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Tuesday, September 17, 2024

Financial Planning & Indian Ethos

 

Indian ethos impacts the performance of business by emphasizing on the concept like sacrificing individual desires in favour of social benefits, preferring long term benefits. Self-motivation and self-development helps a lot in development of business and its quality.

Indian Ethos in Management refers to the values and practices that the culture of India (Bharatheeya Sanskriti) can contribute to service, leadership and management. These values and practices are rooted in Sanathana Dharma (the eternal essence), and have been influenced by various strands of Indian philosophy.

Work values from Bharatheeya Sanskriti

1. Paropakaaraartham Idam Shareeram - The body is meant for serving others or for the higher common good.

2. Atmanomokshartham Jagat Hitayacha - Endeavors should be made considering the well-being of the world too, while considering the (spiritual) well-being of oneself.

3. Trikaranasuddhi - To consider work as a means to grow oneself in 'Purity and Unity of Thought, Word and Deed'.

4. Yagnaya charatha: karma - To engage in work as a sacred offering




The Purusharthas, also known as the "four aims of life," are foundational concepts in Hindu philosophy. They outline the essential pursuits and goals that individuals should strive for in their lives. The Purusharthas provide a framework for understanding the purpose and direction of human existence. The four Purusharthas are Dharma, Artha, Kama, and Moksha. Let's explore the relationship between values and each Purushartha:

1.      Dharma (Righteousness and Duty): Values Associated: Dharma is often translated as righteousness or duty. Values associated with Dharma include integrity, honesty, justice, and ethical conduct.

2.      Alignment with Values: Following Dharma involves living in accordance with moral and ethical principles. Upholding values such as truthfulness and compassion is central to the practice of Dharma.

3.      Artha (Wealth and Prosperity): Values Associated: Artha encompasses the pursuit of material well-being, wealth, and prosperity. Values associated with Artha include hard work, discipline, and financial responsibility.

4.      Alignment with Values: The pursuit of Artha is guided by ethical means. Values ensure that the accumulation of wealth is in harmony with principles of honesty, fairness, and social responsibility.

5.      Kama (Desire and Pleasure): Values Associated: Kama involves the pursuit of desires, pleasures, and aesthetic enjoyment. Values associated with Kama include balance, moderation, and ethical indulgence.

6.      Alignment with Values: While seeking pleasure, individuals are encouraged to do so within the boundaries of moral conduct. Values ensure that desires are pursued with respect for oneself and others.

7.      Moksha (Liberation and Spiritual Freedom): Values Associated: Moksha represents the ultimate goal of spiritual liberation and freedom from the cycle of birth and death. Values associated with Moksha include self-discipline, detachment, and spiritual wisdom.

8.      Alignment with Values: Living a life aligned with higher values is seen as a path to Moksha. Ethical conduct, selfless service, and the pursuit of spiritual knowledge are integral to the journey toward liberation.

 Relationship between Values and Purusharthas:

1. Harmony and Balance: The pursuit of each Purushartha is guided by values that emphasize harmony and balance. Balancing material pursuits (Artha) with ethical conduct, moderation in desires (Kama), and a commitment to righteous living (Dharma) leads to a holistic and fulfilling life.

2. Ethical Foundation: Values provide the ethical foundation for the pursuit of all Purusharthas. Whether accumulating wealth, seeking pleasure, fulfilling duties, or striving for spiritual liberation, ethical values guide individuals in making choices that align with higher principles.

             3. Integrity in Action: Values such as integrity, honesty, and authenticity play a crucial role in each Purushartha. They ensure that actions are aligned with one's principles and contribute positively to personal growth and societal well-being.

             4. Spiritual Growth: The pursuit of Moksha, the ultimate aim, is deeply connected to values that foster spiritual growth. Values such as humility, self-discipline, and detachment are essential for transcending the material world and attaining spiritual liberation.

            5. Social Responsibility: Values associated with Dharma and Artha highlight the importance of social responsibility. Pursuing wealth or pleasure ethically and fulfilling one's duties contribute to the well-being of the community and society at large.

            6. Guidance for Decision-Making: Values serve as guiding principles in decision-making for each Purushartha.

 

They help individuals navigate the complexities of life, ensuring that choices are aligned with principles that promote personal and collective welfare.

  In summary, the Purusharthas provide a comprehensive framework for understanding the diverse goals and pursuits in human life. Values serve as the moral compass that directs individuals in navigating these pursuits in a way that is ethical, balanced, and conducive to spiritual growth. The alignment of values with the Purusharthas contributes to a meaningful and purposeful life in accordance with Hindu philosophical traditions

Influence of Arthasasthra

 

Written by Kautilya, also known as Chanakya and Vishnugupta, around 350 B.C., Arthashastra literally means 'Scripture of Wealth'. To Chanakya, the source of livelihood of man is wealth and that for a nation the wealth is in the form of both the territory of the state and its inhabitants with variety of occupations.

Wealth is defined, in modern English, as “an abundance of valuable possessions or money” or “a plentiful supply of a particular desirable thing.” The father of capitalism, Adam Smith, in his book The Wealth of Nations, described wealth as “the annual produce of the land and labour of society”. This “produce” is “that which satisfies human needs and wants of utility.” In popular usage, wealth is understood as an abundance of items of transactional value.

 

Kautilya, also known as Chanakya, had a great understanding of wealth. He often termed it Artha. In the Artha Sutras, he suggests “Artha is the root of happiness.” Kautilya’s Artha is not just currency, but also material property and, most importantly, knowledge. “No wealth is greater than the wealth of knowledge,” he argues in his Neeti. That is because “Knowledge explains our being, as well as that which is in our possession (resources) and enables us to use those resources to get that which we want (wealth).”

 

In the second axiom, he says, “the root of wealth is Dharma.” Kautilya’s Dharma is never to be translated as “religion”. Dharma is good conduct. It’s that “which sustains” and that which empowers us to “do good to us as well around us” – our family and society. Anything that hurts any being (humans as well as animals) for no fault of theirs, is Adharma or against Dharma. Therefore, any Artha or wealth gained through the path of Adharma is called Anartha. Anartha, in Sanskrit, also means “disaster”.

Wealth is useless when hoarded without any utility to the one who possesses it. Modern economists will agree that hoarded currencies are detrimental to a nation’s economy. For Artha or wealth to be in shape, it must be used in transaction – either as an investment or expenditure. Kautilya defined hoarded wealth as Vyartha or liabilityIn Sanskrit, Vyartha also means useless. He advises, “Wealth has only three ends – it’s either spent on deserving people or things, misspent on undeserving people and things or just rots away and falls into the hands of others (deserving or undeserving).” Stagnant wealth is of no utility.

 

When wealth is used for something good, which includes satisfying one’s needs, needs of dependents, helping those who are less fortunate as well as those who are despondent, is Artha. It is important to note that Artha also means “meaningful” in Sanskrit.

According to Kautilya, the understanding of the ideas and ideals of Artha, Vyartha, and Anartha are key to earning, retaining as well as the rightful dispensation of wealth for one’s own as well as universal welfare. It also helps in establishing peace and prosperity in one’s family, society, the nation as well as the world at large.

A despicable person bereft of wealth, is often the one who’s bereft of knowledge or Gyaana. Knowledge, one must understand, is not just data or information. Modern educational institutions, often offer courses with the apparent intent to provide knowledge, but only end up providing some form of data or information, and a certificate to that effect.

If “knowledge” does not help you sustain yourself or those who depend on you, it is not “knowledge”, but data or information. They are subject to change. This does not mean data is useless, rather it is pointless without the knowledge and its application. Knowledge provides us with the ability to interpret data and information and use it to our best advantage. In the absence of knowledge, we suffer. In the absence of knowledge, we are ignorant. In ignorance, there is uncertainty bound with a certain fear. Fear causes mental unrest. Mental instability often makes us take detrimental decisions, causing loss of wealth and even poverty.

Manusmrithi

Yogi Adityanath, then a Member of Parliament and now the Chief Minister of Uttar Pradesh, wrote an article on his website on the role of women in Indian culture in 2012. He famously wrote that women could not be left free. He was echoing what had been prescribed in Manusmriti, which held the following:

5.148. In childhood a female must be subject to her father, in youth to her husband, when her lord is dead to her sons; a woman must never be independent.

…9.2. Day and night woman must be kept in dependence by the males (of) their (families), and, if they attach themselves to sensual enjoyments, they must be kept under one’s control.

9.3. Her father protects (her) in childhood, her husband protects (her) in youth, and her sons protect (her) in old age; a woman is never fit for independence .

In the Hindi heartland one often hears men wistfully say, “Ladki Hath se Nikal gayi” (the woman has slipped out of one’s sphere of influence). The insensitivity was reflected in an equally outrageous statement by yet another chief minister of a BJP-ruled state who wasquoted as saying, “If girls want freedom, why don’t they just roam around naked?”.

Surprisingly, or not so surprisingly, sanctioned character assassination of women and blaming the woman for sexual harassment and rape.

2.213. It is the nature of women to seduce men in this (world); for that reason, the wise are never unguarded in (the company of) females.

2.214. For women are able to lead astray in (this) world not only a fool, but even a learned man, and (to make) him a slave of desire and anger.

Verse 9.3

Sanskrit text, Unicode transliteration and English translation by Ganganath Jha:

पिता रक्षति कौमारे भर्ता रक्षति यौवने
रक्षन्ति स्थविरे पुत्रा स्त्री स्वातन्त्र्यमर्हति

pitā rakṣati kaumāre bhartā rakṣati yauvane |
rakṣanti sthavire putrā na strī svātantryamarhati || 3 ||

The father guards her during virginity, the husband guards her in youth, the sons guard her in old age; the woman is never fit for independence.—(iii).


The Vice Chancellor of Jawaharlal Nehru University, Santishree Dhulipudi Pandit while delivering the keynote address at the B R Ambedkar Lecture Series organised by the Union Ministry of Social Justice and Empowerment on Monday (August 27, 2022).said that the Manusmriti has categorised all women as “shudras”, which is “extraordinarily regressive”.

In the modern world, wealth takes different form of assets like listed /unlisted equity shares, debentures, derivatives of various types, luxury items like yacht, Car, airplanes and helicopters  in addition to gold,  animals land and buildings. Mutual funds are portfolios made of a variety of assets with varying risk dimensions. In pursuit of wealth & progress, people can rely on these asset forms to create niche opportunities for personal wellbeing and that of family.


One need to understand manusmrithi as something written at a time education was not allowed to girls generally. They were seen as objects of pleasure only in those societies at the time it was written. Therefore no need for taking it as it is literally to the modern  world. Today women have equal opportunities to get educated, vote, and get elected to houses of assembly/parliament. Investment decisions are taken by the elderly woman of the family in certain parts of the country. Ration card is issued in India in the name of the elderly woman of the family.

 Given the above traditions and ancient writings, financial planning is required for every family and for every member to meet their earthily life requirements irrespective of the gender. Whether father,  husband or son  take care of the women in the family financial planning is unavoidable.  In financial planning mutual funds come handy by making maturities suitable for any need.


Happy reading



Monday, September 16, 2024

Financial Planning & Christian Life

 

… "The earth is the Lord’s and the fullness thereof," wrote King David in Psalm 24:1-2, "the world and those who dwell therein, for he has founded it upon the seas and established it upon the rivers."

Every spending decision is a spiritual decision. Ask yourself if your purchasing aligns with your values and what God would have you do with your money. After all, we are simply managers of His resources. To be intentional with our money, often means budgeting for future goals and expenses, as well as present needs. 

Only let your manner of life be worthy of the gospel of Christ…(Philippians 1:27).

Understanding that we are merely stewards of these resources and that God owns it all, can help us reorder our spending decisions, and challenge the amount of power that money has over us. Since we are not God — not sovereign, omnipotent, or omniscient — we don't know the future. We can only trust God to guide and sustain us - not the amount of money in our bank account/cash at home.

Christian life is gospel based, prayer saturated and faith oriented…… If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you. – James 1:5 (NIV)

 

Diligence and Planning

Proverbs 21:5 states, “The plans of the diligent lead to profit as surely as haste leads to poverty.” This verse underscores the importance of diligence and careful planning in financial matters. Biblical wisdom encourages believers to approach their finances with a thoughtful and strategic mindset, emphasizing the value of setting goals and devising plans to achieve them. The principle of diligence teaches that success in financial matters is often the result of careful planning and disciplined execution.

Faithful Provision and Trust

The Bible assures believers of God’s faithful provision. Philippians 4:19 states, “And my God will meet all your needs according to the riches of his glory in Christ Jesus.” This principle encourages individuals to plan and budget with a sense of trust in God’s provision. While responsible planning is essential, it is equally important to recognize that ultimate security comes from trusting in God’s faithfulness. Planning and budgeting, when rooted in faith, reflect a reliance on God’s guidance and provision.

Stewardship and Accountability

The biblical concept of stewardship plays a pivotal role in planning and budgeting. In the Parable of the Talents (Matthew 25:14-30), individuals are entrusted with different amounts of resources, and they are held accountable for how they manage what they have been given. This principle emphasizes that every individual is a steward of the resources provided by God and should, therefore, plan and budget in a way that reflects faithful stewardship. It calls for a sense of responsibility and accountability in managing financial resources for God’s glory.

Spend Less Than You Earn

The wise store up choice food and olive oil, but fools gulp theirs down. (Proverbs 21:20)

Advisors often encourage clients to have a budget (or a “spending plan,” as we like to call it) for several reasons, including:

  • If you don’t know how you are currently spending your money, it can be hard to plan for the future. In order to identify where you want to make a change you need to first know where it’s all going. Not to mention, the largest expense in retirement is living expenses; planning for retirement without knowing how much you need to live can be nearly impossible.
  • Sometimes people who don't live on a budget can find themselves in debt without realizing it. Spending less means that you are able to avoid debt and take care of your other financial responsibilities first.
  • Online tools, apps, or even a yellow pad can make it easier to track your spending habits. This way you're not caught by surprise at the end of the month when your bills arrive. 
  • Using cash rather than credit cards, checks, or online payments can actually help you spend less. People often spend more money when using plastic; someone could buy $50 worth of groceries but still feel like they haven't spent anything because there's no receipt, money exchange, or money taken out of an account. Having a budget may help you identify certain areas where using cash is a good idea.

It also helps to practice living within one's means and not carrying high levels of debt from one month to the next. It’s a good idea to develop a spending plan based on income and expenses (and creating categories for where money should be allocated). The number of categories or complexity is up to you. It should be a spending plan that is meaningful for you and how you spend your money. Developing a budget may seem daunting initially but sticking with it over time will help develop good habits that will benefit you in the long run.

Spending decisions are spiritual decisions. When you build your spending plan, spend time in  prayer. Ask Him to give you wisdom about how to handle your finances throughout the month.

Before making any major purchases, prayerfully consider whether those purchases fit into God's plan for you and your family. 

As you build your spending plan, don’t forget about savings. Commit to putting a percentage of all new income into savings as soon as possible. Having savings set aside will provide peace of mind when emergencies arise or you want/need something unexpected. You'll never regret your choice if you save up for a purchase instead of buying something on credit just to have it right now.

Getting more bang for your buck is simply smart economics — whether it applies to food, clothes, cars, homes, or vacations. Spending wisely can create lasting abundance while taking care of both current and future expenses.

Avoid the Burden of Debt

The rich rule over the poor, and the borrower is slave to the lender. (Proverbs 22:7)

(Proverbs 22:7)

"The wicked borrow and do not repay, but the righteous give generously." (Psalm 37:21)

 

Taking on debt means making an assumption about the future - the assumption that you will be able to repay. 

Debt can be a very dangerous thing if you find yourself unable to pay. If you're tempted not to make that month’s payment - don't give in!  You won't be doing your future self any favors. Revisit your budget and figure out where else you can cut back.  If you are in a repayment phase, realize that it may be difficult at first, but make sure you keep up with the process until those debts are paid off. Then work on keeping them from coming back again.

The best way to avoid debt is to adopt a pay-yourself-first mentality when budgeting your finances. Save for your goals in advance; if you know you’re going to need a car in 2 years start saving now. If you budget for your needs such as gas and groceries before paying anything else then you will not likely be strapped for cash.

 

Build Financial Reserves and Liquidity

 

Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. (Proverbs 6:6-8)

(Proverbs 6:6-8)

This principle supports saving for the future with a focus on liquidity and preventing financial hardships by building a rainy day fund. The Bible says in Proverbs 21:20, "There is treasure to be desired and oil in the dwelling of the wise; but a foolish man squanders his wealth." 

A good rule of thumb is to keep 3-6 months of living expenses in a savings or money market account. These are funds that you may quickly access if the washing machine breaks or you unexpectedly lose your job. For more long-term future expenses, consider investing 10-15% of your household income into retirement accounts. If you have children, you might consider creating and funding educational savings accounts.

We should save and invest so that if, and when, unexpected things happen, we are prepared — not so that we can be greedy or presume upon the future. The Bible says in I Timothy 6:17-19, "Command those who are rich in this present world not to be haughty, nor to trust in uncertain riches but in the living God, who gives us richly all things to enjoy. They are to do good, to be rich in good works, generous, and ready to share, thus storing up treasure for themselves as a good foundation for the future, so that they may take hold of that which is truly life." In Ecclesiastes 11:2 we are reminded of the importance of diversifying. Consider investing in way that reflects humility and across multiple asset types, companies, and countries.

 

Give Generously

But since you excel in everything—in faith, in speech, in knowledge, in complete earnestness and in the love we have kindled in you—see that you also excel in this grace of giving. (2 Corinthians 8:7)

 

Give generously. There is a difference between tithing, which often means giving a percentage of our income to the church and being generous with how we use our money. 

Are we holding too tightly to our money, when there are kingdom purposes or needs directly in front of us? Are we in a position to be generous towards those who are close to us? How do our friends and family see us using our money? 

Giving to mission-driven charities is a powerful way to make a difference in the world. Choose an organization that helps solve a problem you feel strongly about. Ask God to open your eyes and heart to a current need or charity. Research an organization's impact and stewardship reports. Then consider giving to the causes you believe in.

We may never stop trying to grow financially, but we should also realize that many people live on far less than we do. The U.S. Census Bureau estimates that 37 million Americans live in poverty, and around the world, one out of every ten people lives on less than $1.90 per day. As people of faith, we are called to use our resources to make a difference for people who are struggling or may have less then us.

Don't forget you can be generous with yourself as well. You are, after all, a person with a mind, spirit, and physical body that all need attention. Work hard and rest well so that you are healthy both physically and spiritually. What would happen if you didn't take time off? How would it affect your relationships? Would you lose sight of the fact that there's more to life than what you do every day? 

Think and Plan Long-Term

 

Be very careful, then, how you live—not as unwise but as wise, making the most of every opportunity, because the days are evil. Therefore do not be foolish, but understand what the Lord’s will is. (Ephesians 5:15-17)

(Proverbs 16:9)

Look at the life you want now and well into the future, recognize that it won't always be easy or straightforward (God may even choose to modify your desires at some point). Then determine and act on a plan that can help get you there.

The Bible provides ample guidance on how Christians should approach their finances:

  • Trust in the Lord with all your heart.
  • Lean not on your own understanding.
  • In all your ways acknowledge Him.
  • He will direct your paths. (Proverbs 3:5-6)

People with a lifetime commitment to Christ have the responsibility to be intentional with their money, but they also have the blessing of confidence in God's plan. While we need to give God the freedom to modify our own plans, it’s still a good idea to focus on short-term and long-term spending, savings, and investing. Keeping biblical stewardship in mind, it makes sense to focus on investments that will support you into retirement, but also beyond, enabling you to leave more behind for your spouse, descendants, and/or the kingdom of God.

Proverbs 13:22 says, "A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous." In Biblical times, inheritance didn't necessarily mean money. It often meant land, and it conveyed a sense of honor, provision, and family status.

As Christians, we want to leave behind more than a financial legacy. For most of us, the impact of what we do with our time and talents will far outweigh the impact of the estate our heirs will one day inherit.

In fact, good stewardship of money is just one small part of passing on a legacy to our children… and their children… and their children.

In Genesis 15, Abraham worried that his wealth would go to a servant instead of to his own child. Jacob famously snookered his brother Esau out of their inheritance. And Joseph's sons received Jacob's blessing at the end of his life. "In them," Jacob said, "let my name be carried on."

These men were not just concerned with safeguarding their property so their families could prosper. They also wanted to keep the knowledge of God alive for their descendants. 

Other women and men in the Bible also left a legacy of faith. Moses gave his leadership position to Joshua. Elijah let his mantle fall on Elisha. Sarah left a legacy of faith and commitment for her people. And Jesus left His ministry to His followers.

Legacy of faith. You are your child's most important influencer. They are watching you and imitating you. Even if you don't see it now, you probably will. Make sure your children and grandchildren observe the vibrant Christian faith that influences your everyday life.

Legacy of good character. Lead your life with honesty, passion, and gratitude. Treat people well. Encourage others. Thrive.

Legacy of hard work. No one achieves something spectacular without working hard at it. A combination of patience and discipline, hard work is the only way to the top.

Legacy of family memories. Your children and grandchildren will remember the quality time you spent with them. They'll talk about the games you played, the books you read together, and the stories you shared with them. These memories will help carry them through the tough times in life.

Finally, you can leave a financial legacy. Judicious use of assets and responsibility to manage it needs to be instilled in children from young age. Children learn from what you did in your lifetime. So try to leave sufficient to keep them going and make it known to them

 

Sunday, July 7, 2024

Market Capitalisation Categorisation & MFs

 Market capitalisation (market cap) represents the total value of a company's outstanding shares, calculated by multiplying the current market price per share by the total number of outstanding shares

Market cap, or market capitalization, is one way of measuring a company's total value, based on outstanding shares of stock. Market cap is also used to compare and categorize the size of companies among investors and analysts.

  • Large Cap – Large cap companies are usually stable, reputable and well-established businesses that have a significant market share. They have market caps of INR 84300 crore or more. Due to the low volatility in comparison with mid-cap and small-cap stocks, the risk associated with investing in the stocks of large-cap companies is very low. However, the downside to this is that the growth potential of these stocks is also low.
  • Mid Cap – Mid-cap companies have a market cap ranging from INR 27600 crore to INR 84300 crore. While the risk of investing in these companies is higher than investing in large-cap companies owing to the increased volatility of their stocks, they tend to have a higher growth potential.
  • Small Cap – Small-cap companies operate at a smaller scale than large-cap and mid-cap companies. Consequently, their market cap is also lower (less than INR 27600 crore). Stocks belonging to these companies have considerable growth potential, but are also extremely volatile. Thus, they are often the riskiest options for investors.

 

These class of shares have significant differences in risk & return and related  parameters.

Comparison of different market cap classes

 

Particulars

Large-cap

Mid-cap

Small-cap

Mkt capitalization Limit

Top 100

101-250

251 onwards

Risk Profile

Low

High

Very high

Liquidity

High

Moderate

Low

Volatility

Low

High

Very high

Returns

Average

High

Very high

Growth

Reasonable

High

Very high


According to the SEBI circular no: SEBI/HO/IMD/DF3/CIR/P/2017/114dated October 6, 2017 on Categorization and Rationalization of Mutual Fund Schemes, schemes are broadly classified as:

a. Equity Schemes

b. Debt Schemes

c. Hybrid Schemes

d. Solution Oriented Schemes

e. Other Schemes


Further Equity shares are classified into Large , Mid and Small cap based on market capitalisation for uniformity in the Mutual Funds schemes that will enable easy comparison by investing public:

a. Large Cap: 1 st -100 th company in terms of full market capitalization

b. Mid Cap: 101 st -250th company in terms of full market capitalization

c. Small Cap: 251st company onwards in terms of full market capitalization

AMFI used to publish the market capitalization limits for these classes periodically as these are moving target with passage of time.

Movement of Market Capitalization Floor Limit

 Rs Crores

Period

Large-cap

Mid-cap

Small-cap

Jan-June 2024

84, 300

27, 600

Below 27600

July-Dec 2023

67, 017

21, 994

Below 21994

Jan-Jun 2023

49, 687

17, 409

Below 17409

July-Dec 2022

48, 898

16, 813

Below 16813

Jan-June 2022

47, 461

16, 441

Below 16441


It is always advisable to go through Scheme Information Document(SID) and Statement of Additional Information(SAI) given in the Offer Document(OD) brought out by the Asset Management company(AMC) to understand the risk characteristics in detail. 


Happy Investing

You may also be interested in 

1. Why Rich become more Rich and poor Middle class remain poor?      

2. SIP- The all weather investment approach                  




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