Market Corrections, Investing Behaviour and Building Wealth — Harsh Gahlaut in Conversation

Vivek Law:

Welcome to this episode of Simple Hai! Today, I am going to introduce you to a very special person.

Looking at him, you probably won't believe that he has more than 25 years of experience. He is very handsome and a sportsman as well.

But now, coming to what is useful for you: he is counted among the country's well-known financial planners.

And one of his biggest distinguishing qualities is that around nine or ten years ago, when hardly anyone was talking about digital—about how we could use digital to reach people and for investing—he had already started building his digital footprint.

Harsh Gahlaut is the Founder of FinEdge. Thank you very much, Harsh, for coming.

Harsh Gahlaut:

Thank you for so many compliments. Thank you very much.

Vivek Law:

I gave those compliments from the heart.

I remember meeting you for an interview around eight or nine years ago. Even then, you were talking about digital, at a time when hardly anyone was talking about it.

Harsh Gahlaut:

Absolutely. I think when we started, it was a completely unknown concept for us as well.

I think it has been about 14 or 15 years now, conceptually.

It was an idea at that time. We faced certain problems and felt that, going forward, digital could solve a lot of those problems.

The digital ecosystem didn't really exist then. We had to build our own understanding as well, but one solution appeared very clear: in the future, this was how we could solve a lot of problems.

I think that's where the idea started.

We didn't have expertise in digital. Conceptually, we saw digital as a problem-solving instrument and felt that it was very important.

Vivek Law:

So how did you get into financial planning?

You played Under-19 soccer nationals. Even now, you look like you're about to go out and play a game.

How did you enter the world of financial planning and investing?

Harsh Gahlaut:

At my age then, I really enjoyed playing football. I played a lot, played well and had a lot of fun.

But after that, I started working, and I think life took me in that direction.

I started working with a bank. I worked in investments, worked in private banking and helped set up private banks.

So my total work experience of around 12–13 years was in banking, and that's where the idea of setting up FinEdge came from.

Working in banking gave me a lot of experience. I learnt many things, but I also learnt many things that should not be done.

I realised very early that there is a certain ruthlessness when you join banks or financial institutions. To a large extent, it becomes revenue at any cost—keep selling products.

When you join, the first thing is that if you don't do two times your salary, you could lose your job; then it becomes four times. It's built into the system.

And if you're not ruthless, you will not survive.

So to survive and thrive, at some point you have to set aside morality and then focus on your career.

I think that was the starting point for me: this system is so broken; there has to be a better solution.

And when we were talking about digital and everything else, that was conceptually where it began: these are the problems, so what can we do to solve them?

Vivek Law:

Football, for sure.

Do you ever feel that perhaps you should have been born in this generation? I don't like calling it "our generation" because you still look so young!

But back then, having a job was very important. Choosing sports as a career was very difficult. Telling your family, "I won't take up a job; I'll play instead," was difficult.

Harsh Gahlaut:

I think that option was extremely limited. It wasn't even something you could seriously think about at that time, especially with football. Cricket was perhaps different.

Vivek Law:

And you're the son of an Army officer, so it must have been even more difficult.

Harsh Gahlaut:

Yes, absolutely.

At that time, for an average middle-class person, the option was to get a job. There was nobody behind you to take care of things. You had to build your own path and survive.

So I don't think choosing football as a career was ever really an option. That thought never even occurred to me.

Vivek Law:

You play golf nowadays. Are golf and investing similar?

Especially today, when everybody wants to earn returns faster. Even in golf, it takes time to go from one hole to another.

Harsh Gahlaut:

Actually, there is a very strong similarity.

People who don't play golf look at it and laugh. They say, "What kind of sport is this? The ball isn't moving. You're standing there, hitting it and then walking."

People usually make fun of golf, and people make a similar mistake with investing: "What's there to it? Put money in and it will double."

When I draw a similarity, one reason many people aren't successful at investing is that they start saying, "I want to earn this much. I want to earn more than this. I want a higher return."

The essence of golf is that you compete with yourself, not with someone else.

A good golfer can cut out all the noise and focus on what he is doing. Every time you play golf, you try to improve yourself a little.

I think investing is similar to a large extent.

When we say personal finance, I keep saying that personal finance is 90% personal and 10% finance.

If, in investing, we constantly look around and say, "He's doing this, so I'll do it too. He earned this much; why didn't I?", that's where the difficulty arises.

In the end, you have to focus on your own purpose and what you want to achieve.

To be a very good golf player, I think you have to be calm, focus on yourself and improve yourself. That's the greatest learning from golf.

Vivek Law:

You also go trekking, spend time in nature and do photography. When do you run the company?

Harsh Gahlaut:

Not with that much frequency!

But yes, I've always done these things. They're calming. They give you energy. They're experiences in life, and they're enjoyable.

Whether you're in nature or doing photography, you look at different things.

One thing I do every day is run five kilometres, no matter what.

These are things that make you feel very good.

And if you haven't done all these things, then why did you earn money? What is the essence?

These are the things you earn for, the things you strive and work hard for.

And in turn, when you do these things, you get more energy, you feel better, there's positivity, and you feel good about what you're doing.

Vivek Law:

Tell me, Harsh, about the recent correction.

The Sensex reached around 85,000 and then, in percentage terms, perhaps fell 9–10%, maybe 12% or 15%. If you look at the broader market, it fell somewhat more.

But you've seen much larger falls during your career—cycles where markets fell 30–40%, including COVID.

Before this correction, many people were concerned about investors who entered the markets after COVID, whether through mutual funds or directly. A lot of people entered.

For them, this was going to be a test of whether they could absorb a fall.

So how much did your clients trouble you? Were they able to adjust to and accept the fact that markets can fall too? Markets don't move in only one direction.

Harsh Gahlaut:

Neither life nor markets move in only one direction.

Absolutely. I think these are repeated cycles.

Every time we have seen that when the market is doing very well, everybody wants to invest. And when the market falls, everybody panics.

I think the essence here is: what expectations have been set, and what are the reasons for investing?

I always say that where you invest is not very important; why and how you invest is very, very important.

Our entire company is built around the why and how of investing. The "where" is a natural outcome.

Once I understand why Vivek is investing, what his purpose is, what his requirements are, what kind of person he is and what his goals are, only then can I suggest where he should invest.

It's like going to a doctor and saying, "I won't tell you my symptoms. Just give me the medicine."

It's not going to help you.

Unfortunately, what you said is correct. A lot of people entered after COVID.

The problem is that a greed factor came in. We saw many people wanting returns very urgently.

In a way, I think the younger generation felt they had found a shortcut—that the rest of the world was foolish and, "I can quickly go into the stock market. What could be easier? We'll make money."

And initially, they did make money.

But the stock market doesn't work like that.

In the end, what expectations are you going in with?

Let me give you a sports example.

If we talk about fitness, there are two types of people.

For example, financial wellness and physical wellness are two very important things, and both are major concerns in this country. Wealth isn't being created, and fitness is becoming a bigger concern every day.

There are many people who don't go to the gym at all. There's not much that can be done about that.

There's a joke where a man says, "It's been six months since I joined the gym and nothing has happened. I think I'll have to go there in person now and see what's wrong with the gym."

People don't realise that buying a gym membership is not going to make you fit.

In the end, you have to go and put in effort over a very long period of time for results to start showing.

That requires a process. There has to be a thought process. You need clarity about why you're investing.

Are you investing to beat other people on returns, or are you investing to create wealth for yourself?

What does compounding mean to you? Are you taking advantage of it or not?

To a large extent, whether it was the 2008 cycle, later cycles or COVID, some mistakes keep getting repeated.

While the industry might say, "We're very happy that so many new people have come in," my question is: our success isn't necessarily about how many new people entered.

Of all the new people who entered, how many had a happy experience? How many created wealth?

I think that's the yardstick we need to go back to.

And to some extent, I'm not very sure that we've been very successful there.

People are making the same mistakes.

If you look at derivatives, futures and options, a lot of young people went into them.

I interview a lot of people for jobs, and among the younger generation who finished their education and entered the working category around the age of 21 or 22, one common thing on many CVs is derivatives courses.

Just doing a derivatives course doesn't make you well-equipped enough to handle derivatives.

We saw a huge number of people doing derivatives.

Again, over the last two months, SIPs have become negative and outflows are huge.

There was a SEBI report during the peak of the bull market which said that, over a two-year period, 70% of people had not continued investing for even two years.

That was during a bull market. If the same report were done today, I don't know what it would show.

Those mistakes are happening because, again, if you go to a gym, everybody has the same equipment.

Every machine tells you whether it's for your chest, arms or legs. But not everybody gets fit.

If you get a personal trainer, the first thing that person will ask is, "What have you come to the gym to achieve?"

Someone will say, "I've come to gain weight." Someone will say, "I've come to lose weight." Someone else will say, "I've come for strength training."

They will ask whether you have any injuries.

Then they'll decide how you should start.

You don't have that when you're on your own.

You may see someone bench-pressing 150 kilograms while everyone applauds. If you go there on your first day and start trying to bench-press 150 kilograms, it's going to lead to a major problem.

A gym membership doesn't solve that problem.

There is a process you must follow if you're serious. According to me, that seriousness is the key.

When we talk about financial discipline, I actually believe discipline works across the board.

Typically, you will see that a person doing well in life will have a certain structure, discipline and habits.

Somebody who does well financially will automatically start spending more time on mental well-being and physical well-being.

I think the foundation of all of this is financial well-being, which comes from the habits and discipline you form.

That's very important.

I wish it were as easy as deciding today, doing a Google search for which product gave the best return in the last year—30%, 40%, 50%—investing in it and becoming wealthy.

But that's not the thought process that works.

Vivek Law:

You've created this Bionic Advisory Model.

One of the biggest difficulties in our country, in my view, is that there simply aren't enough good advisors.

There are mutual fund distributors, but they're distributors. If you consider advisors who are purely fee-only or genuinely on your side rather than product sellers, the number is extremely small for a country of 140 crore people.

An investor or a young person today wants to be more informed because they have access to the same smartphone that you and I do.

How do we bring them into this journey?

They can listen to audio messages, but perhaps they aren't going to read lengthy documents and all the literature that keeps coming out.

How do you bring them in?

This was a problem ten years ago, and perhaps the supporting infrastructure didn't exist then.

But isn't this still a major challenge? We're happy that five crore investors have entered, but the fact remains that we need to reach 50, 70 or 80 crore people.

Harsh Gahlaut:

Absolutely, it's a challenge, and it will remain a challenge.

In essence, for many of the good products that are appropriate for people, commission structures are low.

So naturally, for people who want to enter this business, the glide path for making money is very slow. You need patience.

That's one resistance factor.

Having said that, we've started from such a low base. It will take time to build.

Every day, I meet people who are building scalable businesses and new entrants who are coming in.

But the actual number of people practising may be even lower than the number you're talking about.

So it's going to take time. There's no doubt.

Over time, both the number of people advising and people's knowledge will need to get built out.

Somewhere along the line, when we urgently say that more people should come in, I don't think we're equipped today to handle so many people.

Vivek Law:

You were among the first to go digital, and today people say digital is perhaps the right way.

Harsh Gahlaut:

I think the problem isn't whether it's digital or not digital.

Conceptually, the underlying problem is revenue.

Today there are two or three—or actually four—types of business models.

One is RIAs who charge fees, which is very suitable if you have large investments. That's a good place to be.

Another is the MFD structure, where the fee is built in. That's the second structure.

The third is influencers.

And the fourth is these; supermarket, DIY businesses.

In the end, even if you go to a bank, they may talk about investments, but the underlying problem is that they may sell insurance and high-revenue products.

Financial supermarkets may talk about commission-free or free mutual funds, and then cross-sell products that you may never need to buy.

These are also difficulties.

I think, to a large extent, a balance will eventually be created where people become more informed about how to look for what is good for them.

Some amount of financial awareness will naturally get built. New people will come in. New business models will emerge.

I think that will happen over a period of time.

Vivek Law:

What are you doing?

I know what you're doing today, but when we look at the next 10, 15 or 20 years—which are considered very important years for India because of the young population and increasing investor education—has the time come for your business to make a big leap?

Harsh Gahlaut:

Absolutely. I believe that 100%.

It may take two years, four years or five years the time factor is something we cannot precisely know.

But I do believe in it.

When we started this business, our premise was that we would do good for people.

The same problems we're talking about existed then: how will revenue be generated?

We knew there would be no revenue for the first five years. We had that glide path. We said we would put money into the business for five years, but we would not change the essence of our morals and values.

It takes time to build that out.

Then the ecosystem came.

Today, when we build software, it comes after the first eight or nine years we spent getting our proposition right.

We've received very, very good feedback. We don't lose clients.

In the end, for you to be successful as a business over the long term—and especially if you want to scale and become large—a value system is very important. Culture is very important.

I don't know too many business models in the country like ours.

We have no revenue target, no product target, no sales target, no cross-sell target and no upsell target.

We don't reach out because we believe good investing is not a push product.

People will come to you at the right time when there is seriousness around it.

Coming back to the point, you put in a lot of thought and follow a process only when you're very serious.

If you're very young and experimenting with a little bit of money, that gambling-sort-of experience can also be important. But you're not yet a serious investor.

A serious investor will eventually reach out, select the right people and the right process, and then invest.

I think we're at the cusp of that.

We strongly believe that from here, within a relatively short period of time, we will have one lakh clients.

Over a longer period, we will have ₹1 lakh crore of AUM that we manage without losing our values.

That means, whatever happens, we will not do what is wrong. We will not start selling products or getting into sales targets at the cost of the people we serve.

Vivek Law:

For young people 20, 21, 22 or 23 years old where should they start?

Harsh Gahlaut:

When we were young and today, I often hear people say that this generation experiments a lot and does things differently but we did the same things.

When you start out, you need to experiment.

I talk about everyone's relationship with money. This is the time when you figure out your relationship with money.

You'll lose some money and gain some. You're young.

At that stage, you don't have too many responsibilities, so you can afford to play around a little and see what fits you.

At that age, you will usually be a little more aggressive and willing to take much more risk.

It may not necessarily be good for you, but you'll still do it, and I don't think there's anything wrong with that. You should do that.

But as a safety net, start a boring SIP.

Vivek Law:

Which category should someone begin with?

Harsh Gahlaut:

At that time, you also want to use some money quickly to buy things.

If I were a twenty-something-year-old person, I would have two goals.

One would be something I wouldn't even think about for the next 10–15 years. Every month, I'd put away something like ₹500-₹1000 something that makes no difference to me and start a long-term SIP.

And the other would be to buy my next iPhone, buy my next car or take a holiday abroad.

So, I don't think I can answer your question with one category because of this reason.

Vivek Law:

I understand that because everyone has different reasons and goals.

Let me ask you differently.

One thing that is going to come into almost everyone's life is retirement.

Someone may choose whether or not to have children, or whether to have one or two children, but at some point almost everybody will retire.

What would you say about planning for that?

Harsh Gahlaut:

Time is on your side.

And if you're investing systematically, you're also reducing your risk over a long period of time.

So, it makes a lot of sense to go aggressive.

Today, if you go on social-media platforms, you'll get a lot of knowledge—mid-cap, small-cap, active, passive, index, crypto. It's overwhelming.

Earlier, there was a need to simplify things. Today, we've complicated them.

Twenty years ago, knowledge was at a premium. Today, knowledge is at a discount. It can actually kill you.

Everyone has knowledge now.

Vivek Law:

Everyone is an expert.

Harsh Gahlaut:

Yes, because an influencer's job is to come and distribute knowledge in order to look good.

They have no accountability towards you. They have no ownership.

Every time, they have to create new content that attracts people.

Some influencers used to give very different kinds of advice when they were sharing knowledge. But when they started their own businesses and raised money, the first thing they did was put that money into an FD.

You'll see content saying, "If you hadn't bought a car and had invested in Maruti Suzuki, you would have become so-and-so wealthy. If you hadn't bought a bike and instead invested in Royal Enfield, you would have become so-and-so wealthy."

Tomorrow, should I stop breathing and invest in a crematorium?

There is money to be made, but there is also a life to be lived.

If I wanted to drive a car at that point in my life, I drove the car. I didn't buy shares instead.

What's the point of earning money if you don't do these things?

Money is a tool to experience life, and that's very, very important.

One good thing is that Gen Z values this a lot. That's a very good thing because experiences are more important to them.

At the same time, you want to do well. You want to increase your standard of living. You want to have a better life.

Vivek Law:

But for that, investing is necessary.

Harsh Gahlaut:

It's very necessary.

So, you need to balance it.

A lot of people believe that in order to invest, they have to compromise on their lifestyle.

If you plan properly, you don't have to.

In fact, you can increase your standard of living.

Where you could take one holiday, perhaps you can take three. You can buy a better car.

It just requires a little planning. That's all.

There is nowhere written that you have to make some enormous sacrifice in order to invest.

If you have to make that kind of sacrifice, then don't invest. You don't need to invest right now. The time will come later. There's no such urgency.

Life is long.

But retirement is also getting longer.

Lifespans are increasing. Earlier, somebody may have needed to plan for only 20 years of retirement. Now, they may have to plan for 40 years.

Inflation will be there.

Nowadays, people talk about FIRE and retiring at 30.

When we were young, we used to think about retiring at 40. When we reached 40, we realised we didn't have enough money, so it became 50.

And by 60, whether you want to retire or not, someone may retire you.

To retire at 40 and then lead another 50 years of life afterwards, I think almost everybody has got their maths wrong.

They're calculating based on an old assumption of 20 years of retirement and not accounting for potentially 50 years of retirement.

That maths is wrong.

It's very, very difficult.

I know many people who planned for FIRE at 40 and, at 45, started looking for a job because they realised that their corpus wasn't sustainable.

So yes, to a large extent, it's wishful thinking. It doesn't work that way.

Also, over time, your requirements keep increasing.

The country's standard of living and per-capita income are going up.

Inflation exists at various levels. You can't simply go by 6% inflation.

Your education expenses may be going up at 11–12%. Healthcare and the luxury items required to maintain your standard of living can inflate at a much higher rate than everything else.

That becomes difficult to manage.

There are many aspects to this, but retirement is critical.

The earlier you plan, the smaller the amount you have to invest.

And if you lead a normal life and continue investing, you will do very well.

Vivek Law:

One last question, Harsh.

Advisory is very important.

Earlier, you gave the example of going to a doctor and explaining your symptoms.

We see a similar problem in mental health as well: there aren't enough professionals, and people may not be willing to go and seek advice.

How are you solving this problem?

Even understanding your basic risk tolerance is very important.

Without understanding it, people enter investments. Then, when expectations aren't met or the market falls a little, they realise they can't handle it and conclude that equity itself is bad.

How do we solve this?

Harsh Gahlaut:

It isn't only about risk tolerance.

The problem begins with expectations.

Nobody set the right expectations for you. Nobody guided you.

Unfortunately, if we look at the narrative again, it is all about saving money on fees and going direct.

The value of the person gets ignored because it's a service and you can easily override it.

But in the long run, if you take professional financial advice from someone, it isn't just about where you should invest.

That person will also be able to manage your emotions.

There is a saying in the financial industry that we are our own worst enemies when it comes to investing.

Everybody is attracted to money, and nobody likes seeing their portfolio go down.

But let me give you an example.

A lot of the noise that's created today ignores the significant difference between wealth management and wealth creation.

If I've already made a huge amount of money and I'm investing it to preserve that money and grow it slowly, my requirements will be completely different.

But if I want to create wealth which is applicable to 99% of people then if I'm accumulating money for a long-term goal, there is nothing better than a falling market.

Why wouldn't I want that?

I'm accumulating something every month and getting it at a lower rate.

Everybody understands this logic.

But when you actually experience it, your natural reaction is, "Oh no, what's happened?"

Because, as I said earlier, people often begin investing on the basis that, "It was giving 40%. I should at least get that much."

The same cycle plays out again.

You invest thinking you need to make 40% in a year. Usually, you start investing at a time when the market is at its peak.

Then you begin investing and suddenly you're sitting at minus 10%.

So, expectations matter.

Personal finance is not that simple in those terms.

It is very simple to invest, but you need a thought process and discipline.

Control is very important.

Vivek Law:

A couple of days ago, I was watching some of my old interviews and podcasts.

In 2024, I was speaking to a very prominent market expert. At that time, the Sensex was at 65,000.

Today, even after falling, the Sensex is around 75,000, but we're behaving as if there is complete chaos because we became accustomed almost addicted to 85,000.

Harsh Gahlaut:

Absolutely. One hundred percent.

It's about expectations.

If you ask people, they'll give you numbers. People have previously talked about 50,000, one lakh, one-and-a-half lakh very senior people in the industry who have spent a lifetime here.

These are all numbers.

Of course, if India grows, these things will happen automatically.

And I can give you very logical numbers.

I can tell you that when a country's per-capita income reaches around $2,500, with 140 crore people, an economy that is growing and a democratic system, then what happens?

People talk about a 20-year horizon as a golden era.

Maybe it is.

But again, my essential question is: are you investing because there's some competition going on in investing, or are you investing because you want to achieve a goal?

Whether your goal is achieved at 11% or 12%, how is that relevant in the end?

A lot of people might not like what I'm saying, but when I invest my own money, first, I don't look at my portfolio very frequently, and I almost never make changes.

Second, when I do look at my portfolio, I look at the amount I have invested.

And it makes me feel so good.

I think that if I hadn't started investing, this safety net that I've created wouldn't exist.

People are completely ignoring the savings aspect.

The question becomes whether I got a higher return than Vivek.

But how does that change my life?

My life depends on whether I become financially free, whether I can enjoy life, buy what I want, go on trips, not have too many liabilities and meet my financial goals.

Somewhere, all this excitement and the narratives being created are completely discounting the essence.

And, just like golf, the more you focus on yourself, the better it is for you.

Then you get a personalised plan that is right for you.

What is right for you may not be right for the person next to you.

That's the basic understanding.

It is that simple.

You need to have your basic common-sense understanding in place, followed by a disciplined process.

You should know your cash flows.

You should understand your own behaviour to some extent.

You should keep some emotional control.

You should prioritise your goals.

You should know which goals are so important that you won't tinker with them.

If for a month or two you need to follow a "save first and spend later" approach, that's okay.

If you start investing every month from a very early stage, you won't have to make major compromises later.

That's all there is to it.

It's very simple.

Vivek Law:

All right, we won't compete in finance, but you must teach me golf.

And if we go trekking sometime, you'll have to teach me a little of that too.

I don't think I'll be able to run with you.

But there are other things you can teach me photography.

Harsh Gahlaut:

I'm not an expert in any of these things, but I'm more than happy to.

Vivek Law:

Thank you, Harsh, for coming, speaking with us and sharing so much of your knowledge.

Harsh Gahlaut:

Thank you very much. Thank you very much. Thank you.