We at mutualfundwala ponder over this fundamental question every now and then. Why should an individual or a family trust their hard earned savings in the hands of an entity or an individual? This is all the more relevant today as Investors can invest directly and save a part of their expense.
In our close interaction with various individuals, from our family of over 5000 investors, this is what we figured out :
We take pride in calling ourselves “advisors to middle class Indians”. We are extremely conservative in our approach to investments. We know perfectly well that our 90% of retail investors lose money in stock markets. In last 13 years not a single investor has lost money investing through us.
We take an extremely calibrated approach to investing. We will look at several subjective & objective parameters before recommending a scheme or a product
Following are five factors that are looked at before recommending debt or equity scheme:
|What We Do||What We Don’t Do|
|Recommend products that factor in the current market conditions and future outlook.||Recommend aggressive high-risk products only to satisfy investors need for ‘investing’.|
|Design conservative investment plans with very little weightage to past returns.||Pitch aggressive, high risk schemes based on past returns|
|Regularly monitor the portfolio and recommend changes.||Look up at the portfolio only when the investor is worried and calls.|
|Maintain logs of relevant conversation with the investor (with date, time etc.)||Have no recollection of what the client wanted.|
|Only deal in mutual funds no ULIPs and no alternative product like PMS, structured products etc.||Sell structured products with high commissions.|
|Only sell open ended funds (unless investor specially wants ELSS) that gives flexibility to exit.||Sell closed ended funds with lock in.|
|Give honest opinion about market, liquidity, macros and micros||Conceal relevant facts to collect the investment cheque.|
New to the world of mutual funds? This is what we can do for you….
Risk Profiling : Mutualfundwala, will access your risk appetite. This is the first step in suggesting a scheme or designing a financial plan. At time a retail investor has no realisation of his/her risk appetite. Let us illustrate: A working professional nearing 60, with no retirement planning feels that he has a high risk appetite. This thought process is a recipe for disaster. Another individual in the same age bracket with substantial alternate income (eg. Rental income etc) feels he is nearing retirement and has “zero” risk appetite. This too is factually incorrect. A hawkish look at an individual or family’s risk appetite is the starting point in looking at investment products.
State of Equity markets and the Economy: These are 2 extremely relevant factors for any investments for 3-5 years. Mutualfundwala will factor this in before recommending a product. Look at 2018. We have a situation wherein the economy isn’t doing too well. Oil is up. Interest rates are on the way up. Rupee is depreciating against the dollar. Macros don’t look good. And we have general elections in 8 months. In august 2018, stock markets seem overpriced. At this time, we recommend caution and patience for things to settle down and not get swayed by euphoria. Investors can start a sip or a 3 year STP and wait for the picture to get clear or things to settle down. Hence, Mutualfundwala will factor in the 2 related pieces (economy and stock prices) before recommending a Mutual Fund be it debt or Equity.
Tenure of investments and the objective of investment : These 2 variables determine if an individual needs to invest in debt or equity. Investors may invest in high risk equity with risk mitigation tools like SIP or STP. Let us explain; An individual who has saved money for his daughters marriage next year, need not use the equity route. Investment can conveniently go in debt instruments and generate 2-3% higher return than FD. Another investor who is 35 and needs to plan a retirement corpus can easily invest in equity and take the SIP route.
proactive monitoring of your investments: Once you have invested with Mutualfundwala, your RM will regularly monitor your investments and give you feedback at least once in 6 months. We will recommend changes and reasons for the same. This helps in beating the benchmark and generating a higher ROI.
We use the word “risk” very often. And have little idea of what it is. Risk is the possibility of losing something of value. Risk can also be defined as the intentional action that may lead to unpredictable results. Hence, when an individual (or an investor) exercises a choice or an action that may lead to “unpredictable, and uncontrollable outcome” is called risk.
Risk in mutual funds?
Now let us deliberate what is risk in financial investments. More so in equity or Equity mutual funds. We illustrate with an example. An investor, totally new to the word of investing, invests a lump sum amount in a small and mid-cap scheme. A year later he finds his investments down by 50%. Now when the investments were made a year earlier it may have seemed a smart one. There may have been some convincing reasons why small and mid-caps will go up. Investors financial advisor may have thought likewise. However, all this was done without factoring in risk. Hence it led to an “intentional action leading to unpredictable results”. This is a disappointing introduction to the world of investing. Risk can be cut on 3 fronts. Intentional action is made wiser with low or no risk. And unpredictable results are made largely predictable. Lastly dosage of risk is advised as per the investors risk appetite.
How will mutualfundwala mitigate risk?
You may have already made some MF investments and may not be sure if the schemes are the ones for you. This is what Mutualfundwala can do for you :
1. Investor is categorically made aware that results (returns) may come in 5-7 years. Unpredictable outcome is made largely predictable by increasing the time horizon.
2. Investors are suggested not to take the lump sum route. STP (systematic Transfer Plan), minimum period of 24 months. Unpredictability or probability (and quantum) of loss comes down.
3. Small and Mid-caps are not recommended. Multi cap and large cap-oriented schemes are suggested. This will bring down the risk.
4. Lastly suggesting the product factoring in investors age, financial status, liabilities etc. Good example is a retired pensioner, leading a comfortable middle-class life. He may be suggested a “risk free (or negligible risk) product” with risk free returns of 8-9%. Hence no unpredictable outcomes.
We at mutualfundwala, will give more attention to “managing risk”. As we fully understand that no investor likes to see his capital being eroded. And protecting downside will easily lead to a higher upside.
Started operations in April
2005 had 7 investors in
the first month
Jan 2008, the peak of bull
run, had 285 investors and
assets of 7 cr.
MAY 2014: Assets of
70 Cr, 1200 investors when
UPA II came in.
March 2016: AUM of
135 Cr and 3000
July 2017: AUM over
300 Cr and over 4400 investors.
Employee strength of 14
AUM of over 386 cr.
Over 5300 investors.