Independence in its true form means to become self sufficient and setting your own rules. Whether it be with your choices, governance or finances, being independent gives you the voice to follow your aspirations.
In ‘Wint Wealth’s – Celebrating Financial Independence’ series, we interview a host of individuals who have changed the face of the financial and business sphere.
We talk to them about the significance of financial independence and how we as Indians can let go of certain financial taboos to lead our finances more successfully.
In this article, we interviewed Deepak Abbott, who is the Co-founder of the well known fintech start-up, Indiagold. Deepak was previously the Senior Vice-President of product at PayTm and COO of Getsmart. He is known to have scaled several products in his illustrated career.
Let’s get started.
1. What prompted you to start Indiagold? What was that one financial problem you wanted to solve?
When I quit PayTm along with Nitin, we decided to start something around lending. Probably an alternate credit score or try and build credit on UPI. We realised that there were atleast 70-80 startups who were building products around unsecured lending and it was actually an 80-85 billion dollar market. So we started exploring other ideas.
We found out that there are 160-170 million credit eligible people in India. Whereas, there are 450 million people who are not okay with paying credit and they usually go to money lenders for loans.
And we decided to look at secured assets.
We thought of property and gold and realised that unlike property, gold is liquid and mobile. Almost 180 million households have 7-8gms of gold which is lendable. And that is a good percentage!
Then again, gold loan became an embarassing product unlike unsecured loans, because people were exchanging gold for money. We decided to create a simple and transparent product and started working more towards the asset backed lending side.
And that’s how Indiagold was born.
2. What has been your smartest investment till now?
That’s a very good question.
I’m a firm believer of a very balanced, distributed portfolio.
I invest in debt funds, large cap and bluechip funds, bonds, gold bonds and even illiquid assets like start-ups and property.
I won’t deny that it is lucrative to invest in the stock market where you can get returns of 14-15%. But when I did my calculation, I realised that I’m earning 8-9% returns, beating inflation and still securing myself from the ups and downs of riskier investments and this idea has worked out for me.
In fact, I have spent 6-7 months planning my portfolio and I do not want to deal with riskier investments, the trick for me is to play it safe.
3. How important are debt instruments for an investor’s portfolio, keeping in mind market fluctuations?
So, what we need to understand is that everyone has their own risk profile and everyone understands the pros and cons of putting all their money in riskier assets.
I will not recommend based on what I feel is right. But if you look at this in terms of a balanced portfolio, debt plays a big part.
We saw what happened in March-April 2020.
Many investors panicked and sold their holdings at a loss. And even though the market recovered, it was a risky gamble.
Whereas most of my debt instruments were doing okay. I did not even think of withdrawing from them. And that’s why my overall portfolio did not stoop below 8-9%, whereas the market went down significantly.
We are currently in the bull run, but like I keep saying we can never predict the market. You need to be prepared for a scenario where the market gives less returns.
4. Usually, debt instruments are perceived as low returns and Indians only think of FDs and RDs when they think debt. Why do you think people are so unaware of other debt instruments?
There are two primary reasons for this.
First of all, most Indians are risk averse. If you look at our parents or people of that age, they are only attracted towards investing in FDs. They don’t realise that they are not beating inflation. But I think the major problem is lack of awareness and also, it is hard for laymen to understand financial concepts.
A lot of people take recommendations from financial advisors and these suggested avenues may not always be the right kind of investment for them.
So unless you research yourself, there are chances that you may end up putting your money in the wrong avenue/instrument. So there is definitely an awareness issue and this issue arises due to the complexity of products.
Doing your own research is important. Listening to your friends and not clearing fact is probably not the best way to go.
But the awareness part is slowly becoming better. The number of people opening demat accounts are increasing, people investing in mutual funds are increasing.
And I believe that steadily this knowledge will spread.
5. What is that one financial concept that you think Indians need to be free from to make more wealth?
I would go back to my first point, which is, to have a well balanced portfolio.
We like to put all our eggs in one basket. For example, if someone does an FD, they will continue doing FDs. If I like debt funds, most of my money will go in debt funds. I think diversification is something very few people understand.
And another concept not many people globally understand is compounding. Everyone knows compounding is good but they don’t practice it. They get panicky when the market goes down and returns are not as per expectations. They put money deliberately for short-term and that’s probably not the right way to go about it.
6. A lot of people are scared to invest in non-traditional investment platforms, what are your views on them? Why do you think people are so sceptical?
I’m personally a firm believer that of spreading your investment and I think as far as any non-traditional investment avenue is concerned, I think there is lack of education.
And non-traditional investment platforms should make sure that they keep educating their customers and potential customers.
7. What is financial freedom to you?
For me personally, if I can reduce my expenses to an extent that I can live off the interest income, that is the ultimate freedom one can get!
But for that you will need to cut down on your expenses, because, there is no end to non-essential expenses. I, demarcate everything through wants v/s needs.
As long as all my wants are being met from my savings, I can pursue whatever I wish. But for that to happen, one needs to be honest about their wants and needs. Eg: In my mind, an IPhone is a want, but for someone else, it may be a need.
P.S: Follow this space for more such interesting interviews from our ‘Celebrating Financial Independence Series’!