manki’s weblog

A software engineer’s fear of AI systems taking their job away

2026-04-03T08:06:00.001+05:30

In a private Facebook group, a software developer expressed fear about losing their job to AI systems that can write code. As a software engineer who has been thinking about this for a while, I posted a reply to that post. I am so proud of that reply that I am persisting a copy of it here (with some minor edits). 🙂

Go back a few decades. When people moved from assembly language to high level languages, there could have been a similar fear. (I don’t know if there really was, but I think we can draw a parallel.)

You suddenly didn’t have to painstakingly write optimised assembly code and manually link different assembly modules. Compilers and linkers were “good enough.” Tasks that needed three human programmers now only needed one. Experts in different machine architectures were not needed anymore; any high-level-language code can be compiled to run on any architecture.

If you were an assembly programmer, you were right to be terrified of losing your job to compilers. But then, if you just learnt how to code in a high level language, you became a lot more productive. You just had to look beyond machine architectures and see where you could add real value.

I don’t pretend to know how many software engineers will lose their jobs to the new AI systems. But I am fairly confident that today’s programmers will have an easier time adapting to the new world than a non-programmer learning to vibe-code today.

It’s entirely in your control whether you stick to the “old ways” or adapt to the new paradigm. Are you doing something to stay relevant? Ask yourself that, and keep adapting and improving until you have a satisfactory answer.

Random thought: Learning is thinking

2026-03-23T00:11:00.000+05:30

Learning is thinking.

Many consider reading, writing, listening to lectures, participating in discussions, etc. as learning. However, they remain only as tools that enable the actual learning, which is thinking.

Surrender: responding to life without a bias

2025-11-03T23:26:00.005+05:30

My life coach recommended The Surrender Experiment to me. I have been reading the book ever so slowly.

My primary takeaway from the book so far is to accept life as it happens without the influence of my own personal preferences. The following quote captures the core of the advice:

From now on if life was unfolding in a certain way, and the only reason I was resisting it was because of personal preference, I would let go of my preference and let life be in charge.

For a couple of days, it seemed obvious what I had to do. But slowly it started to be confusing. If on a Sunday I feel like eating at a fancy restaurant, is that my own personal preference, or is that life offering me a fancy meal (in the form of a spontaneous thought)? I didn’t have an answer.

Then it occurred to me. Accepting life means living spontaneously; pausing to question every single choice is anything but.

If always acting by one’s personal preferences is the south pole of the earth, purposely acting against one’s preferences is the north pole. The direction may be different, but they are qualitatively the same; you are still on the same plane; you are still anchored to the earth. What we really need is to rise above the earth. Rather than basing your actions on your preferences, you should ignore the preferences.

Respond to the situation that life presents. If the response aligns with your preferences, so be it. If the response is against your preferences, so be it.

Dream big to realise your potential

2025-10-12T15:22:00.001+05:30

I am a credit card enthusiast. I often browse through credit card offerings to see if there are better cards than what I currently have.

Earlier in 2024, I got the Infinia credit card from HDFC Bank. This is sort of like “winning” the credit card game. There is no clearly better card an Infinia holder can upgrade to. (While there may be more beneficial cards for some people based on their spend patterns, it’s hard to do better than Infinia for most people.)

My “credit card optimisation” game pretty much ended when I got the Infinia, with me winning the game. However, I still habitually explore other credit cards every now and then. As expected, such explorations end with a reaffirmation of what I already know: there aren’t many cards I can upgrade to. The time spent looking at credit cards is wasted time, more or less.

But why do I still look at credit card options even when I know it’s not a productive use of my time? I think it’s because I don’t have anything more productive to do.

This is where the advice to “dream big” shines through. Dreaming big and working towards achieving those dreams is an effective way to realise your potential. Had I dreamt of doing something more meaningful than simply collecting credit card rewards, I wouldn’t be wasting time now browsing credit card brochures.

Where GenAI tools struggle

2025-08-22T18:56:00.000+05:30

A tricky, niche, tax question. Basic clauses that apply to the majority of taxpayers in the country are described and discussed everywhere on the web. But this specific question is not.

Since GenAI tools are the new panacea, I asked Gemini about this. It said something that was clearly wrong. I thought its “deep research” mode may do a better job. I asked the same question again but in the deep research mode. It did a lot of work and eventually spit out a report, which was also unsatisfactory.

There are nuances in tax rules that need to be considered for answering this question. Most web sites don’t care about this nuance; Gemini, which uses information from the web as its source, also couldn’t understand the nuance. It produced an answer without solid justification.

I then did a regular Google search and found a site that said the opposite of what Gemini said. I asked Gemini a follow-up request to include information from this new page.

My expectation: Gemini will reconcile the differences between the sources and improve on its previous answer.
What Gemini did: Gemini simply overwrote whatever it had said before with what was in the new site.

Gemini did exactly what I do when a code reviewer is forcing me to do what I don’t want to do, but I am tired of arguing. I just do whatever the reviewer says and move on. Gemini doing that to me did not exactly instill confidence in the report it had generated.

While GenAI tools are great at many things, they are not exactly good at answering niche questions based on conflicting information from different sources.

A different kind of social media diet

2025-08-17T14:32:00.000+05:30

As I was going to write a rageful comment on a random post by a random person on Facebook, I realised something.

If someone told me in real life the exact same thing as that post, what would I do? I would say the least amount of words possible to stay polite and flee the scene. I know not to engage with idiots in the real world.

But when it comes to social media, I was constantly engaging with idiots. That’s why I wasn’t feeling good after spending time on social media. I am choosy about whom I engage with in real life; I should emulate the same on social media too.

(In my defence, this was not an issue in the initial days of social media. I only have sensible people as my connections; they don’t post garbage. With every social network promoting everything from outside the user’s own network, chancing upon random garbage has become more frequent.)

Starting to appreciate consistent performance

2025-07-13T15:12:00.002+05:30

The following graph shows 3 year rolling returns of 3 different mutual fund schemes. (I have removed the fund names from the graph since the names of specific funds are not needed for this post.)

Rolling return graph taken from primeinvestor.in

The green and purple funds had sharp declines in March 2020 when the market had just reacted to the Covid-19 shock. The blue fund also fell, but not by as much. The reverse of this fall can be seen in March 2023. Any investor that invested in these funds in March 2020 got a significantly higher return than anyone invested right before or right after.

When I was new to evaluating investment assets, the peaks that the green and purple lines reach used to attract me. I liked such funds. “There is a chance of making an incredible return from these funds,” I’d tell myself. Investing in funds like the blue line felt like leaving some returns on the table. I wanted to invest in assets that have the potential to maximise returns.

But high volatility can be hard to live with. When investing in a fund that provides fairly consistent returns, entry and exit times do not matter as much. A volatile fund can leave us less than satisfied depending on our entry/exit time.

Let’s say a fund’s NAV goes up from ₹100 to ₹130 within 4 months, and then falls to ₹121 in the next month. I’d find it hard to sell my holdings when the price is ₹121 despite knowing that anchoring to ₹130 is irrational. I’d delay exiting the fund as much as possible in the hope that the NAV may rise back up. Of course, the NAV can keep dropping below ₹121 as I wait. But that knowledge hasn’t been enough to gather the conviction necessary to sell at ₹121.

Over time, I have started appreciating consistent performance over potentially high—but uncertain—performance. I think the following reasons triggered a change of mind in me.

Reading various articles on portfoliocharts.com and looking at the various charts that they plot to compare different portfolios.
My experience selling the RSU shares that I receive from my employer. Working with volatile assets can be emotionally taxing.

There’s another angle to this, too. I used to think that investors avoided risk only when they were afraid of it. But now I know better. I avoid certain risky assets or risky portfolio mixes not because I fear the potential loss. Rather, I don’t particularly want the added return, so I am happy to keep both the extra risk and return outside my portfolio.

Uncertainty = discomfort of the mind

2025-07-10T22:27:00.001+05:30

I went to see a doctor today. I was only expecting a simple treatment. After all, the symptoms didn’t seem severe. It seemed like something that could be cured in a few days.

Then came the diagnosis as a shock. It was a condition I’ll have to live with forever. Something that can change my life as I have known it. Something that can potentially disrupt what I consider as my identity. Something that can make me humble.

It hasn’t been easy since then.

A part of me keeps reminding me of what Oscar Wilde once said: “If I may not write beautiful books, I may at least read beautiful books; and what joy can be greater?” Though this will be a life-altering change, I have great confidence that my happiness will remain intact.

Nevertheless, it’s all a haze right now. Things will become clearer and more certain in the coming weeks and months. For now, however, this uncertainty hasn’t been easy to endure.

How diversification increases risk

2025-06-20T14:27:00.002+05:30

Trump’s remittance tax is spooking many around the world. Some Indian residents investing in US assets are also worried if their withdrawals may also fall in this tax net.

A while back, I wrote that diversification doesn’t strictly reduce portfolio risk. This remittance tax is an acute example of how holding assets in the US exposes us to more risk.

Just to be clear, this post is not about global diversification or US assets. The only point I am trying to convey in this post is that diversification does not strictly reduce risk; it alters the portfolio’s risk-reward behaviour.

The impact of the recent enthusiasm in gold ETFs

2025-06-14T06:44:00.001+05:30

I have invested in 2 gold ETFs: Quantum Gold and SBI Gold. Every month, I download the fact sheets of all the funds I invest in to monitor how my money is being invested. As I was checking May 2025 fact sheets, I noticed something interesting.

Gold ETFs have appreciated more than physical gold in recent months. This is bizarre since gold ETFs are expected to always underperform physical gold because ETF returns are physical gold return minus expenses.

I looked up the trailing returns of these ETFs on Value Research Online. To make sure this isn’t special to these 2 ETFs, I also looked up India’s most popular gold ETF, Gold BEES.

Trailing period	Physical gold	Gold BEES ETF	Quantum Gold ETF	SBI Gold ETF
1 month	4.50%	4.85%	4.92%	4.86%
3 months	12.86%	13.80%	13.81%	13.83%
6 months	24.20%	27.67%	26.96%	27.71%
1 year	35.72%	36.54%	36.72%	36.68%
3 years	23.92%	22.90%	22.94%	22.92%
5 years	15.37%	14.50%	14.53%	14.63%

This table reveals something new to me: gold ETFs have run ahead of physical gold in the past year. Gold ETFs have been in so much demand that they are running ahead of physical gold’s price appreciation! But this has only been happening in the recent year+. The numbers for 3 and 5 years (and beyond) are as one would expect.

What does this mean for investors?

If you need to trim your gold allocation, now is a good time; you’ll be able to sell at a price higher than the fair price.
Now is probably a wrong time to buy gold ETFs. Eventually the market will sober up and ETF returns will fall in line with gold price return minus ETF expenses. That means we can expect gold ETFs to underperform physical gold in the coming months/years. (Of course, no one can tell when the shift will start to happen.)

Caution: Please don’t take this—or anything I write—as financial advice. I myself don’t act on most of my observations. For me, this is merely a fun intellectual exercise.

Life isn’t the final draft

2025-05-26T11:51:00.001+05:30

Came across a beautiful video and this observation from the video struck a chord:

Life isn’t the final draft. It’s just breakfast over and over. You burn some. You get better.

Does your AMC act to protect your money?

2025-05-12T16:49:00.001+05:30

I noticed a strange bump in the NAV history of Bank of India Short Term Income Fund. The fund’s NAV on 3rd November 2024 was ₹27.05. The NAV went up by 1.9% on 4th Nov to 27.57.

Screenshot from Value Research Online

I was curious what went on and started digging. To my surprise, there was no news coverage about this at all. Comparing the fund’s October and November fact sheets did not give any clue. After a bit of searching around, I found a letter BOI MF had written to their investors about this. The letter says that the fund’s NAV was reduced in 2022 following a default.

After recovery from selling of shares, the outstanding amounts for Bank of India Credit Risk Fund was Rs. 24.11 lacs and for Bank of India Short Term Income Fund was Rs. 6.75 crs.

In November 2024, the fund has received a settlement. The letter says:

After trying to recover the balance outstanding amounts since the default, Bank of India MF (“the Fund”) finally entered into OTS agreement with promoter group and the final OTS amount of Rs. 9.08 lacs for Bank of India Credit Risk fund and Rs. 2.54 crs for Bank of India Short Term Income Fund was received by the Fund respectively on 4th November 2024. The received amount was dully accounted in the NAV of the respective Schemes on 4th November 2024.

Anyone that invested in this fund before 2022 lost some of their money. I have no problem with that; investors sign up for such potential losses when they invest in debt mutual funds.

What makes me sad is that the AMC chose to not create a segregated portfolio with the Coffee Day NCD (despite the fund’s SID allowing portfolio segregation). Any investor that bought into this fund after the NAV fell in 2022 but before it increased in 2024 would have received this 1.9% rise in NAV “for free.” The AMC is essentially taking the previous investors’ money and gifting it to newer investors. Creating a segregated portfolio would have prevented this unfairness altogether. But, for whatever reason, the BOI AMC chose to not create a segregated portfolio.

I wrote an email to the AMC asking about this more than 10 days ago, but they have not responded (other than an automated reply with a ticket reference number).

This is the kind of behaviour—I don’t know what to call it… laziness, lack of integrity, or incompetence—that an investor should be weary of when choosing an AMC. Bank of India AMC has shown that they will not do what’s right for the investors. It is up to us how we act on that information.

Can we invest in high-yield bonds?

2025-05-03T09:53:00.001+05:30

There are bond investment platforms that let retail investors buy bonds directly. Many of these platforms sell high yield bonds issued by private organisations. For debt/bond allocation in a long-term portfolio, can investors buy these bonds?

As an example, let’s look at this high yield bond that pays 10.75% fixed coupon, but available in the market at the yield of 11.415%. (This is just a random example; not a recommendation for/against investing in this bond.)

Screenshot from goldenpi.com

When I calculated the XIRR for this bond, it came out to an impressive 11.72%. But that’s before accounting for tax. Advance tax is due every quarter on the interest received, so let’s assume that we set aside the cash necessary to pay the tax as soon as we receive the interest. That causes the XIRR to drop.

Effective XIRR of the bond for 30% tax + various surcharge rates (source)

Some of you may point out that the after-tax XIRR of 7+% is actually great from a fixed income instrument. You are right, but we need to look beyond (the admittedly attractive) XIRR the following reasons:

Investments with high XIRR are useful only if you can reinvest the incoming cash quickly. If the interest piles up in a savings bank account, you are not benefitting from the high XIRR. (See Don’t let attractive XIRR figures fool you.)
These bonds usually have so little demand in the market that these bonds are held till maturity in practice. When the interest rate falls, you don’t benefit from the increase in the bond price. There is no inverse correlation with equity in practice.

This means that you cannot rebalance your portfolio by selling bonds to buy equity. The bonds need to stand on their own, and cannot be part of a portfolio diversified across asset classes.
A bond mutual fund that holds higher quality bonds, however, can be a great addition to a diversified portfolio. Such a fund may have a lower yield, but it’ll be liquid enough to be useful at all times.

When you invest in a bond mutual fund, you can defer taxation until redemption. This could be years or even decades for a long-term investor. This will increase the effective after-tax return for those investors.
Gains made from bond mutual funds are considered capital gain. Capital gain arising from bond mutual funds can be offset by short-term capital losses. No such benefit for the interest earned through holding bonds directly.

If the bond issuer goes bankrupt and the bond value becomes zero, that may count as capital loss, but I don’t know the tax rules around it.

A sovereign bond, which has virtually no credit risk, will likely give around 7% pre-tax yield. Consider holding a gilt mutual fund for 15 years. Your returns will be pretty good at a much lower risk. If we consider the risk-adjusted return, isn’t a gilt fund a much better choice for most retail investors?

I’ll likely buy a low-quality high-yield bond to hold in my fun portfolio. But that’s mostly for the cheap thrill of investing in this asset. Such bonds have no place in my more serious portfolios.

Do savvy investors need a financial advisor?

2025-04-17T12:21:00.001+05:30

If you are capable of learning investment processes and evaluating investment assets and portfolios, do you still need to hire a financial advisor?

Maybe you do; maybe you don’t. That’s a decision only you can make. But I’ll show you a reason why I have been retaining my advisor for over 3 years now.

Back in 2022, my advisor had recommended me a portfolio with 20% allocation to bonds and 10% allocation to gold. I insisted that I’d not invest in gold. He agreed to change the recommendation to have 30% allocation to bonds instead (and 0% to gold).

2 years later, in 2024, I started researching different portfolio combinations. This is when I discovered that gold was a great ingredient to have in long-term portfolios. In September 2024, I wrote the following email to my advisor, asking him if I should allocate 20% of my portfolio to gold.

Email I wrote to my financial advisor; click to enlarge

I was vehemently against gold when my advisor had recommended gold. But now I was taking a U turn and asking if I should add gold to my portfolio.

This was his response:

Email reply from my advisor; click to enlarge

Eventually, I agreed to keep the gold allocation to 10%. Basically, I accepted the portfolio that he had originally recommended to me.

• • •

So, why do I need an advisor? To keep me grounded and stable when I am being blown away by something new I have learnt. Some investors can find such a balance naturally; for them, an advisor may not be needed (or they may need an advisor for a different purpose). I, however, need an advisor to keep me safe from myself. 🙂

My stance on gold: learning from the pros

2025-04-13T12:10:00.001+05:30

I used to have no opinion about gold as an investment asset. Then I came across this Warren Buffett quote:

[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

Thinking more, I came to the decision that investing in gold was a bad idea. I wrote 2 different blog posts declaring that gold was a bad investment (post 1 and post 2). Many months later, I hired a financial advisor, who recommended that I allocate 10% of my portfolio to gold. I told him that I wouldn’t hold gold, and I stood my ground.

A couple of years pass, and I discover the idea that the portfolio as a whole is more important than the individual components in the portfolio. I warmed up to the idea of having an allocation to gold, and I compared gold to spices such as bay leaf or star anise that are added to biryani. No one eats bay leaves on their own, but we all want bay leaves in our biryanis.

Image source: pickpik.com

I still didn’t like gold, but I was willing to add it to my portfolio because of what it brings to the table. I was still hesitant because gold is a speculative, non-productive asset. Then I came across the most complete write-up on gold I have ever seen: this is the memo that fund manager Howard Marks wrote to his clients in 2010, named All That Glitters.

I already knew that Howard Marks was not a fan of investing in gold, so I was expecting to see arguments against gold. I was also a bit nervous because if I am convinced by Howard Marks’ arguments, I may have to change my stance on gold once again. But that memo blew my mind. It was as rigorously seeking truth as an unbiased academic research paper would. Strangely, I am more at peace holding gold after reading the memo. (Confirmation bias, maybe?)

Here are the key points that I took from the memo:

To profit from an investment, the question of intrinsic value may not be fully important. As long as we have other investors willing to buy the asset from us, we can make a profit.
We call bonds and shares productive assets because they produce cash flow. But what is that cash? Cash is the fiat currency of some country. Do fiat currencies have intrinsic value? They don’t. They have value only because everyone agrees that they are valuable. Then how is gold different?
Howard Marks’ investment framework requires knowing the intrinsic value of an asset and then buying it at a bargain price. For gold, no one knows what the intrinsic value is. Hence, Howard Marks cannot buy gold using his prudent methodology.

Gold is not compatible with Howard Marks’ strategy, but my investment strategy is a lot more passive, and I don’t usually care about valuations. That means I can buy gold according to my portfolio allocation without worrying about overpaying for it. (If I overpay, I’ll correct that mistake when I rebalance the portfolio next time.)

I still worry about a technological advancement making gold abundantly available and hence crashing its price. But I have grown a lot more comfortable giving allocation to gold in my portfolio.

Great work is a great energizer

2025-04-02T08:34:00.003+05:30

We often see people who act with an incredible amount of energy while we struggle to even wake up in the morning.

Many of us would also have noticed that we are filled with energy at times, but we can’t muster any energy at other times.

I have wondered why, and I think I have an answer now. Maybe not the answer, but an answer.

When we do great work, it’s easy to find the energy needed to do it. If the work that awaits us—and the things that we can accomplish—are of great importance and interest to us, it’s easy to wake up early and start the day with a smile. When we expect the day to be dull, it becomes mysteriously hard to get up and move.

Great work is a great energizer.

Don’t buy a cake for the cherry on it

2025-03-31T15:39:00.002+05:30

This is an analogy I learnt from my manager at work. It aptly fits investing to save tax.

We should choose investment assets based on the merit of the assets. If the investment also comes with tax benefits, then that’s an added plus. If the investment asset is a cake, tax benefits are the cherry on that cake.

Only buy the cake that you want to eat. Enjoy the cherry if the cake comes with a cherry. But don’t buy a less than delicious cake only to get a cherry.

Picture by phiraphon srithakae from Pexels

To invest is to go out on a limb

2025-03-28T14:42:00.001+05:30

Investing is an act carried out mostly in faith. We can look at hundreds of different data points or read dozens of books and research papers. But none of that—literally none of that—can guarantee anything about the future.

Any asset we pick, any strategy we pick—there will be a dozen arguments supporting them and a dozen opposing them. Which arguments should we accept and which ones should we ignore?

We have to go out on a limb and make our bets. We may get the returns we wanted, or we may not. The risks we took great care to avoid may play out, or they may not. If the risks play out, we get to feel smart; if they don’t, we get to look like fools for not getting on the bandwagon.

Investing is a humbling exercise. It shows us how powerless we are. It’s also an empowering exercise. It forces us to march on even when the path is dark and our legs trembling.

Picture by Caio Triana from Negative Space

Being aware of emotions

2025-03-20T11:29:00.001+05:30

The good news is that awareness is a significant half of the solution. Knowing how and when we allow emotions to hijack us is the first step towards a solution.

The bad news is that awareness is only half the solution. When I become aware that I am acting in anger, I am usually left puzzled about what to do next. I need to pause and reconsider the situation to decide on a response. Sometimes there is just nothing for me to do, i.e., the situation is simply beyond my control.

As someone who used to get hijacked by emotions on a regular basis, this awareness is making me uncomfortable. I am still figuring out how to deal with it. I suppose I should be proud, but I don’t feel that way yet… I am still confused. 😅

Emotions hijack us

2025-03-13T15:51:00.001+05:30

This happens often. I am in the process of doing something, but a seemingly stupid thing prevents me from doing it. I become angry. That “stupid thing” may be a broken tool or someone’s inexplicable policy or someone not living up to my expectations. Essentially, something that is not in my control blocks me.

Often, this enrages me. I go on the offensive and my focus turns into hurting or humiliating this entity or person whom I am upset with. Naturally, I forget about my original goal. Hurting/humiliating becomes the priority now.

Photo by Andrea Piacquadio

But angry responses seldom help. People are more likely to cooperate when I am nice than when I am yelling at them. I cannot persuade an inanimate tool by being nice, but being angry is no better. If I shifted my focus to what I want to accomplish rather than cursing the broken tool, I’ll likely come up with an alternate solution.

Emotions hijack us. We should avoid getting hijacked. When we unconsciously allow ourselves to be hijacked, we should be flexible/humble/honest enough to drop the emotion and course correct.

‘Anchoring bias’ in investing

2025-02-22T08:45:00.001+05:30

Anchoring Bias is when we anchor ourselves to an old piece of information or to a state of the world that is not real. In this post, I’ll go over a few examples of anchoring bias that I have come across. The goal is to make you, the reader, and me, the writer, aware enough to spot such a bias when we come across it in future.

Anchoring to a specific rate of growth

Someone posted on Reddit that their portfolio XIRR had come down. Though this user had already met their savings target, many Reddit users were advising them to sell their mutual fund holdings only after the XIRR rises back to a reasonable number.

Let’s say we invest expecting a return of 11%. The market is good, and it gives us 17% return until a few months before we plan to cash out. We feel great. But the market sentiment changes suddenly and the rate of growth falters to 12%. If we wait for the growth rate to pick back up to 14 or 15%, then we are anchoring to a specific rate of return. 12% is still better than the expected 11%, so it’s better to follow the original plan and cash out now. Waiting for the value to go up is anchoring bias.

Let’s say I expected to amass ₹5,00,000 from my investments. The investment value becomes ₹7,80,000 one day, but soon falls down to ₹6,10,000. If I cash out now, I still have ₹1,10,000 surplus. If I stay invested, the value may go up to ₹6,80,000 or it may fall further to ₹4,50,000.

Anchoring to the acquisition price

I receive RSUs (restricted stock units) from my employer as a part of my compensation. A recent batch of RSUs vested at the price of $197.57. This was particularly high as the share had seen an uprise in the few days before the vesting date. When the newly vested shares were deposited into my account (T+2 days), the shares were trading at around $191.50.

I sell newly vested RSUs pretty much immediately, but this time I hesitated to sell the shares because the price had fallen.

I didn’t have any specific valuation in mind for these stocks. All I knew was that the price was now lower than it was at the time of vesting. Had the shares vested at $191, I would have gladly sold them for $191.50. My hesitation was only because I was anchoring to the vesting price.

Anchoring to a recent high

I was planning to sell a large number of my old RSUs this month (February 2025) because holding US assets is a bad idea. The price of the shares went up significantly in January, but I couldn’t sell then as the trading window was closed. I could sell in February, but the recent fall in the stock price made me hesitate.

The price of my RSUs has fallen by 5.74% in the trailing month

I lamented the ~6% fall in the past month, but I didn’t consider that the price was up by over 10% in the past 6 months even after the recent fall!

The price of my RSUs has risen by 10.62% in the trailing 6 months period

I was so anchored to the price movement in the past month that I had lost sight of how good the price still was.

Anchoring to tax rules of the past

Tax for gains from bond mutual funds went up significantly on 1-April-2023. Since then, I kept looking for “bond like” mutual funds that are taxed better. It took me close to 2 years to see that “bond like” mutual funds aren’t all that good. I was anchoring to a tax rate that was no longer available.

The impact of anchoring bias

If you are thinking, “What’s the big deal? Investors are humans too, and this is how typical humans behave,” you are right. But you need to be slightly better than typical humans to be a successful investor.

Before we start investing, we make an investment plan considering the risks and rewards. We are usually equanimous while we make the plan. What do we do when a bias gets the better of us? We change the plan on the fly. We dance to the tune of the market. That is not how investing success is achieved.

Modifying the plan mid-way is not a problem in itself. We often need to tweak our plans as we go along. But such changes should be holistic updates done without fear or excitement. Changing course solely based on market movement, arbitrarily changing asset allocation based on market sentiment, etc. don’t usually lead to anything good.

Conclusion

I don’t think it’s practically possible to eliminate all biases. But being cognizant of our biases can help us make better decisions. The ability to avoid biases can often be the difference between a good investor and a mediocre one.

Why you should avoid active mutual funds

2025-02-19T14:40:00.001+05:30

The biggest reason I recommend against actively managed mutual funds is that most investors have a time horizon much longer than any AMC’s or the fund manager’s.

Assuming you start investing when you’re 40 and you live up to 80, your retirement portfolio has a lifespan of 40 years. Quite a few people will have portfolios with a longer time frame. Many would start investing at a younger age; many would want the retirement corpus to last for an additional decade or more. A lifespan of 50 or 60 years for a retirement corpus is not unusual.

It’s fairly easy to shortlist active funds that are great today. There’s a reasonable chance that these funds will stay good for the next 10 or 20 years. But change is inevitable. AMCs change hands; fund managers switch jobs; fund managers retire; investing landscape changes; regulations change. In a constantly changing world, it’s impossible to tell which of today’s top active funds will remain good 30, 40, 50 years from now.

A passively managed portfolio will never give you amazing, market beating returns, but the characteristics of such a portfolio won’t dramatically change later on. Anyone that likes a predictable portfolio over an unpredictable one should seriously consider passive management. (This is predictability relative to the market. A passive portfolio that replicates the market will always have the same amount of risk and return as the market itself. The risk and return of active portfolios can drift in either direction.)

While that’s my stance in general, I still use and recommend some actively managed funds. They are often hybrid or multi-asset funds that can act like “one fund portfolios” (meaning that’s the only fund you have in the entire portfolio).

I use such funds to hold cash for a short duration (such as a few years).
I also recommend such funds to people who wouldn’t get any equity exposure otherwise. The chosen active fund may not be the best available, but if it’ll generate more return than a bank deposit. That’s often good enough.

The case for investing in NPS

2025-02-18T09:21:00.002+05:30

I used to strongly recommend against NPS (National Pension System) because it doesn’t offer much flexibility to investors. It took me a while, but I eventually understood that NPS is a mass market product, and hence, it needs to account for the quirks of the “common people”. Recently I came across a few news stories that confirmed this.

News story 1: A vegetable vendor named Pradipkumar Vaishya has invested ₹4.55 crores in a Ponzi scheme called Torres. Reportedly, this capital belonged to him and others who invested through him. Torres shut down, taking with it many crores of rupees from investors like Pradipkumar Vaishya.

News story 2: A retiree has invested his entire life savings in an invoice discounting platform. He lost all his money when the firm shut down without notice. Many other investors have lost their capital too.

When looking at all this, it makes sense that NPS forbids people from squandering their retirement corpus. If falling for outright scams is one way to lose money, making emotional decisions is another.

You retire with a corpus that looks huge (but in reality it may be just enough to keep up with inflation). Someone in your family wants to borrow 10 or 15% of your corpus for some need. You think you have more than enough, so you lend it to them. They are never able to return the money. Inflation does its thing, and you are penniless in your final years. Or, maybe the borrower returns the capital without interest after 10 odd years, and you have lost a significant amount of interest that could have somewhat bridged the gap between inflation and your corpus.

A typical “common person” in our society is not good with money management. They are especially bad when it comes to living for a few decades off a corpus. Living off a corpus is a qualitatively different skill than managing one’s expenses with regular (or even irregular) cash inflow. Life doesn’t prepare us for it; we need to figure it out after we have retired. The vast majority of us will make mistakes. Some (many?) mistakes can have irreversible negative impact. It is an extremely hard problem.

NPS acknowledges this challenge and forces people to take a monthly pension. Even if the investor squanders all the money they have access to, the pension corpus stays intact and they’ll continue to receive some monthly cash flow.

I have strong opinions about how to invest my money. You—someone reading a blog post like this—also likely have strong opinions. NPS is most likely incompatible with our ideas and goals, so NPS is probably not a good fit for us. But we are outliers. For most people, NPS is a fine choice.

Holding RSUs because ‘they are there’

2025-02-12T11:53:00.001+05:30

It is said that George Mallory, an English climber, was planning to climb Mount Everest for the third time. A reporter asked him why George Mallory wanted to climb again, and his reply was, “Because it’s there.” He wanted to climb the mountain because it was there.

Similarly, employees who receive RSU shares of their employer companies hold on to those shares. Ask a Microsoft employee if they want to hold Amazon.com shares. They’ll say No, but they’ll continue to hold their Microsoft shares. Ask a Facebook employee if they want to hold Walmart shares. They’ll say No, but they’ll continue to hold their Facebook shares.

These shares are held by those employees not as investments, but merely because “they are there” in their RSU accounts. If you are holding onto RSU shares of your present or past employer, ask yourself whether you are holding them because they are there or because you have a well thought out reason to hold them.

Correlation of assets in my portfolio

2025-02-11T20:35:00.005+05:30

My investment portfolio has 4 assets: global equity, Indian equity, Indian bonds, and gold. I didn’t put this portfolio together myself; my financial advisor recommended this to me. I hesitantly took his recommendation because I couldn’t tell how good/bad this portfolio mix was.

I have been learning about portfolio construction for the past few months. As I learn about portfolio construction, I keep evaluating this portfolio—and I see that this is a great portfolio.

Recently, I have been thinking about asset correlation and how uncorrelated or negatively correlated assets make up resilient portfolios. Naturally, I checked the correlation of the assets in my portfolio. This is what I got, and as you can see, +0.3 is the worst correlation.

	US equity	Sensex	ABSL income
US equity	-
Sensex	0.3042	-
ABSL income	-0.2025	-0.4045	-
Gold	-0.4006	0.0400	0.0784

Notes about the data used to calculate the correlation. I couldn’t get data for the very specific assets I am investing in, so I used substitute data where necessary.

I got US equity return data from the ‘Toolkit’ spreadsheet of portfoliocharts.com. This is the substitute for global equity data.
For Indian equity, I am using Sensex data. I invest in a much broader index than Sensex, but this was the data I could get.
I couldn’t get Indian bond return data, so I used the NAV history of the oldest debt fund, ABSL Income fund.
The correlation is calculated based on their calendar year returns from 1996 through 2023.