Hacking Kuvera “family account” for goal separation

tl;dr: Create “fake” family member profiles to keep short-term and long-term goals separate or to keep your debt/equity investment ratio intact.

Let’s say you’re investing for some long-term goals (10 or more years away). Simultaneously, you also want to save for some short-term goals (1 or 2 years away). Or you just want to park some money in some debt funds (such as ultra short term funds). Kuvera’s default setup doesn’t support these needs very well. (Maybe for a good reason? They have SaveSmart which is probably what one should be using?)

Photo courtesy: PickPik.com

Mixing of short- and long-term goals
Kuvera uses unified goal planning, which takes advantage of the fact that as years pass, you’ll be earning more but your needs will reduce (because, say 2 of your 6 goals are already accomplished). But what it also means is that you cannot use Kuvera as a “recurring deposit” for saving (not investing) for a short-term goal. When you add a short-term goal, Kuvera will ask you to add just a tiny bit to your existing (long-term) SIPs because unified goal planning is inherently like that. If you kept adding many such short-term goals—I don’t pretend to know what really will happen—but intuitively it feels like you won’t have sufficient time for the money to grow for your long-term goals. It feels safer to keep the long-term SIPs and short-terms SIPs separate.

Parking surplus money for a few months/years
Let’s say you have some extra money lying around. You cannot quite invest it because you know you’ll have to spend that money in a few months. Or you may want to put a portion of your emergency funds in ultra short term debt funds that give higher return than liquid funds. (Also something wise people advise you to not do. Debt funds are for giving stability to your portfolio; don’t chase returns without understanding the risk.)

Basically, you want to park some money in debt funds. The moment you do that, your goal-based investments’ debt/equity ratio gets out of whack. This can be confusing and if you aren’t careful, would make your portfolio less than optimal.

In search of a solution…
Making Kuvera ignore your short-term or parked funds is easy: go to the folio management page and hide the folios that have the short-term funds. But now you cannot keep an eye on those funds.

I looked for alternate apps to track these funds. I tried ET Money and MoneyControl. They had the main feature that I wanted: I can enter when I bought what funds for how much; they’ll show me the current value, daily change in valuation, etc. But their user interfaces were a mess compared to Kuvera’s clean and beautiful UI. I tried Goalwise, but they only support defining and tracking goals, not the “I just want to track these external investments” use case. Their UI was so cluttered I didn’t even have the desire to learn if I can use their app somehow.

After struggling through this for a few weeks, I suddenly thought of a solution: just add a new “fake profile” to my account. I have enabled Family Account feature on my account so I can track my wife’s and brother’s investments. Now I have added a fake profile (i.e. a nonexistent family member) to the family for tracking short-term goals and parked funds. Now that I have learned this trick, all my recurring deposits will be going to Kuvera. I hope I’m not making a dumb mistake here 😬

Notes from ‘Happiness Unlimited’ #2

I have been watching 1 episode of Happiness Unlimited, a show where Mr Suresh Oberoi interviews Sister BK Shivani. Notes from the second episode ‘Stop Postponing Happiness’ that I watched today are here.

• We have 2 choices: I’ll be happy when I achieve this, and I’ll be happy while achieving this.
• We are not going to be able to lead our lives without goals, aims, and objectives. Because without goals, we’ll become very passive. I wouldn’t know where I’m heading.
• It’s not about what has happened. It’s about what I need to do now, how does my state of being have to be. I have to take care of that. Otherwise I’m in the vicious cycle of negativity.
• Whatever may be the situation, however challenging they may be, I am not going to get the solution unless I take care of myself.
• Let’s say I’m a family of 5 people. And 4 of them are not well. They are ill. I want to take the responsibility of taking care of them, of healing them. I’ll only be able to do it if I’m fine. This is about physical health, but now you take the same equation to emotional health.
• Happiness is an internal strength. Happiness doesn’t mean excitement. I’m not going to be jumping and dancing the whole day. I have lost my job; I am not excited about it.
• My child has got less marks. My responsibility at that time would be first to take charge of my mind... fine... first I have to remain stable so that I don’t react, I don’t shout at him. I don’t upset him. Then my responsibility is to take care of his state of mind. Then my third responsibility is to take care that he studies and gets good marks next time.
• The only reason a child commits suicide is because he is not able to face his parents after a failure. It’s not because he failed. It’s because he doesn’t want to see his parents unhappy. And he holds himself responsible for the parents’ unhappiness, because the parents conditioned him the whole year that we’ll be happy only when you do this.
• Every individual’s life is based on 4 aspects: physical, intellectual, emotional, and spiritual. Like the 4 legs of chair we are sitting on. If I want to be successful in life, all 4 should be equally balanced.
• It’s possible that a parent has not gone to school, but they send their child to the best school. It’s possible that a parent doesn’t eat, but gives food to the child. But it’s not possible for a parent to have his child happy without the parent being happy himself. You cannot make your child emotionally strong without being emotionally strong yourselves. That’s where the responsibility comes first on yourself.

Analysing the health of mutual funds

What should a mutual fund investor ideally do? Study mutual fund documents first and then invest. What did I do? Bought some funds without much analysis or reasoning and then, after a few months, I am looking at fund fact sheets and trying to understand how well they are managed. I am saying this upfront because I want to highlight that I am just doing things haphazardly, including the analysis itself. I don’t know what all information one should look at in a fact sheet, and how to determine if a fund is doing well. With that caveat out of the way, let me get into what I found from my analysis.

As a newbie investor, Franklin India’s decision to shut down 6 debt funds was bizarre to me. That news made me realise how some mutual funds can be bad. I had noticed this Reddit thread before, but couldn’t understand what they were talking about. I didn’t try to understand the discussion because I hadn’t invested in any of those funds. After the news, I reread that post and read some more on the web. I started to get some idea on what fund attributes I could look at.

If monitoring the health of mutual funds is an important thing investors should do, there must be dashboards on the Internet… or so I thought. After failing to find such a dashboard, I decided I had to make one myself. I downloaded March 2020 fact sheets of all my funds and I summarised some key stats (click on the image to magnify):

This was more confusing than useful to me: of the 12 funds I had data for, 6 had negative cash! Many debt funds, including liquid funds, had exposure to sub-top-grade debts. Is every debt fund taking risk in the market then?

After a few hours, I decided to add data from February so I can see how things have changed over the course of March. This turned out to be a good idea. Now I was able to see a clearer picture:

The market was less crazy in February, and that shows up in the numbers:

• Only 2 funds had negative cash. They also held a fairly low amount at -0.29% and -1.46% of respective AUM.
• Other than Kotak Savings, exposure to sub-top-grade debt was also minimal. Nippon Liquid fund had 0.35% lent to unrated borrowers.

In March, uncertainty rose sharply due to Covid-19 lockdown. That is also reflected in the numbers:

• Many investors have redeemed their debt funds: 30% reduction in AUM seems normal! (Remember, this was before the Franklin fiasco.)
• Quite a few funds now hold negative cash, probably to accommodate the high number of redemption requests.
• Risky debt has also increased across the board.
• PGIM is the only fund house to exclusively hold top-tier debts; they are also the only debt fund managers to hold some cash in hand.

(One surprising observation from the data is that people have bought equity mutual funds while they have exited debt funds. Maybe they were rebalancing because it was the end of quarter?)

What are my takeaways from this exercise? I was fond of Kotak Savings fund because it looked so nice. Kotak web sites are so good, I just loved looking at this fund’s official web page. PGIM UST fund’s site looks okay, but it’s hardly impressive. Logging into PGIM’s investor web site also doesn’t work most of the time. Due to all this, I didn’t really like PGIM funds. Dumb mistake, I know! I was judging both Kotak and PGIM ‘books’ by their ‘covers’. When I look at my spreadsheet, however, I see how disciplined PGIM’s fund managers are, and how risky Kotak Savings fund really is.

If I hadn’t gone through this exercise, I might have sold the PGIM units and bought Kotak units instead. I am so glad I sat down and looked at the numbers.

Legalese vs code

This morning, I had to read the text of one section of India’s Income Tax act. Unsurprisingly, reading the text and understanding it was not easy. The difficulty is so well known that there’s a name for the language used in such legal documents: legalese. As I was reading through the rather short document, I was reconstructing an internal version of the same document in my head. Only this internal version was easier for me to understand.

Suddenly I realised this practice of reading something complex and reconstructing it inside my head is something I had been doing for years. Reading legalese and making sense of it is not very different from reading legacy code and trying to understand what it does.

Understanding code is easier sometimes because experts have been steadily making progress in making code easier to understand. These include creating new languages that are easier to understand as well as coming up with ways to alter existing code to make it easier to understand (known as refactoring in the programming community).

Compared to lawmakers and lawyers, programmers are at a better place because programmers have the tools to help us simplify code. Less readable code is also culturally frowned upon.

Lawmakers, on the other hand, are stuck with imprecise human language to write precise laws. Inventing new languages for writing laws is not an option. Think of it as a surgeon using a kitchen knife to perform a surgery. It’s doable, but it’s very hard to be as precise as the surgeon would want to be. That’s probably why laws are so hard to read, understand, and interpret.