The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 3 • April 1 to April 15, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Market insight: With US markets facing volatility, investors are looking overseas.
- Strategic Opportunity: Indian stocks have outpaced the S&P 500 over 25 years. However, the market has recently undergone a short-term correction. This has created an attractive entry point for long-term investors. An opportunity to participate in the Indian market will be presented in this issue.
- Risk Alert: Recent poor performance in the domestic US markets has investors reviewing their portfolio strategies – especially those that are insufficiently allocated.
- Action Point: Consider further diversification of your portfolio with investments in markets that have a low correlation with the currently volatile US markets.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
Markets and consumers have shown increased pessimism this year. The back-and-forth from the new Trump administration surrounding tariffs has created volatility and apprehension among investors. The potential for increased trade costs and retaliatory measures only adds to this unpredictability.
Concerns about rising inflation, partly due to potential shifts in import costs, have further dampened market sentiment. This has led to worries about purchasing power and overall economic outlook.
Surprisingly, this period of uncertainty in the US has coincided with stronger performance in some international markets, including Europe and Asia. This is somewhat counter-intuitive since the US is the largest economy in the world, and tariffs would seem to be bad for our trading partners.
This may be because, beyond the short-term adverse effects, the US turning inward may catalyze other nations to develop stronger domestic markets and demand to become less dependent on the United States.
This presents an opportunity for those with a value-investing mindset. International markets that have lagged behind the US for over a decade now offer compelling entry points at more attractive valuations.
See below for some of the thinking behind our excitement for India and Indian companies. Another much smaller market that we recently visited and are excited about is Argentina in South America—a subject we will touch on in future editions of this newsletter.
India: A Compelling Asset Class for American Investors
Ridgewood's Executive Summary
- India has seen strong long-term growth, outperforming the S&P 500 over the past 25 years.
- Recent economic reforms are setting the stage for a cycle of prosperity and investment.
- Accelerating digitalization, a burgeoning middle class, and favorable demographics continue to power India’s positive outlook.
- Geopolitical shifts and the diversification of global supply chains are reinforcing India’s strategic appeal.
- The recent market correction in Indian equities presents an entry opportunity for value investors.
- India’s large market capitalization and relatively low correlation with US markets offer valuable diversification opportunities.
The Foundations of India's Market Success
Data over the past 25 years reveals that the MSCI India Index has consistently outperformed benchmarks like the S&P 500, delivering a compound annual growth rate nearing 10% compared to 7.7% for the S&P 500.
We have identified three factors that have helped drive this growth and continue to position the Indian market for long-term upward momentum:
- Demographics: 800 million Indians are below the age of 25. India also has a rapidly expanding middle class, now exceeding 300 million. Domestic consumption is a major driver of economic expansion, so this gives India a solid foundation for sustainable growth.
- Economic Reforms: Recent policy initiatives such as the Goods and Services Tax (GST), corporate tax cuts, and the Production Linked Incentive (PLI) scheme have helped modernize and formalize India’s economy. These measures are predicted to boost productivity, attract global corporations, and help diversify supply chains.
- Accelerating Digitization: India’s government has driven nationwide digitalization through programs like “India Stack” and the Unified Payments Interface (UPI). This has been remarkably successful – India now has 700 million smartphone users with access to one of the world’s most advanced payment systems. It has opened online commerce and financial services to millions who were previously excluded from the formal economy.
Diversification Benefits
India’s equity market is sizable, rivaling many major Western economies (such as the UK, Germany, Japan, Canada, and Australia). Moreover, the Indian market has a low correlation with US equities, historically in the range of 0.3 to 0.4. In a portfolio context, adding Indian equities can help reduce overall volatility and risk, offering American investors a hedge against domestic market fluctuations.
Geopolitical Tailwinds
As global companies move their supply chains away from China, India has benefited from increased foreign interest. For instance, India received record-high foreign direct investments totaling $84.8 billion USD in 2022, making it one of the top beneficiaries of the shift in investment flows amid anti-China sentiments.
Apple has also accelerated its diversification away from China, ramping up iPhone production in India. By 2024, India accounted for around 15% of global iPhone output, up significantly from less than 2% in 2020, and is expected to rise to as much as 30% by 2027.
Valuation and Risk
While investor enthusiasm has driven stock prices higher, recent downturns in the market have created an attractive entry point for long-term investors. Since September 2024, India’s Nifty 50 index has declined approximately 14%.
Despite this, as well as risks such as geopolitical uncertainties, cyclical political challenges, and global economic headwinds, India’s fundamentals remain strong. While short-term volatility is inevitable, India’s multi-decadal growth story makes it an opportunity well worth considering as part of a diversified global portfolio.
Ridgewood’s Commitment to India’s Growth Story
At Ridgewood Investments, we recognize the value-investment driven potential of India’s economy. We’ve recently launched the Ananta India Growth Fund which directly invests in listed Indian equities. If you want to learn more about it, please use the button at the end of the newsletter to book a free, no-obligation call with us.
Dynastic Wealth – Tips on Preserving and Building Your Legacy
When it comes to retirement, accumulating savings is only half the battle. The real challenge is effectively managing withdrawals to maximize your lifestyle while minimizing your tax burden.
Why Your Withdrawal Strategy Matters
Once your regular paycheck stops, you’ll rely primarily on your savings. Here are some strategies we recommend our clients consider as they build their retirement nest eggs.
1 The 3.5%/4.5% Rule
While the 4% rule is the most popular strategy, we at Ridgewood Investments advocate a plan we call the “Flexible Rule.” This approach starts with an initial withdrawal of 3.5%, adjusted annually for inflation, but with built-in flexibility. During strong market periods, you might comfortably withdraw 4.5%, whereas, in downturns, you can modestly scale back to 3.5% to preserve your portfolio’s longevity. This approach averages out at 4% but allows for increased enjoyment of retirement savings while protecting against market volatility.
2 Bucket Strategy
This strategy divides your savings into different time frames or “buckets”: short-term (for immediate expenses), medium-term (for the next several years), and long-term (for future growth). This approach helps ensure liquidity and avoids forced asset sales during market downturns, although it can mean holding substantial cash reserves, which may limit long-term growth. An alternative would be to hold these reserves in liquid stocks or money market funds.
3 Proportional Withdrawal Method
Under this strategy, you take proportional amounts annually from your taxable, tax-deferred, and tax-free (Roth) accounts. This spreads out your tax liability, potentially reducing lifetime taxes and creating a more predictable tax bill each year. This method is especially useful for retirees seeking stable and predictable withdrawals.
4 Dynamic Withdrawal Strategy
Also known as the “guardrails” method, this strategy adjusts withdrawal rates based on market performance and your spending needs. Setting upper and lower withdrawal limits helps preserve your savings during market downturns while allowing increased spending during better economic times. It is suited for retirees who are comfortable with some fluctuation in income.
The Importance of Tax Efficiency
Taxes can significantly erode your retirement savings. Optimizing your withdrawals will reduce your tax burden, preserving the money you worked hard to earn. Consider strategies such as:
- Utilizing Low Capital Gains Rates: Withdraw funds from taxable accounts strategically, especially if you can take advantage of the 0% capital gains rate.
- Managing Required Minimum Distributions (RMDs): Starting at age 73, RMDs must be taken from tax-deferred accounts like traditional IRAs and 401(k)s. Planning withdrawals carefully before and during the RMD phase can prevent tax bracket “spikes.”
- Saving Roth Accounts for Last: Roth IRA withdrawals are tax-free and not subject to RMDs. Delaying withdrawals from these accounts allows tax-free growth, providing flexibility in managing taxable income.
How Ridgewood Investments Can Help
Navigating retirement distributions can be complex, and everyone’s situation is unique. Ridgewood Investments offers personalized financial advice tailored to your retirement goals. Our team is here to guide you through tax-efficient strategies, account consolidation, and risk management to ensure your retirement savings provide you lasting peace of mind.
If you are interested in optimizing your retirement strategy, click the button at the end of the newsletter to book a call with us.
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
Gain Industry – Level Intelligence For Your Investment Strategy
Transform your approach to wealth building with institutional-grade insights. Schedule a private discovery call with Ken and the Ridgewood team to:
- Analyze your current portfolio positioning
- Explore sophisticated investment opportunities
- Design your personalized wealth architecture
Building generational wealth requires institutional-grade thinking. Let’s discuss how our sophisticated approach can work for your family’s future.
Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.
While investor enthusiasm has driven stock prices higher, recent downturns in the market have created an attractive entry point for long-term investors. Since September 2024, India’s Nifty 50 index has declined approximately 14%.
Despite this, as well as risks such as geopolitical uncertainties, cyclical political challenges, and global economic headwinds, India’s fundamentals remain strong. While short-term volatility is inevitable, India’s multi-decadal growth story makes it an opportunity well worth considering as part of a diversified global portfolio.
