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financial freedom: Dhirendra Kumar on long-term investment & art of taking minimum risk


Dhirendra Kumar, CEO, Value Research, says he would encourage everyone to be just a little thoughtful about expenditure and divide spending broadly into three categories. One is essential, that you cannot do without – living, travel, food, stuff like that. Then, something that optimizes your efficiency. And the third one is for pleasure. Your holiday and things like that. Do that by all means, because no financial plan is good if you have to delay everything or not have something critical to you, but make sure that you are not mortgaging your future income of many years.

What kind of change have you seen in your personal, and professional life that is reflected in India so far as India celebrated its 78th year of independence? I am assuming that you will be focusing more on the financial aspect of it. So, what is going to be your answer?
Dhirendra Kumar: No, I think I am pretty close. It will sound like bragging about myself, but I can tell you that I have been a very disciplined spender. I have always thought before spending and I have always delayed my spending or consumption and that is why I would like to share my experience that delayed gratification translates into a huge benefit for you because your money compounds and a few of the things that applied to me but may not be valid for many investors. I have been an entrepreneur right since my graduation in 1990. I set up Value Research.

I was unable to invest for the initial couple of years, except for the tax saving funds I could not invest anything more. I wish I could, but I do not have any regret because I was investing my money in my business. Effectively, it was an equity investment, that is the other way of looking at it. I think that has also paid off well. But more importantly, delayed gratification.

I would encourage everyone to be just a little thoughtful about your expenditure and you should divide your spending broadly into three categories. One is essential, that you cannot do without – your living, travel, food, stuff like that. Then, something that optimizes your efficiency. And the third one is for pleasure. Your holiday and things like that. Do that by all means, because no financial plan is good if you have to delay everything or not have something critical to you. But just make sure that for the third part, you are not borrowing big and mortgaging your future income of many years, because that is not an asset that will compound and you will derive pleasure from. So, just be a little thoughtful about this. I think in the third category, if somebody is thoughtful and not out to impress others, things will be sorted and you will be taken care of.

Can we say that you have achieved financial freedom in your life?
Dhirendra Kumar: Yes, fortunately, I have. There are two…, that also will sound like bragging about myself, but my financial goals, at least for myself, are made simply because I have very limited requirements, that is one.

Second, I have been a very disciplined investor or saver, first saver and then investor. Third I have been in the periphery and I have abstained myself. Fortunately, I have not had a financial disaster of any kind with my investments. I have been so disciplined and boring that things have worked out nicely. It is a very boring thing to say that choose the boring way. But that way, you never fail.Gen Zs and millennials may lack understanding of how to create wealth. So, they understand money making, which is why we will see them putting money in speculative assets. But having said that, because we are putting so much thrust on having the right strategy for financial independence and financial freedom, can we achieve that at any age? How do you do a back calculation to achieve this particular life goal?
Dhirendra Kumar: No, this is the in thing. Everybody is getting inspired by FIRE, which is, Financial Independence and Retire Early. And it is a good goal to aspire for. If you thought that you would retire at 40 and if it gets postponed to 45, I think you have still achieved it. So, it is a good goal to set for yourself. But do not deprive yourself too much. Also, make sure that you have retired early so you have an alternate plan ready. You might be financially independent, you might be financially on your feet, and make sure that you have little more than enough so that just in case you live longer, that will also be taken care of.

But the most important thing is that, of course, it has nothing to do with finances, which is if you retire early, if you have all the resources, and you have an alternative way to spend your time and which you will enjoy because that is going to be nearly half your life.

Earlier you said that you have been a boring investor, you have been a saver first, and then you became an investor. Have you not taken any risks in your life? Is it possible to have an investment strategy without taking any risk?
Dhirendra Kumar: I tried and every time I ventured a little bit, I failed, it did not work out, I have been very inconsistent, whether it was IPO, of all the things which I advise people, I have burnt my finger myself. Whenever I get excited to invest a little disproportionately in the market at any point, whether it was in 2007 or whether it was in 2002, or whether it was in 1995 or 1992. I have experienced everything and what has worked out for me is I have been able to do SIP in funds when open-end funds did not exist. I will tell you how it happened.

Initially, in the ‘90s, there was no Section 80C, there was something called Section 88, under which the government had made restrictions that you can invest in mutual funds, the maximum that you could invest was 10,000 rupees and that rule was valid as recently as 2005.

So, my Rs 10,000 annual investment in a closed-end tax-saving fund went on for many years, whether it was Franklin Taxshield or UTI Master Equity Plan or those were the ones or Magnum Tax Gain, these were the two to three funds that used to be there.

My Rs 10,000 investment held for 10 years has turned out to be a bonanza. Any investment that was made in the ’90s or the 2000s becomes a sizable sum, when your money multiplies by 50x, 100x, or 150x, over such a long time. When we say long-term, a lot of people ask me what is the minimum period which we can say is long-term, and then I am forced to think of at least five to six years. But when I am talking of long-term, I am talking of these periods when magic happens and get the magic done, invest and forget it.



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