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. This is surely tempting. Ease of investing online and saving part of expense is alluring. However, this Is just one part of the story. With over 2000 schemes in debt and equity category the choice of the scheme has to be correct. Going forward consistent monitoring of investments becomes extremely important. More so in the absence of an advisor. Rebalancing of the portfolio with the changing market and political conditions needs to be done by the investor on his own. Add to this various servicing needs like change of bank, updating of address, email ID’s, statement of capital gains etc. Hence, a Financial advisor may be indispensable. The moot point is “is the advise provided really worth it ?” . “Advise” is precisely what differentiates a good advisor from an ordinary one.
Is the advice and advisor worth it?
In our close interaction with various individuals, from our family of over 5000 investors, this is what we figured out about “ the worth it” advise and advisor.
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 over 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:
Equity Mutual Funds are essentially vehicles which hold ‘shares’ (or part ownership) of various companies. Retail investors view mutual funds as a ‘black box’. This “black box” is viewed with lot of scepticism and negativity. A layman would think mutual funds has a price (NAV) that may go up and down. Mostly down. Fear of losing money will keep investors at bay. As a result, total head count of investors in the Indian Mutual Fund space is barely 2 Cr. A penetration of less than 2%.
What are Mutual Funds, and more importantly how do they work?
Equity Mutual Funds (or Equity oriented Mutual Funds) are essentially vehicles which hold ‘Equity shares’ of various companies. As we know the ‘shares’ of these companies are listed (and traded) on various stock exchange, such as BSE or NSE. When you buy a unit of the mutual fund, the investors’ money is used to buy parts of these companies. The diagram on the right shows a Mutual Fund with the Top 10 listed companies. In India 80% of all equity mutual fund assets are spread across around 150 companies.
How does mutual funds grow your money
Mutual Funds tend to do well, if the companies they invest in do well. Performance of the mutual fund scheme is proportional to the growth in revenues and profits of the invested companies. Secondly, managers of the scheme, comprising, CIO, fund manager and analysts also play an important part. They decide what to buy, what to sell and when to buy and when to sell. How much to buy and how much to stay in cash etc. Lastly, macro-economic variables and sentiments also play a big part in share price movements and hence the performance of the fund.
Here’s the performance of some of the leading companies in India over the past decade. Hence, any equity fund owing these shares would have grown accordingly.
Indian economy is one of the fastest growing economies in the world, growing at close to 12% pa in nominal terms, and it is expected to grow at the same pace for years to come.The incremental growth in the economy in 2018 alone was equal to the size of the economy in 1996. This path of progress is here to stay.
If you want to create wealth, start by owning great companies through mutualfunds. Mutual Funds as a vehicle for you to own ‘shares’ of some exceptional companies has done an exceptional job in wealth creation. You do not need to bother about what to buy or what not to buy. Let the fund managers do their job and you (as investors) will monetarily benefit by investing and sitting tight.
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 will assist you with your existing investments.
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 :
We use the word “risk” very often, and have little idea as to what is Risk. Risk is defined as 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.
Now let us deliberate on 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 investment decision was 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. This Investors financial advisor may have thought likewise. However, all this was done without considering risk. Hence it led to an “intentional action leading to unpredictable results”. This is a disappointing introduction to the world of investing. This is risk and unpredictable result as loss.
Risk can be mitigated on 3 fronts. Firstly, Intentional action is made wiser with investments in low or zero risk products. Secondly, unpredictable results can be made largely predictable. Lastly, dosage of risk is advised as per the investors risk appetite, market valuations and other macro-economic factors.
Mitigation of Risk (in the above illustration) can be done in the following ways…
1. Investor is categorically made aware that results (returns) may come in 5-7 years. Hence, 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 as the products in itself is low risk.
4. Lastly recommending a product after 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 or unpleasant surprises.
We at mutualfundwala, will give more attention to “managing risk” then returns. We fully understand that no investor likes to see his capital being eroded. And protecting downside may 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.