The world of finance and lending has never been particularly welcoming to women looking to climb the ladder and lead major financial institutions. According to Mckinsey, less than one-third of SVP and C-suite roles at financial institutions are filled by women, despite women making up 53% of entry-level finance positions. Deloitte puts that number even lower, with just 24% of leadership roles filled by women and only 9% in senior leadership positions.
These figures are striking, and a clear sign this industry isn’t tapping into the creative minds and diverse experiences that could help us deliver better products and services. Given many women start in entry-level positions and do not advance into leadership is a loss of institutional knowledge, front-line experience, and untapped potential. There is a solution. If companies mentor and nurture talent, that untapped potential can lead to institutional change, and there is a strong business case for doing so. Thetop companies know this. Eighty-four percent of Fortune 500 and 100% of Fortune 50 companies have formal mentorship programs. Those companies with mentorship programs are more profitable and experience less turnover than those without similar programs. Moreover, those companies with a female CEO in 2020 weathered the pandemic and the economic downturn better than those with a man at the helm.
Creating an effective mentorship program doesn’t have to be complicated or time-consuming, but it does require commitment. Below are a few considerations to implementing a mentorship program.
1. Your investment will yield dividends.
Yes, it’s great to provide opportunity to people, but it also has to make dollars and sense, and mentorship programs deliver on that front. Sixty-seven percent of businesses with mentorship programs report an increase in productivity, while 55% say it has positively impacted their profitability.
There are also cost benefits that don’t appear on the balance sheet. Employees with a mentor are much more likely to stay at a company if they are involved in a mentorship program. The Wharton School found that retention rates were 72% and 69% for mentees and mentors, respectively. For those who didn’t participate, retention was just 49%. Even more compelling was that mentors were promoted six times more often than those not in the program, and mentees were promoted five times more often.
The Harvard Business Review found that CEOs who receive mentorship are better at making decisions, helping them avoid costly mistakes. It stands to reason that employees at all levels can become better, more productive employees with a similar level of guidance.
2. Both the mentor and the mentee will benefit.
Productive mentor programs require the mentor and mentee to get something out of the arrangement. Luckily, most employees who participate in these programs report a high level of engagement and satisfaction.
The benefits to the mentee seem fairly obvious, e.g., improving skills, having a sounding board, increasing one’s professional network, and gaining valuable industry knowledge. The benefits to mentors may be less obvious, but the impact is real. A Coqual report found that involvement in a mentorship program helped 57% of mentors improve their own skillset, and 43% of mentors walked away with a better understanding of their customers.
The key to successful mentor/mentee relationships is to think about the pairing and how the personalities might complement each other. Don’t expect things to click instantly. It’s important to allow at least six months of regular interaction to develop trust and rapport.
3. You’re creating a culture, not just a program.
It’s easy to think of mentorship as just another offering in the employee handbook, but the results go much deeper. In creating an environment that provides mentor/mentee learning opportunities, you’ll change the culture at your company in a way that encourages learning and the passing on of knowledge. One study showed that 90% of employees with a mentor reported being happy at work. Furthermore, the majority of mentees who stay with a company go on to mentor others to share the experience. That’s a powerful way to impact change at a company and demonstrate a commitment to helping employees advance their careers.
In the end, the case for mentorship is clear. The question isn’t can we afford to do this, but how can we afford not to?
Warren Buffett released his 2024 annual shareholder letter on Saturday, drawing the immediate attention of investors and business leaders worldwide. As stakeholders parsed the document for insights into Berkshire Hathaway’s condition, they were rewarded with the wisdom that has made Buffett a legendary figure in finance. This marks the 60th year of Berkshire under his leadership, with the conglomerate’s market cap now exceeding $1.1 trillion. While its unprecedented success is evident, the intellectual architects who shaped Buffett’s investment philosophy deserve recognition for their contributions to this remarkable legacy.
Benjamin Graham: Establishing the Value Framework
Benjamin Graham, widely regarded as the father of value investing, provided Buffett with his fundamental understanding of markets. Graham’s essential principle—that purchasing a stock means acquiring partial ownership in a business—revolutionized Buffett’s market approach. Rather than seeing stocks as tradable securities, Graham taught Buffett to analyze the underlying business and determine its intrinsic value. This perspective enabled Buffett to look beyond market volatility and make decisions based on business fundamentals rather than price fluctuations.
Philip Fisher: Mastering Deep Research Techniques
While Graham supplied Buffett’s value foundation, Philip Fisher introduced him to the critical importance of comprehensive research and high-quality businesses. Fisher’s “scuttlebutt” methodology—collecting intelligence about companies from diverse sources including competitors, suppliers, and customers—became integral to Buffett’s research process. Fisher’s emphasis on identifying companies with sustainable competitive advantages, or “moats,” significantly influenced Buffett’s gravitation toward businesses with enduring market positions and pricing power.
Ed Thorpe: The Mathematics of Risk and Concentrated Positions
Ed Thorpe contributed two vital elements to Buffett’s investment approach: survival prioritization and strategic concentration. Thorpe’s principle that investors must first ensure survival before pursuing returns helped shape Buffett’s disciplined risk-management philosophy. Additionally, Thorpe’s strategy of making concentrated investments when possessing a clear advantage reinforced Buffett’s comfort with portfolio concentration. This influenced his willingness to make substantial commitments when identifying exceptional opportunities, rather than diluting returns through excessive diversification.
Charlie Munger: The Quality Revolution
No individual has influenced Buffett’s evolution as an investor more profoundly than Charlie Munger. Munger guided Buffett’s transition from Graham’s strict value approach toward focusing on exceptional businesses available at reasonable prices. He particularly emphasized the power of companies that could transform commodities into branded products commanding premium margins. Munger’s influence led to Buffett’s iconic investments in companies like Coca-Cola, where brand strength and operational efficiency created durable competitive advantages.
The Management Masters: Leo Goodwin, Tom Murphy, Henry Singleton, and Bob Kierlin
Geico’s Leo Goodwin, Capital Cities/ABC’s Tom Murphy, Teledyne’s Henry Singleton, and Fastenal’s Robert Kierlin exemplify the exceptional executives who shaped Buffett’s appreciation for superior leadership. Murphy’s disciplined capital allocation at Capital Cities/ABC, Singleton’s pioneering share repurchase strategy at Teledyne, and Kierlin’s innovative distribution approach at Fastenal demonstrated how skilled management could generate extraordinary shareholder value through different methodologies. Their collective influence taught Buffett the importance of identifying and backing talented leaders capable of building enduring cultures of excellence. This appreciation for exceptional management has guided his preference for retaining successful leadership teams after Berkshire acquisitions, allowing them to continue creating value with minimal interference.
The collective wisdom of these mentors transformed Buffett from a pure value investor into a more sophisticated practitioner focused on business quality, competitive durability, and extraordinary management. Their teachings emphasized that successful investing requires more than identifying undervalued stocks—it demands understanding business fundamentals, conducting thorough research, managing risk effectively, recognizing quality, and backing superior leadership. These principles have not only directed Buffett’s personal success but have become the foundation of Berkshire Hathaway’s enduring investment philosophy and exceptional market performance over six decades.
Watching the news these days can seem like a wild ride on one of those sketchy roller coasters at the county fair. The economy? Uncertain. The housing market? Anything but normal. The stock market? Who knows . . .
You might feel like it’s a crazy time to start investing, but hear us out: The best time to get control of your finances and start saving for the future is today!
Trying to figure out the where, when, and how of investing can feel like rocket science, but it’s a lot easier to get in the game than you think.
Let’s look at everything you need to know to get started with investing. We’ll go through a step-by-step plan you can follow to get in the game and set yourself up for success at the investing starting line. Welcome to Investing 101!
How to Start Investing in 7 Steps
Starting anything new can be intimidating—especially when it’s something that can have long-term effects on your finances—but don’t give up. Anyone can invest . . . including you. Here are seven easy-to-follow steps (along with some investing basics) to help you get started.
We’ve always said one of the keys to getting out of debt is knowing your why. Why are you getting out of debt? What’s the big, specific goal you have that’s driving you to kick debt to curb? Having a definite reason for getting out of debt gives you a finish line to look forward to in your race to financial freedom.
That’s also true for investing—the key to starting your investing journey on the right foot is being clear about your goals. Why do you want to start investing? Is it to build your retirement? To pay for your kids’ or grandkids’ college? To save a down payment for your first house?
Getting clear on why you want to invest your hard-earned money will help you with the next step, which is to . . .
2. Figure out how much you’re going to invest.
Your personal savings rate makes a huge difference in your retirement savings (or in your short-term savings as well), and research shows it’s the most important factor in successfully saving for retirement.
If you’ve been following the 7 Baby Steps to get out of debt and build wealth, you know that in Baby Step 4, we recommend investing 15% of your gross income toward retirement.
Why 15%? Because there are other goals you need to set money aside for at the same time you’re investing—like paying off your home early or saving for your kids’ college fund. Just remember, when it comes to juggling college savings and your own retirement goals, saving 15% of your income for retirement comes first.
Think about it: If you invest 15% of your income every year for 30 years (assuming an average 11% return rate), that adds up to literally millions of dollars because of the miracle of compound growth. Pretty neat, huh?
With all those debt payments kicked to the curb in Baby Step 2, you’ll be able to throw that 15% at your retirement without blinking an eye. Just program your paycheck to remove that 15% automatically and you won’t even miss it. Then you can get a clearer picture of how much you want to invest for the kids’ or grandkids’ education, or your other short-term savings goals.
3. Choose your investing accounts.
The next step is to decide where to invest your money. And you’ve got plenty of investing account options—aka investing vehicles in financial speak.
Different types of investing vehicles (like IRAs or 529 college savings funds) are made for different investing goals.
Retirement Accounts
When it comes to saving for retirement, there’s a simple rule of thumb to keep in mind—match beats Roth beats traditional. Here’s how that might play out:
If you have a match through your workplace retirement plan, start with your 401(k) and invest enough to at least receive that full employer match.
After that, you (and your spouse, if you’re married) can open a Roth IRA and max out your contributions there.
If you stillÂhaven’t hit 15% after you max out your Roth IRA, just go back to your 401(k) and bump up your contributions until you do.
This is the tried-and-true process that thousands of Baby Steps Millionaires followed to build their seven-figure net worth—and it’ll work for you too!
Now, if you’re self-employed or a small business owner and don’t have access to a 401(k), don’t worry. You can still save for retirement with a SIMPLE IRA or SEP IRA:
A SIMPLE IRA plan makes it easy to save for your own retirement while also contributing to your employees’ retirement savings.
A SEP IRA is another retirement plan option for small-business owners or self-employed folks. But unlike a SIMPLE IRA, which lets employers and employees contribute to the plan, only employers are allowed to contribute to SEP IRAs on behalf of their employees.
Education Savings Accounts
Once you’re investing 15% of your income for retirement, you’re ready to start saving for your children’s college fund (that’s Baby Step 5). But remember, your retirement comes first.
Here are two of the most popular investing options for college savings and why we recommend them (or not):
529 Savings Plan: A 529 savings plan is a tax-advantaged account that lets you set aside money for educational expenses. And if your child or grandchild decides to skip college, no problem. With a 529 plan, you can roll over any unused money into a Roth IRA for the plan’s beneficiary (if you meet several qualifications).2
Education Savings Account (ESA): An ESA is a trust or custodial account that lets you invest money to pay for someone else’s education.
ESAs are different from 529 plans in a few important ways. First, ESAs have a contribution limit of $2,000 per child per year, while there’s virtually no limit on 529 plan contributions.3 And with an ESA, you can choose almost any kind of investment, including our number one recommendation—mutual funds.
Short-Term Investing Accounts
Okay, folks. If you’re looking for ways to save and grow your money short-term, you can look at index funds or a money market account:
Index Funds: Index funds are types of mutual funds designed to mirror a market index like the Dow Jones or S&P 500. The longer you keep your money in an index fund, the more likely you are to see growth. That makes index funds a great option for growing your savings for a down payment or buying your first rental property, as long as you’re not planning to use that money for at least five years.
Money Market Account (MMA):Money market accounts are great options for low-risk, short-term savings. This is a place for money like your emergency fund or savings you plan to use in five years or less. But keep in mind that the interest you’ll earn likely won’t keep up with inflation, so that makes it a bad choice for a long-term investment.
4. Choose your investments.
Once you know what kind of investing account to open, you’ll need to pick your actual investments.
There are many types of investments to choose from, but good growth stock mutual funds are the best way to invest for long-term, consistent growth. Here’s why.
A mutual fund is an investment that pools money from a group of people to buy stocks in different companies.
Unlike ETFs and index funds, mutual funds are actively managed, meaning an investment professional makes decisions about how to invest the fund’s money. Also, there are thousands of mutual funds, which means you can choose funds that have a long history of outperforming other funds in their category.
Like we said earlier, good growth stock mutual funds are the best way to invest for long-term, consistent growth.Why is that?Because they let you spread your investment dollars across dozens (or even hundreds) of company stocks—from the largest and most stable to the newest and fastest growing.
Spreading your money around like this is part of an important investing principle called diversification, and it helps you avoid the risks that come with buying single stocks.
Ever heard the expression, “Don’t put all your eggs in one basket� Well, mutual funds put your eggs in many different baskets. And we recommend spreading those eggs out even more by investing in four types of mutual funds:
Growth and income (large-cap funds)
Growth (mid-cap funds)
Aggressive growth (small-cap funds)
International
Yep, it’s that simple! Keeping your portfolio balanced with these four types of funds can help you minimize your risk and still take advantage of the returns the stock market can offer.
If you’re confused about your fund options, talk to a financial advisor or investment professional. They can help you make sense of the details so you can feel confident about how you’re investing your money.
6. Open an investing account.
Whew! We’ve been laying out our investing choices and strategy, so now it’s time to actually open an account and start making contributions!
So where do you even start? It’s actually pretty simple. Just remember: Match beats a Roth beats traditional. Here’s how it works:
Start with your workplace plan. Most employers offer a match when you invest in your workplace retirement plan—a 401(k) or Roth 401(k) for most people. If you don’t have a Roth option, invest up to the match in your 401(k), then skip to the next step. If you do have a Roth option and you have a selection of good growth stock mutual funds to choose from, you can invest your entire 15% at work and you’re done.Â
Open a Roth IRA. Like we said before, the Roth IRA is the rock star of retirement plans. You can invest in the best mutual funds, and you won’t have to pay taxes on the growth in the account when you use it in retirement. Max out a Roth IRA for yourself and your spouse if you’re married.Â
Go back to your workplace plan. If you’ve maxed out your Roth IRA and you still haven’t reached your 15% goal, bump up your contributions to your 401(k) until you do.
It’s super easy to start investing in your employer-sponsored retirement plan, like a 401(k) or 403(b). Here’s how to open an account:
Check with your HR department to see if you’re eligible. A lot of companies will allow you to enroll as soon as you’re hired, but some require you to hit the one-year mark before you become eligible.
Fill out any required paperwork and submit it to HR online or in person.
Pick and choose your investments.
Set up automatic contributions.
Opening a Roth IRA is just as easy:
Set up an account online with help from an investment professional.
Fill out that pesky paperwork.
Pick and choose your investments.
Set up automatic contributions.
Your investment professional can also help you open an account and choose your investments to save for your kid’s college. And once your house is paid off, you can work toward maxing out your tax-advantaged retirement accounts.
7. Work with a pro and keep learning.
The last step to set yourself up for investing success is to actually start investing. Don’t let the economy or the scary, exaggerated news about everything that’s wrong with the stock market or the housing market keep you from getting on board. Instead, get with an investing expert who can give you real knowledge and guidance about starting your investing journey.
You’ll have lots of questions—it’s a given. “Which are the best funds to choose?†“How do I manage my 401(k) or set up a Roth IRA?†Your investment professional can show you how to start investing and answer all your questions so you can make the best decisions possible for your retirement savings.
The right investment professional will:
Educate you on investment choices so you stay in the driver’s seat
Help you keep your investments on track with regular check-ins
Offer a client-first approach
When Should I Start Investing?
Before you start investing, you need to work your way through the first three of Ramsey’s 7 Baby Steps. That means saving $1,000 for a starter emergency fund, paying off all your debt except your mortgage using the debt snowball method, and then saving a fully funded emergency fund of 3–6 months of expenses.
If you’re new to the 7 Baby Steps, no problem! Simply put, it’s a plan millions of people have followed to get out of debt and start building wealth for retirement. Let’s break it down:
Step 1:Â Save $1,000 for your starter emergency fund.
Step 2:Â Pay off all debt (except the house) using the debt snowball.
Step 3: Save 3–6 months of expenses in a fully funded emergency fund.
Step 4:Â Invest 15% of your household income in retirement.
Step 5: Save for your kids’ college fund.
Step 6:Â Pay off your home early.
Step 7:Â Build wealth and give generously!
Here’s the deal—your income is your most important wealth-building tool. And as long as it’s tied up in monthly debt payments, you can’t build wealth. It’s like trying to fill a bucket with water when there’s a hole in the bottom—it just doesn’t work.
By building a debt-free foundation and stashing a good chunk of savings in the bank, you’re setting yourself up to build wealth the right way.
In fact, there’s a whole group of millionaires called Baby Steps Millionaires who’ve followed the 7 Baby Steps to hit the million-dollar mark. On average, they paid off all their debt and reached a million-dollar net worth in about 20 years.4
As you start investing and working with a pro, keep this in mind: Never invest in anything you don’t understand. It’s your money! Ask as many questions as you need to and take charge of your own investing education.
Few investors neatly conform to a single description. As with heritage, most people have blended traits. (Although not all: My wife’s ancestry report reads “99.6% Eastern European.â€) But there’s no question that personalities affect investment behavior. This article outlines the strengths and weaknesses of the three prevailing mindsets.
Loners
Investors who belong to this group make their own decisions. They consume investment research neither for its counsel, nor to learn what others are doing, but instead as grist for the mill. Such investors ignore the actions of the crowd. Should they see a line snaking around a block, they will not try to learn what they are missing. They will instead go on their way while pitying the line’s occupants.
Strengths:
1) Buying Low
Loners are not the only investors who try to buy low. Stock mutual funds sometimes receive inflows after market declines because the overall marketplace believes that the dip presents a buying opportunity. Overall, though, loners are the likeliest investor type to sift among discounted securities, seeking bargains.
2) Early-Bird Gains
Besides receiving “dead cat bounces†from securities that are deeply depressed, loners may also profit from the opposite form of investment: highly expensive emerging-growth stocks. Before Tesla TSLAwas mainstream, it was owned mainly by iconoclasts who discovered its story. The same holds for all winning startups.
Weaknesses:
1) Self-Delusion
Unfortunately, not all that glitters is gold. For each dollar they stashed in Tesla or bitcoin, loners squandered thousands on investment dreams that never materialized. Sometimes, wisdom does in fact lurk within the crowd. Loners constantly face the possibility their “insight†is instead self-delusion—the mistaken impression that they have spotted what others missed.
2) Bear Traps
A related problem is bear traps. This error has happily become less frequent, because market-timing has become unpopular, but loners nevertheless tend to exit the stock market, believing they have identified an upcoming bear. (A little knowledge can be a dangerous thing.) Once out of equities, they have trouble getting back in, because doing so before stock prices collapse would be a tacit admission of failure. Loners do not always benefit from having large egos.
Followers
More common than loners are followers, who derive comfort from crowds. Rather than walk past lines, they join them. Followers are strongly influenced by recommendations—from researchers, the media, friends and family, and internet boards. They seek investment allies.
Strengths:
1) Staying Informed
Followers listen to others. Doing so helps to keep them knowledgeable about investments, thereby reducing the chance of an unpleasant surprise. As with inflation, which causes the most damage when it is unanticipated, unforeseen investment losses carry the sharpest sting. Followers who listen to both side of the investment debates—which, it must be confessed, does not always occur—are well prepared for bad news.
2) Trading Opportunities
By the time that followers learn of an investment possibility, the loners have already found it. Word takes time to spread. Astute followers, however, may still reap ample profits by arriving before the rest of the marketplace. Discovering Tesla in winter 2020 was too late. But buying the stock two years before, when it was well known but not yet the investment rage, would have been a splendid trade.
Weaknesses:
1) Tail Chasing
A fine line separates being guided by the collective from being controlled by it. Those who appropriately use investment information, by applying common sense and at least a modicum of their own judgments, can prosper. Not so those who become bewildered by the investment gossip, turned this way and that, like dogs distracted by a fluffle of rabbits. Such is the constant danger for followers.
2) Mob Mentality
Followers are the most prone to being harmed by their emotions. As anybody who has participated in internet forums can attest, chat groups can quickly become mobs. (Whenever I receive an openly insulting email, I know that my column has been posted on a Reddit board.) Investors may benefit from hearing additional views, but rarely will they succeed by sharing others’ emotions.
Zombies
Most investors are zombies. The less they know about their portfolios, the happier they are. Consequently, they tune out the noise. Back in the day, that meant owning a portfolio that had been assembled by a stockbroker, and then leaving future decisions in the broker’s hands. These days, zombies are typically 401(k) participants or index-fund proponents. Either way, they stand aside.
In the 1990s, many investment experts speculated that when the long-awaited bear market finally arrived, 401(k) participants would be the first to sell, given their inexperience. They were instead the last. During the technology stock crash of 2000-02, 401(k) assets were more stable than either retail investors’ taxable accounts, or the portfolios run by professional managers. There is an advantage to lacking an investment brain.
Weaknesses:
1) Missing Out
Although zombies will neither become ensnared by bear traps nor chase their performance tails, neither will they spot investment opportunities. To return to our previous example, some people bought Tesla before the company joined the S&P 500 in late 2020. They might have been loners, or they might have been among the earlier followers. But they assuredly were not zombies.
2) Structural Changes
Over the long haul, the markets are very stable. Roughly speaking, bond yields increased for 30 years, from 1950 through 1980, before subsiding over the next three decades. That made for one inflection point during the Depression generation’s investment lifetime. The long-run performance of equities has been equally predictable. Thus, structural changes rarely leave zombies behind. When such shifts do occur, though, zombies are the last investment type to know.
Dolly Khanna is not your average investor, but she has managed to become a multi-millionaire literally without even lifting a finger.
No, we are not leading you down any random rabbit hole. Mrs. Khanna is a senior citizen home maker, whose portfolio is managed by her IIT Madras educated businessman husband Rajiv Khanna. Mr. Khanna, who began investing in the stock markets only in his 50s, has managed to get multibagger returns of the sort that some of the most established investors can only dream of.
The Khannas owned the famous ice cream brand Kwality Milk Foods, which they sold to Hindustan Unilever in 1995. It was only around 1996-97 that the now 77-year-old Mr. Khanna entered the market, albeit not directly but via his wife’s brokerage account.
To be sure, the Chennai-based Punjabi husband and wife remain low-key and rarely do they talk openly about their investment thesis. But if we look at the publicly available information on their stock market portfolio, there’s enough that we can glean from it.
How much are the Khannas worth?
The Khannas prefer buying shares in stocks that are not that popular, but ones that typically go on to perform very well in the markets.
Over the last few years though, they seem to have reduced their exposure to the direct stock market and seem to have moved their money either into mutual funds or other asset classes.
Public data shows that as of the end of September 2024, Dolly Khanna owns stakes of 1% or higher in 17 stocks, with a cumulative market value of more than Rs. 505 crore. But this does not include those counters in which she holds less than 1%, so the actual value of her stock holdings could be much higher.
Market sources, in fact, put the value of the Khannas’ total corpus at a much higher Rs. 1000 crore or even more.
But the value of their corpus is hardly the point. What matters is, how they got here.
The Dolly (Rajiv) Khanna school of investing
One of Rajiv Khanna’s first successes was real estate company Unitech Ltd in which he invested Rs. 5 lakh in 2003 and harvested Rs 25 crore from the share, in a matter of just around four years.
The Khannas seem to have a simple investment philosophy. They want to capture growth opportunities in the small and midcap segments.
They have managed to make big money on small caps like Nilkamal, Rain Industries, Avanti Feeds, Pondy Oxides, Monte Carlo, Simran Farms, Deepak Spinners, Control Print, Som Distilleries, Talbros Auto, Prakash Pipes and Nitin Spinners, just to name some.
Some of the other small caps that they have been invested in, include Asahi Songwon, Butterfly Gandhimathi, J Kumar infraprojects, Polyplex Corp, Shemaroo, Sharda Cropchem, Goa Carbons, Sharda Cropchem, Zuari Industries, Rama Phosphates, Indo Tech, Ajanta Soya and Aries Agro.
The Khanna portfolio shows that not only are they looking for undervaluation but also for companies that can grow their sales and profits quickly. They are typically eyeing a 15% of higher topline and bottomline growth, along with robust future growth prospects.
But this is not all. What is perhaps even more important is the type of companies the Khannas prefer investing in. They typically do not invest in banks and financial services, technology or government owned companies. Instead, they focus on textiles, chemicals, rubber, automotive and manufacturing companies in their portfolio. They seem to give a higher priority to companies that deal in products and services that they can see being used around them.
For instance, Mr. Khanna, invested in Unitech when he was looking around to buy a house in the Delhi-NCR region. He invested in a company called Manjushree Technopack when he was on the lookout for a bottle manufacturer for his food business. He stumbled upon Hawkins since the company’s cookers were used at home and he bought into Femcare when he saw his daughter use their cosmetic products.
As journalist Shankar Nath noted in a YouTube vlog last year, the Khannas’ preference for such B2C companies comes from the fact that he himself owned an FMCG business and has had a knack for finding good quality businesses in similar customer-oriented segments.
The Khannas know when to get out of a stock
What often defines a good investor is such people know when to exit an investment and cash out at the right time. The Khannas have done this several times including when they sold their holdings in the IT segment before the dot com bubble burst in 2000 and exiting Unitech before it went bust in the wake of the global financial crisis of 2008.
The Khannas have in fact parted ways with stocks that had a high allocation in their portfolios when they began underperforming. Examples include Rain Industries, Manappuram Finance and Gujarat Narmada Valley Fertilisers and Chemicals.
But they also have made some mistakes like exiting many of their positions in the wake of the lockdown of 2020 following the Covid pandemic.
Another important aspect of their investment process is that the Khannas use public data to make their decisions on big-ticket bets. Journalists like Nath say that the Khannas are reticent and rarely meet the managements of the companies they want to invest in or analysts tracking them. They also do not seem to conduct any scuttlebutt investigations or for that matter get into complex calculations. Although since they are so reticent, we can never be sure about this. Rajiv Khanna does however track charting strategies like the 30-day moving averages to track stock prices and exits his positions if the stock goes below his 30 DMA. He uses this as a filter of sorts to predict a calamity as far as the stock goes, exit it, and re-enter the position when the event has passed.
This also means that he does not steadfastly hold on to the maxim of buy and hold for good.
So, should you clone Dolly Khanna’s investment style and gain HNI status?
The honest truth is we cannot recommend either way. While the strategy of backing mid and small caps and generating multibagger returns from them has worked for the Khannas and at least three dozen other well-known investors, do remember that this is a risky strategy and that returns can often be middling or even negative for long stretches of time, depending on how well the small and midcap universe is doing.
But what you can do is learn how they strategise and adapt similar techniques to suit your risk profile.
Here is what their investing style tells us:
The Khannas focus on finding multibagger opportunities rather than just investing in index stocks or diversified mutual funds or index funds. Â
The Khannas find multibagger opportunities in the small and microcap space which is why their portfolio is focused on these counters
They do however tend to diversify their portfolio across sectors and industriesÂ
They invest using indepth research and fundamental analysis with an emphasis on growth and profitability
They tend to target a sales growth of 15%, profit growth of 20% and an ROCE of 15% and buy companies with a high promoter shareholding of 50% or more. They also look at an interest coverage ratio which is comfortable at less than 4 and a price to sales ratio of less than 1.Â
They also seem to regularly review and adjust their portfolio and improve upon their investment framework. Â Â
Stories abound of investors who have amassed wealth through meticulous strategy, keen analysis, and extensive research. These financial wizards have unlocked the secrets to navigating the market’s complexities for remarkable success.
However, emulating their triumphs is no small feat for average investors—it demands extraordinary perseverance and an understanding that each path to success is distinct.
Investing is akin to traversing a labyrinth with its unforeseen challenges; it involves not just ambition but also enduring commitment and the insight that everyone’s journey is individual.
However, attempting to directly mirror the portfolios of these financial legends is a strategy filled with hidden risks.
The Risks of Imitating Investment Gurus
In today’s digital age, numerous online personalities openly share their investment choices on platforms like X (formerly known as Twitter), Instagram, and YouTube.
Television business news channels often feature ‘stockpickers’ who are revered by anchors and viewers alike.
However, attempting to replicate the trades of such ‘experts’ can lead to significant losses, especially when these role models shift from conservative strategies to more controversial positions.
What works for one investor might not yield the same results for another.
Financial freedom, though seemingly elusive, can be more attainable with an open-minded and persistent approach.
The Evolution from Harshad Mehta to Digital Investing
The investment landscape has undergone a dramatic transformation from the era of Harshad Mehta to today’s world dominated by online trading apps.
While Mehta’s shenanigans led to the advent of electronic trading in India, today’s landscape is significantly different.
In the past, investment tips and strategies were exchanged in informal settings like bars, trains, and social events.
Now, digital platforms have emerged as the new arenas for sharing financial information, altering the way we seek and follow investment advice.
Despite these changes, one principle remains constant: successful investing demands a personalized approach rather than mere imitation.
Balancing Risk and Reward in Asset Allocation
Many market-related websites feature stock screeners with labels like ‘Super Investors’ and ‘Guru’, focusing on stocks owned by prominent investors.
Cloning the portfolios of these successful investors might seem like a quick path to wealth, but this approach overlooks essential differences in financial goals, investment opportunities, and risk tolerance.
For example, large investors often have the advantage of investing substantial sums over extended periods, a luxury not shared by many retail investors.
Adopting Intelligent Investment Practices for Personal Finance
Embracing smart investment strategies requires a deep personal reflection on your financial goals and crafting a plan that aligns with your unique situation, rather than blindly following the successes of others.
It emphasises patience as crucial in navigating the market’s volatility and underscores the importance of diligent research across various assets to make informed decisions.
Effective risk management through diversification and disciplined investing, like rupee-cost averaging, is vital for mitigating losses and steadily building wealth over time.
Ultimately, adopting these tailored principles enables individuals to become wise managers of their finances, focusing on long-term achievements instead of short-lived trends or external influences.
The Importance of Diversification in Investment Strategies
You may find it profitable to emulate the portfolio of successful investors, but prudence lies in diversifying your portfolio.
Diversification involves spreading investments across various asset classes, such as stocks, bonds, real estate, and commodities to minimise risk and promote steady returns.
It works on the principle of balancing losses in one area with gains in another to ensure more consistent portfolio performance over time.
While renowned investors successfully employ this tactic by navigating different market conditions, retail investors face challenges like limited capital and lack of expertise required for managing diversified portfolios effectively.
Crafting a Unique Investment Strategy Inspired by Experts
Aspiring investors should take inspiration from the success stories of market experts but tailor their strategies to suit their risk profiles and financial goals.
This involves thoroughly understanding your financial situation, staying informed about market trends, and making investments based on this knowledge.
Becoming a savvy investor is not about blindly following others.
Learning from the best in the field of investing is valuable, but it’s crucial not to mimic their actions blindly.
Intelligent investing is not about emulating someone else’s strategy.
It’s all about picking up tricks from the big players, you know? Crafting your personal strategy for investing that fits just right with how much risk you can stomach. You’ve got to factor in your financial goals and time frame too.
You are not simply mimicking but building a game plan tailored to your needs.
Think of it as learning chess moves from grandmasters and then adapting them to your own risk comfort level.
Remember, it’s about understanding and embracing the rhythm of the market dance while staying true to yourself – recognising when to be bold and when it makes more sense just holding on tight!
Financial advisors face myriad difficulties each day. To succeed, they must combine the skills of asset managers, financial planners, psychologists, and marketers. While most advisors can wear some of these hats well, managing several roles is very difficult, especially if switching from one role to another during a single advising session.
Stephanie McCullough, founder and a financial planner at Sofia Financial in Berwyn, Pennsylvania, said many challenges advisors face come from many misunderstanding their role in financial matters. “The general public is very confused, with good reason, about what we do and who we serve. They are not aware of the many different service models that exist,” she told Investopedia. “It’s still a common assumption that someone needs millions of dollars of investable assets to get the help of a financial advisor.”
Meanwhile, many advisors are working with far less help than in the past. “We used to have a whole back office that took days to enter trades and allocate them within client accounts. Now, one advisor does the job,” said Crystal McKeon, a certified financial planner and chief compliance officer at TSA Wealth Management in Houston, Texas.
Here are some of the biggest challenges financial advisors face in their efforts to grow their business and promote their brand to the public.
Managing Client Expectations
This is an area where advisors need to understand client psychology to succeed. While managing a client’s portfolio might be pretty straightforward, handling their expectations can be more complex. Many clients are unrealistic about investment returns and interest rates.
For starters, clients are often not financial professionals. They are unaware of global markets outside of the headlines they see, how investments work, how macroeconomic conditions may impact certain asset classes over others, why markets may be volatile, and how long investments may take to succeed. In addition, every client has biases, preferences, fears, and expectations. Clients may perceive what they think may happen based on what has happened before.
For example, Bitcoin might have increased more than tenfold from 2019 to 2021, but the asset class will continue to be volatile and may see similarly large declines.
It’s up to the financial advisor to guide them and educate their clients while providing investment advice.1
“For the most part, talking to clients about market volatility during actual times of market volatility is too little, too late,” David Flores Wilson, a certified financial planner at Sincerus Advisory in New York City, told Investopedia. “A better approach is to talk about likely future market volatility when they are first engaged as clients. During [periods of market volatility], we illustrate based on their risk tolerance what they could expect in terms of potential downside in the future.”
Advisors can also show their clients how value increases through investing. One way to do so is by helping clients maintain a long-term perspective in their investing so they don’t go off track with every movement in the market. Clients who can begin to see how their advisor keeps them on track will likely remain loyal to them.
“Educating clients by creating realistic expectations and planning for market drawdowns should be embedded in portfolio management,” said Neil R. Waxman, managing director of Capital Advisors in Shaker Heights, Ohio. “There is only one certainty: investment values will go up and investment values will go down.”
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Staying in Touch
Advisors have more ways than ever to stay in close contact with their clients, but many don’t when things are going well. A constant flow of communication is necessary to maintain a solid relationship with most clients, regardless of what the markets are doing. Advisors can use Zoom and text messaging to keep in touch with tech-savvy clients. Once a market heads downward, being in touch is even more essential.
“During tough market times, it’s all about communication,” Alyson Claire Basso, managing principal of Hayden Wealth Management in Middleton, Massachusetts, told Investopedia. “It’s not just about whether they’re making money or not, but how well you’re keeping them in the loop.”
She said that research backs up her view that clients don’t necessarily leave advisors because of losses but because of a lack of communication.
“It’s crucial to stay in touch, be transparent, and manage expectations, especially when things get rocky. By being there for clients, listening to their concerns, and keeping them informed, we build trust and loyalty, even when the market is unpredictable.”
Negative news is never fun to share, but being transparent, empathetic, and supportive is a must.
Managing Information
Financial advisors always face an overwhelming flood of information. However, successful advisors understand that the key is not to react to every piece of news but to focus on client behavior and long-term strategies. Advisors must guide their clients toward reliable, time-tested sources of information to prevent misunderstandings and avoid decisions based on misinformation.
The breadth of information that advisors must manage is vast and includes the following:
Clients. Advisors must stay attuned to changes in their clients’ lives, goals, and financial circumstances. This awareness allows them to continually adjust and develop road maps tailored to each client’s evolving aims and needs.
Regulations. Staying informed about changing rules in the financial industry is critical. This knowledge is often essential for maintaining the licenses required to handle specific securities.
Economic trends. While macroeconomic conditions are beyond an advisor’s control, understanding global economic circumstances is crucial as they significantly impact portfolio performance. Advisors need to anticipate how worldwide shifts might affect their clients’ investments.
Political developments. Government actions (or inaction) can have broad financial implications for investors. Advisors must stay informed about legislation to position their clients favorably.
Taxes. Changes in tax policies often directly affect investment strategies. Advisors need to be vigilant about shifts in capital gains tax rates, tax brackets, credits, and the treatment of various investment types, including alternative and foreign assets, as these can significantly alter a client’s portfolio trajectory.
By effectively managing this diverse range of information, advisors can provide their clients with more valuable, timely, and comprehensive guidance.
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Emotional Engagement
Many financial advisors are very analytical. Professional certifications are often data-driven and require abundant skills in quantitative reasoning. However, many client decisions are based on emotion. Advisors need to be able to relate to their clients on an emotional level to maintain a working relationship.
“Money is an extremely emotional and personal topic,” said Valerie R. Leonard, CEO and financial advisor at EverThrive Financial Group in Birmingham, Alabama. “This adds to the emotional vulnerability that clients can feel when talking about their past or present relationships with money. If clients don’t believe they can trust you to be transparent or keep their conversations and financial details confidential, they will never do business with you. It’s really that simple.”
Your engagement with clients, of course, has many forms. For instance, suppose a client’s portfolio isn’t doing well. Your engagement likely includes considering the following:
When to tell the client
How often to check in with the client
How to tell the client (i.e., do they prefer blunt language or a soft landing?)
Where to tell them (i.e., is an electronic message most appropriate?)
Preparing for how they will likely react
Financial advisors are bound by legal and ethical standards. As such, they must represent their clients to the best of their abilities and disclose any conflicts of interest.
Group Support
Independent financial advisors may often feel alone in their practices and have little in the way of planning support. Advisors who struggle with this can find support in organizations such as the Financial Planning Association (FPA), the National Association of Insurance and Financial Advisors, or the National Association of Personal Financial Advisors.
These groups have a wealth of resources in marketing, sales, and practice management to help make your professional life easier.
“When you’re joining a professional association, you’re looking for education, you’re looking for resources, you’re looking for peers to connect with,” said Peter Lazaroff, an Investopedia top-10 financial advisor, who noted he’s partial to the FPA, though he also belongs to other organizations.
How Do Financial Advisors Manage Client Expectations?
Managing expectations is a very socially driven, psychological issue that requires empathy, communication, and education. Clients often do not have the knowledge or expertise that their advisor has, and each client experiences different emotions about changes to their portfolio. Financial advisors must understand that their perspective is different from their clients, and bridging that gap is the responsibility of the advisor.
How Much Do Financial Advisors Make?
The median annual income nationwide for a personal financial advisor is $99,580 per year as of mid-2023, according to the last Bureau of Labor Statistics (BLS) estimate. The median hourly wage for professionals in the field at $47.88 per hour.2
Which Financial Advisor Professional Association Should I Join?
Each financial advising-related association has a focus. When deciding which to join, research them to ensure they have the kinds of services and networking opportunities you’re looking for.
Financial advisor Peter Lazaroff said that some associations offer free services to members that can be instrumental in your business. He mentioned that continuing education and even media training are crucial things some organizations offer that modern financial advisors can’t do without.
“Join a professional association that has continuing education, other resources to support your practice’s growth or your growth, and peer networking opportunities—those are what’s crucial to me,” he said.
The Bottom Line
It’s important for advisors to understand where their clients are coming from and make them understand the value that they offer. Those who can successfully manage their clients’ expectations can improve retention and their bottom lines. The pressure to stay ahead of technological advances, maintain a competitive edge in a crowded market, and meet the increasingly sophisticated demands of clients requires advisors to be not just financial experts, but also empathetic communicators and strategic business managers.
The most critical challenge, however, lies in building and maintaining trust with clients in an era of economic uncertainty and heightened scrutiny. Successful advisors will be those who can effectively balance the technical aspects of financial management with the human elements of relationship-building and clear communication. Joining a professional association can provide additional support.
We enter 2025 against an unusual macro backdrop. In 2024, time-tested recession indicators failed, inflation fell even as growth stayed above the historical trend and the Federal Reserve cut rates by 100 basis points even though financial conditions were already easy. Incoming data that didn’t fit with a business cycle led to outsized market responses and abrupt shifts in narratives. This heightened market volatility creates plentiful investment opportunities, we think. Take fixed income. Fed rate cut expectations went on a historic round trip last year. See the chart. The Fed itself pivoted from talk of an easing cycle a year ago to a mere recalibration now. By year end, markets had come around to our higher-for-longer rate view. We expected inflation to cool some – as it did. Yet we long believed that sticky inflation would prevent sharp Fed rate cuts and leaned against market pricing for most of the year.
2024’s round trip in rate cut pricing shows this is not a business cycle but a transformation – our first lesson. We see mega forces, or structural shifts, reshaping economies and markets. This transformation could keep shifting the long-term activity trend, making a wide range of outcomes possible. Last year, we focused on key stock drivers: strengthening corporate earnings and free cash flow growth. This led us to stick with companies delivering on earnings even when valuation concerns flared up. We stay risk-on as we think U.S. corporate strength is the scenario most likely to play out next year. Yet we eye signposts, including greater trade protectionism, to change our view if other scenarios appear more likely. Structural changes mean rethinking long-held investment principles – like the assumption growth will eventually revert to its historical trend.
Leaning against a cyclical view
We lean against markets interpreting data through a business cycle lens, our second lesson. Such an interpretation last year spurred recession fears and brief stock selloffs. That played out in December, too, with the sharpest stock slide in decades to follow a Fed cut during a bull market, our analysis shows. Our U.S. equity overweight isn’t shaken by the Fed’s signal of fewer rate cuts – we had expected that. Our overweight is grounded in the artificial intelligence (AI) theme, robust economic growth and broadening earnings growth. Soaring tech valuations and the concentration of returns in just a few tech companies caused some market jitters. Yet we see market concentration as a feature, not a flaw, of transformation.
Transformation can happen quickly. That is why our third lesson is to expect more volatility and surprises than usual as transformation widens the range of market outcomes in real time. A year ago, the word “hyperscalers†– or large tech firms investing billions in AI – had barely entered the public lexicon. Public policy is another area we expect to see swift change. We think policymaking could itself become a source of disruption and surprises – in an already more fragile world given heightened strategic competition between the U.S. and China. Trade protectionism is shaping up to be a key risk in 2025.
Our bottom line
We carry 2024’s lessons into 2025. We got clear evidence this is a transformation, not a business cycle. And we found it helps to lean against markets adopting a business cycle lens, eyeing more surprises as the transformation unfolds.
Market backdrop
U.S. stocks surged more than 20% over the course of 2024. Mega cap tech names led the way on the AI theme – even as stocks finished the year on a down note overall after the Fed signaled a slower pace of cuts ahead at its December meeting. Markets have brought up their year-end 2025 rate expectations to nearly 4%, in line with our higher-for-longer view. U.S. 10-year Treasury yields swung in a range of nearly 100 basis points during the year, closing out 2024 near 4.58%.
We get U.S. payrolls for December this week. Wage growth remains elevated due to an unexpected rise in immigration, in our view. While wage pressures have cooled some as immigration has slowed, they remain above the level that would allow inflation to fall to the Fed’s 2% target. Given the risk of resurging inflation from potential trade tariffs and the immigration slowdown continuing, market expectations of only two more Fed policy rate cuts in 2025 now seem reasonable, we think.
After talking to hundred of investors I’ve learned that the majority go into the experience with the feeling that they’re doing this for themselves, and so they’re on their own. They seek the education and the hand-holding they need to do it themselves. Which is fine if that’s what they want to do. But I’ve found that investing is much easier and much more enjoyable when you do it with someone else. Peers and mentors have helped me to gain more from my investments, and I’ve also made lasting friendships with people I’ll know and love for the rest of my life. Now I don’t mean going into joint investments with these people, but talking about the routes you’re taking and the things you invest in, sharing tips and pointers, and going on that journey together. An investment mentor can do a lot for you.
Looking at having peers and mentors that are doing more than you, are putting more value than you are contributing, that is a powerful person to have in your life. If you don’t have that person and there is not this drive to meet that level or get to that next point of resistance then I would say that’s one place to start. Now, it doesn’t have to be someone you hang out with all the time, it doesn’t have to be someone you have a relationship with. We live in a world where you can get on a podcast and you can listen and find personas or find people that are doing amazing things and use them as your mentor and use some of the things they’re doing as your goal and that’s what’s going to kind of push you along and hit really that other need that we have.
Now, I think the idea of these needs, they’re different for people and sometimes are even different based on the circumstance you’re in in your life. Looking again at this growth side of things, it’s just one of those principles that’s going to continue to push you and you can either deny it or you can accept it. Accepting that principle is incredibly empowering because I think if you accept it, now there’s some accountability associated with it. You know that you have to be growing and whether it’s through books or courses or personal development seminars or whatever, you’re gonna try to get yourself driven, get yourself motivated and pushed to that next level.
So let’s maybe go through a few other needs. And there have been studies on this Abraham Maslow is big into it, Tony Robbins is huge into this. We have a lot of these kind of gurus that are out there that have really kind of discovered some various similar principles and they’ve organized them in different ways. There’s really two ways to do it. You can just live life and experience things and try to figure it out on the fly or you can learn from people that have discovered them already.
Q: Why is it important to have an investment mentor in your financial journey?
A: Having an investment mentor is crucial because it provides guidance, knowledge, and expertise that can help individuals make informed investment decisions, avoid common pitfalls, and achieve their financial goals more effectively.
Q: How can individuals find a suitable investment mentor?
A: Finding a suitable mentor involves networking, seeking recommendations from trusted sources, and researching potential mentors. It’s essential to identify someone with relevant experience and a willingness to share their insights.
Q: What are some of the valuable benefits that individuals can gain from having an investment mentor?
A: Benefits of having a mentor include gaining access to industry knowledge, learning from real-world experiences, receiving personalized advice, and building confidence in one’s investment decisions.
