Myths Busted For Investors To Make Informed Investment Decisions In Purnartha Advisory

Purnartha Investment Advisory, a SEBI registered investment advisory service is one of highly credible equity investing solutions. It’s performance numbers speak for itself, so, cannot be ignored. However, deep diving is in our attitude. So, we, PMS AIF WORLD conducted a detailed conversation with Team Purnartha, to demystify four common myths, about Purnartha investment advisors.

1: Purnartha philosophy is very risky as it is highly concentrated

Agreed. Yes, Purnartha is a highly concentrated equity investment, across 6-8 sectors and 100% equity. But, worldwide successful investors have made serious money from holding a few businesses over a lifetime and we strongly believe in the same. Further, concentration is our philosophy, need not be of investor’s. As an investor, one would invest a maximum of 20% to 30% of his equity allocation to Purnartha. The rest 70% to 80% is still with him in other more diversified products like – Mutual Funds & PMSs and Direct Equity Portfolio. And, most investors who hold mutual funds, hold more than one scheme, so, in any case, their portfolio is over diversified as all these products are highly diversified. We, at Purnartha, in fact, are offering to investors, a solution that doesn’t further increase the problem of over-diversification.

Despite the fact that Purnartha’s portfolio has less number of stocks, all businesses are consumer-facing scalable in nature, and the portfolio is spread across 6-8 different sectors. And, finally, the standard deviation, other risk measures are competitively comparable to any other well-diversified index, portfolio, or a fund.

So, basically, it’s just a myth that we’re highly risky because we are highly concentrated.  

Risk is inherent in equity  as an asset class, and it is not because of high concentration. Remember, the real risk is volatility in the business cash flow and not the market volatility, and we are fairly confident about the businesses we hold, so, what other call as concentrated, we call as conviction.

2: Concentration burns on way down

At Purnartha we firmly believe in the philosophy of Vasudhaiva Kutumbakam, i.e. what we recommend to our families, we recommend to our clients. If Risk is defined as Beta, the beta of our portfolio is 0.7, which basically implies that our portfolio is less risky. Theoretically, it sounds like high concentration increases risk, but practically if you hold these good companies, which virtually are debt-free, it reduces risk. Rather than holding 15 debt-ridden businesses, it’s better to hold 6-8 debt-free businesses, which are consistent in terms of both, Growth and Performance.

It’s easier for anyone to just comment without looking at the facts. Our volatility is close to Nifty and less than Midcap50. Last, but not the least, recovery has always been faster because of the nature of businesses we hold.

Things have gone down for us as well, when markets fell, in March 2020, or any time before that over the last decade. Two things, I can highlight, to address this myth, that, in bad times, our relative performance & relative time to recovery is better.

3: Valuations of the companies held, is highly expensive

The real question is how much we pay up to buy growth. The perception seems to be that we are fine with almost any price for growth. There is no doubt that the companies selected by us, are by themselves very good or one can say exceptional, so, they are bound to be expensive, but, investors perceive, we pay way too much price for the quality. Well, I would say, one, we want to bet on Star CEOs and Great Businesses which drive our portfolio to create wealth, rather just looking for value or cheap stocks. Two, seen from the comparative lens of Valuations to Operating cash flow ratios our companies are cheaper then Nifty.

4: Purnartha’s fees is very high

We don’t push any investor into any fee plans. We offer 6 types of fee structures with a varied combination of fixed + variable fee, and 2 fee plans – 1 year and 3 years. Amongst the 6 fee structure, as per the lowest 1 year fixed fee one, the fixed fee is 0.6% plus a variable performance fee of 20% with zero hurdle. So, one can always pay this near-zero fixed fees and pay performance fee, only post-performance. Even PMS or Mutual Funds charge similar fees, but one accepts it, as it is charged to the investment amount on a regular basis and is not to be paid upfront. We, Purnartha, is not a product, but a service, and we charge an upfront fee for our service. I would invite investors to verify our audited fees adjusted performance for the last 1-3-5-7 years, and compare the same to MFs, and PMSs, and then their Myth regarding high fee will get automatically addressed.

We at PMS AIF World work with investors not just to make them invest, but associate to make informed investment decisions towards long term wealth creation and prosperity of our clients.