested at all times and have never bought or sold a futures and options contract. 

What are your thoughts on Index funds & ETFs v/s mutual funds as a source of wealth creation? 

I think every investor should have some allocation to passive funds (ETF’s + Index funds). They become more effective, the longer you hold them. It will take a long for passive funds to take off, but luckily awareness has improved. Guys like @passivefool (I call him the ‘Batman’ of the investment world) didn’t exist a few years ago. 

My advice to investors would be to keep things simple, not to chase returns and not be greedy. The stock market punishes the greedy and rewards the patient. I have not looked at my investment portfolio for months now. 

Tell us about Motilal Oswal AMC and the funds you handle.

I take care of all passive funds – 7 index funds and 3 ETF’s at Motilal Oswal AMC. I’m carving a separate business unit/vertical that focusses on passive funds and passive investing. 

Before this – I was part of a company in the US where we built and sold index fund solutions to investment advisors. When I came back to India – I realized there were only a few index funds and ETFs. ETF’s are still painful to buy due to poor liquidity. So I started with creating supply and launched 6 index funds in large, mid, small, multi-cap and sector space. 

Tell us some of your favourite books.

Innovator’s Dilemma by Clay Christensen. He, unfortunately, passed away a few days ago

Zero to One by Peter Thiel. A friend of mine shared notes of Peter Thiel’s class on which the book is based. At the time – I thought it was the best stuff I have ever read. Anyone who loves the book should try and find the original class notes. 

All of Noah Harari’s books. I think he’s the most interesting writer I know. 

Siddhartha by Herman Hesse is also one of my favourites.

What are your hobbies?

I love reading books on weekends. My reading habit is probably something I’m most happy about. I also love listening to EDM music (I try going for one EDM festival once every 2 years) and playing football. Recently – I have found lifting weights to be a little more effective in improving my fitness levels over running/playing football. 

How do you increase your market knowledge?

The market is 90% noise and 10% substance. I don’t track the markets. I track business models, ideas and trends, mostly via books and conversations with CEOs/entrepreneurs. 

Are you bullish on Small and Midcap space in 2020? What sectors are you betting on? 

I am bullish on equities in general. An investor should not pick and choose sectors or themes (small, mid, etc.). He/she should have the relevant ones (as per risk profile) and rebalance once a year or so. It’s the only proven way of creating wealth. 

Betting on a theme or a sector is market timing, and countless studies have proven that market timing leads to more damage than gain. 

With the advent of discount brokerages such as 5Paisa, Zerodha, Upstox and Fryers, where do you see premium brokers such as Motilal Oswal, Sharekhan and others headed in the near future? 

In the US, – there are discount brokers, and there are full-service brokers. 

I have travelled wide and far in India, and if you go to Tier II and III cities – people still need relationship managers (someone to talk to). 

Who are your role models in investing and in life?

My role models in investing are Warren Buffett and Howard Marks. Both are actually quite similar in approach, and both write beautifully. Hopefully, I can invest like them and also write like them 🙂

I don’t have role models in life – I tend to pick and choose characteristics I like (and respect) from multiple people. 

What are your thoughts on Disruptions – What do you think of them and how do you evaluate if a business you are looking at as a prospective investment won’t get disrupted easily? Also, what correlation do you draw between today’s disruptions and the cash burn that happens to cause this? 

I think disruption happens when incumbents stop losing sight of the customer or customers’ changing preferences. Big companies today have a huge legacy problem + the big size makes it hard for them to be agile and adapt to changing customer preferences. That’s why you are seeing so many startups doing well today. 

I think my biggest issue with the current way startups are run the over-emphasis on customer acquisition and little to no emphasis on revenue. The real disruption will happen when these smaller tech players who have changed behaviour start making large sums of money. 

Some worldly wisdom & advice you would like to give to younger people who have just started earning/saving/investing in the financial freedom journey?

Start as early as possible – the trick to investing is not making the right stock or fund purchase. It is to invest as early as possible. Warren Buffett started investing at age 11, and his biggest regret is not starting sooner. The money you invest today will start multiplying every year, 10-15 years from now. That’s the power of compounding. 

The above is for educational and informational purposes only. It is not an endorsement or a stock recommendation. The author may be holding the securities mentioned above. Do your independent and thorough research before investing.

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