Losing less is winning more

A saint was a sinner too. True knowledge can only be gained when people make mistakes. Of course, it matters a lot whether or not we learn from our follies. Meet Rohan Mehta, one of the youngest PMS fund managers in the billion-dollar industry, who openly admits the wrongs he did in the early part of his investing journey, and then smartly used those precious realizations to create investment systems that today manage crores of money. It is almost poetic justice.

22 Oct 2020

Rohan's Turtle Wealth, headquartered in 'diamond city' Surat, is a promising addition to the fast-growing Portfolio Management Services space. With a young dynamic team, Rohan sees the sky as the limit for Turtle Wealth, named after the animal which beat the fox with perseverance and focus on the end-result.

In a special webinar session organized by PMS Bazaar, Rohan reveals his 'kal, aaj aur kal' when it comes to investing, market, strategies in a characteristically witty and frank manner. Coming from a typical Gujarati family, Rohan says the number one priority has always been never to lose money as a professional investor, and now as the steward of the hard-earned money of resident & non-resident clients. Read on to know more.

One degree - From good to great 

A typical fund manager usually quotes Warren Buffett, Charlie Munger, Ben Graham etc. at the drop of a hat. American investing legends have their own stories. Rohan, while being a fan of the classical market gurus, seems guided by his own moments of understanding. So much so that he even ended up writing a book on something profoundly simple, yet brilliant - Water Boils at 212°F.

One day, the new-age dhandho investor that Rohan is, realized that water is warm till 211°F. That extra degree, that journey to 212°F makes water powerful enough to power a train! "It’s that one extra degree that makes a difference of being a winner or a follower...," says Rohan about his best-selling book.

But Rohan is no typical author type. He remains tethered to money-making, for clients first and for his firm later. He believes investing is a lot of science and a tad bit art. But, these lessons did not come cheap.

"I don't come from a rich family. I lost Rs 50,000, money taken from my father. I lost it in trading. The loss made me realize many things, it pushed me to work hard," he says, letting his guard down. While he came across some market mavens and did pick up interesting pieces of nuggets as his journey progressed, Rohan did not want to be fed by others. He wanted to wear his own apron.

Money matters, every penny of it

Turtle Wealth oversees assets worth Rs 200 crore today including money in advisory. Every trader, investor, person wants to roll in riches. But, the key to being financially solid is not to lose much.

"Every penny counts. I have seen people lose money up close and personal. So, we must know how not to lose money in markets. And, it all starts with a system driven approach," says Roha, who over his 15 years of experience, worked in institutions like Standard Chartered MF, ABN Amro, Anand Rathi, Jainam Share Consultants to name a few.

#1 Risk is centre

Turtle Wealth has two strategies - 212° Wealth Mantra and newly-launched Growth Mantra. Rohan says that NRI clients ask him about risk, but domestic clients ask about return. "Risk is the thing you can manage. Returns cant be directly managed," he says, giving an important lesson. The idea is to understand the risk of investing in businesses.

"We invest in good businesses. It may sound too simple a philosophy, even a kid can understand it. It does not have mumbo-jumbo. But by investing sound businesses with growth potential, we lower risk," Rohan adds.

The idea is to buy businesses that will last. Horizontal growth potential, sustainable competitive advantage, top-class management, good governance standards, manageable debt situation and favourable risk vs. reward are important attributes for a business.

#2 Remaining invested

Modern civilization has given us tools to accelerate processes. Yet, there is no tool or device that can speed up time. Many investors, who think they are long-term, do not behave in the same manner. Merely selecting a good business, a good management and a good price is not enough. Adequate time needs to be given.

At 20% CAGR "It takes 4 years to double your wealth. 13 years makes your wealth multiply 10 times. In 26 years, you can get 100x of your wealth," quips Rohan, talking about the effect on compounding.

Unfortunately, investors exit early. Those who stay on, hang up in the last lap. "Often, investors sell a stock when only half of the work is done. Think about a pond of lotuses where every day you have twice the number of flowers. That pond fills up in 30 days flat. On the 29th day, the pond has 50% of lotuses. It is only on the 30th day that the flowers double, filling up the entire pond with their grandeur," Rohan says, adding that investors can't afford to miss the best-return days.

#3 Avoiding debt-ridden businesses

One of the important parameters for Turtle Wealth stock selection is avoiding debt ridden businesses. Rohan says they prefer lowest to 0 Debt/equity. But, isn't debt important to grow business? "My grandfather said'' returns you can't make everyday, but interest you have to pay everyday."

Too much debt is a bad thing for companies and, importantly, shareholders because it prevents a company from creating a cash surplus. Furthermore, high debt levels negatively affect common stockholders, who are often last in line for claiming payback from a firm that becomes insolvent. Some promoters prefer a loan to grow business as debt does not provide an ownership stake and avoids dilution to the owners' equity position.

#4 Fix exit target early on

With long-term investing in vogue, many investors think the best holding period for equity is buy-and-hold-forever. While this may be a fashionable way of putting things, staying invested forever may not be ideal. In fact, it may be sub-optimal for a portfolio."

We invest in 15-18 stocks. And, believe me we know the exit price target before we invest. Fundamentals say what to buy, technical analysis says when to buy. Our Risk Management System, which is based on investor profile, is designed to be perfect. But, it is important to exit at the price. There are always many opportunities around, and it is important to get out," Rohan says, as he talks about the 3 Star Strategy for exiting stocks.

Q&A with viewers

At the end of the webinar session, Turtle Wealth fielded questions from viewers. Here are some interesting ones.

Q: What do you mean by a human-friendly portfolio?

A: Turtle Wealth as a company is started by us and we don't invest in business that kills animals. So, these businesses have to be ethical in nature. Apart from companies that profit from direct killing of animals, we avoid drug, alcohol, high debt businesses.

Q: What is your cash holding at present?

A: It will vary with client portfolios. However, at a broad level, we have 7% cash overall. We don't time markets. Our cash position is not by design.

Q: In a declining inflation scenario, is it possible to generate 20% CAGR as indicated in your mission statement?

A: Yes, it is possible. Making returns is important. Gains can become bigger if returns are not lost or capital is not eroded.


Those who missed the opportunity to hear from the expert directly can listen to the entire session through the link appended below

For more information, please contact info@pmsbazaar.com

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