Regardless Of Who Is In Power In Delhi India Will Grow Rapidly, Says Mark Mobius

Billionaire investor Mark Mobius, the chairman of Mobius Emerging Opportunities Fund, is known by many names, such as the Indiana Jones of Emerging Markets, the Godfather of Emerging Markets and the Pied Piper of Emerging Markets. A recent comic even called him the ‘Bald Eagle’. Mobius particularly likes being called the Indiana Jones of Emerging Markets, perhaps because he is known to go out of his way to find “undervalued stocks” before other investors do. In an interview with Nidhi Sinha, editor, Outlook Money, as part of its Wealth Wizards series, he spoke about his latest book that addresses the younger generation and the potential of the Indian markets, among other things.

You are known by many names, such as the Indiana Jones of Emerging Markets, the Godfather of Emerging Markets and the Pied Piper of Emerging Markets. Which one do you like the most and how do you react to these sobriquets?

I get excited when I hear these names, and they are quite amusing. I like the one called Indiana Jones of Emerging Markets. It’s a good one.

You have recently come out with your new book, The Book of Wealth: A Young Investor’s Guide to Wealth and Happiness, which addresses younger investors and their needs. What message do you want to convey to them?

I want to convey to the young people is that it’s (life is) not only about wealth, but it’s about happiness. This (happiness) is, of course, connected to health. It’s important for young people to think about their health over the long term. When you’re young, you feel healthy. But as you get older, you must realise that if you don’t take care of yourself, your life will be shortened, and the best way to get wealthy is to live longer because you have more time to get wealthy.

You know the compounding effect is very important. The longer you are able to stay invested, the richer you become. What is more important is that the longer you live and the healthier you are, the more you can enjoy your wealth.

So, that was one of the things I wanted to put across to the young people that health is wealth, and wealth does not lead to happiness automatically. You have to think about other factors, too.

You have a very interesting example in your book about this gentleman who had acquired a lot of wealth but ended up committing suicide.

Exactly. That’s a good example of when people can have tremendous amount of wealth, but are still not happy with themselves. It’s tragic because they spend all their lives trying to acquire wealth, but forget about their own health, and relationships with other people.

You’ve also talked about frugality, and how wealth can get created in the long term. If you’re healthy and live longer, then you can enjoy the fruits of that. But a lot of the Gen Z and the younger millennial generation want immediate gains or returns. What do you have to say to them?

One of the first things that people have to remember is that the Bill Gates of this world and the other wealthy people of this world are one in millions. The chance or probability of becoming very wealthy at a young age is very, very low. So you may get lucky and become wealthy when you’re young, but it’s very unlikely. It doesn’t happen very often.

So they’ve got to remember that in order to become wealthy they need to have a plan and think about how to do so, and more importantly, think about their own life. What do they really like? What do they enjoy? That’s because you can get very wealthy and then be very miserable at the end of the day. So these are the kinds of things I try to convey in the book. You’ve got to think about your happiness and know what makes you happy and what’s your objective.

Some of the most successful people in the world say they have never worked a day in their lives. But what does that mean? Of course, they’ve been working. They may be an investment banker, or a carpenter, or a waiter in a restaurant, but they enjoy their work so much that it doesn’t feel like work to them. That’s the kind of thing I would like to convey to the young people. Try to get yourself in that position.

Coming to investments, one of the interesting things you have said in your book is that long-term stocks can be more stable than even bonds, which are believed to be more reliable. What do you really mean by that?

People usually think that bonds are safe, but they aren’t. Talk to the people who bought Argentine bonds, and ended up with nothing. Interestingly, I have on the walls of my rooms here in Dubai the bonds of the Chinese Republic, which were never paid back. If you see (older) bonds with coupons (bonds came with coupons clipped on and these coupons were used at the time of claiming the interest), you will see some of the coupons are missing (were claimed), but most of them are still there. That’s because they were never paid.

So (though) people think bonds are safe; that’s not necessary. They may be safe in the short term, but over the long term, they may not be so. But if you invest in companies with good balance sheets, strong finances, growing earnings, high return on capital, your chances of success are much better. If you take the bond index and compare it to the stock index, you will find that over the long term, equities outperform bonds by a wide margin.

One of the things I try to convey in the book is that there are a lot of fluctuations in the stock market just like anything else. But it’s very important for people to stay put, even when things look bad and always reserve some cash to go in when the stock market goes down. It’s the best time to buy when everyone else is selling, because you will then gain the upside.

You have also written that bonds, though important for diversification, are not so popular among retail investors yet, but baby boomers moving towards retirement might see merit in them. Could you elaborate on that, especially because life expectancy is increasing worldwide, including India?

When you’re young, you can take more chances and maybe go into more volatile stocks or investments. But as you get older you have to be careful to ensure that you maintain your assets. For that reason, some people do buy bonds, but I would say that you’re better off with good dividend-paying stocks companies because at the end of day that would probably be a better investment for your retirement.

One of the worries in retirement is about having regular cash flow, especially for people who do not get a pension. What should they do?

I would say to them, first of all, keep about half of your assets in cash to earn interest from the bank. Keep the other half in dividend-paying equities of strong and financially viable companies. Maybe (you could have) a list of 20 companies, so that you have enough variety and diversification. I think that’s a good formula to have for people in retirement.

Coming to the markets, the third Modi government has already taken oath, but it is an alliance government. You had earlier predicted that under Modi 3.0, the markets will reach the 100,000 mark. Does your take remain the same now that it’s a coalition government?

Yes, I think things will remain the same, because at the end of the day, even if you have a coalition government, the Modi (government) policies on digitisation of the economy for advanced technology will continue. The great thing about India is that you have a variety of states who are relatively independent and do things on their own. And many of them are now competing to develop technology, because they’ve seen the benefits of doing that. So I think, regardless of who’s in power in Delhi, progress will still be seen in various states, and you will see the country grow rapidly.

So are you saying, whether or not there is continuity in the government, the Indian economy is robust and the markets will see good returns in the long term?

Exactly, you can see incredible growth. The education of the young population is growing at a rapid pace because of the widespread use of Internet. People are moving into the cities and there’s more urbanisation. One of the problems, of course, is infrastructure. The government will have to continue, and maybe, even accelerate infrastructure development, whether be it railroads, bridges, highways, and most, particularly power. India needs more and more power as people become more wealthy. This is something that we have to account for.

Besides the domestic factors and given the macroeconomic conditions, what’s the way forward for the Indian market?

The Indian market is going one place, and that’s up. Now I say that with some reservations, because you’re always going to have corrections along the way. In a bull market, you will have corrections which will be opportunities for you to buy more stocks. But I would say that the Indian market is on a roll, and will continue that way going forward.

You’ve also called India the safe haven for investors. Why is that so?

I was referring mainly to the international investors who are investing in emerging countries. That doesn’t mean they should put everything in India. All I’m saying is that India should be a very important part of anyone’s portfolio because of the growth that you see here.

Of course, you’ve got to look at China, Brazil and other emerging countries, as well as the US. But India should be definitely a part of any investor’s portfolio.

You visited India earlier this year. How was your experience?

Well, first of all, the variety and richness of the (Indian) culture is amazing. It’s just incredible as you travel through the country. I wish I could have spent more time in each place but it was an amazing experience for me.

The other thing is the vitality of the people. The activity and the enterprise of people is so good. And, of course, I’m a big fan of Bollywood. I went to Hyderabad and visited the place where Bahubali was filmed.

For me, it’s an incredible experience, and it also tells you something about the country, because this incredible richness of the society and the culture adds a lot to the enterprise (enterprising nature) of the people and to their ability to create new things.

You are someone who has travelled across the world, about 112 countries, “in search of undervalued stocks”. Are there any undervalued stocks that are on your radar in the Indian market?

There are quite a few. We always look at the return on capital, and we make sure we get companies with very little debt and with earnings growth. We do global scans and look at all the thousands of companies around the world, and a lot of Indian companies pop up in that scan. It’s quite exciting.

Do you have any recommendations?

It would be a good idea for people to look at railroad-related stocks and power companies. One of the amazing things about Indian companies is that many of them are global in nature. Indians have been very good at going global, mainly because so many of them speak English, and they’re very open to open up offices and to sell globally. Companies like that in India would be a good bet.

Finally, what are the three big money mantras on stock investing that you have for the younger generation?

Number one, I would like to say is that emotion is the potion. In other words, pay close attention to your own emotions and the emotions of others, because that’s what drives the market. Be careful about how you control your emotion and observe how other people are not controlling their emotions, because when people are selling, that’s when you should be buying.

The second thing is that be patient. Don’t be in a rush. Don’t think that you can become wealthy overnight. Yes, there may be one out of a million people who will become rich overnight. But don’t think about that. Think about your own ability to get rich over the longer term. So you have to be patient.

Number three, don’t listen to anybody’s advice. Listen to your own advice after your own study.

So, don’t listen to Mark Mobius. Don’t listen to any other guru who may suggest something. Listen to your own heart, and invest accordingly.

nidhi@outlookindia.com