The new financial year starts today. It is a day to make new beginnings.
Today, I would like to share with you all that I learnt about investing in all these years. It worked for me, I hope it works for you too.
Here’s myMaster List.
Remember, if an investment is not offering you a guaranteed return, then just ignore it. Risk is for losers. I need certainty.
Here are a few good things you would like to read this weekend. Why you should save more You probably by now know and understand the power of compounding. You also know that in the equation, what is in your control is the P (your investment) and the N (the time you can keep it for). … Read more
You are on this forum to learn more about money, investments and behaviour.
I am sure you have done a great job so far. You have made investment decisions based on your reading and understanding. And most of them have been ‘so far, so good’.
However, you would not mind an opportunity to learn more, right? Great!
It will be important to note here that the process of learning is powered by practice and reflection.
While practice is the art of perfecting, it is reflection which provides for insights through serious evaluation of the practice and principles.
Today, I intend to take you down the path of ‘reflection‘.
Welcome to the second edition of Dhan Ki Baat. In the previous edition, I had written about ‘making money even when you are sleeping’.
It is a very tantalising idea and in times to come, we will explore it further.
In this second edition, I want to cover the other side and that is – ‘losing money even when you are sleeping‘.
Sounds scary. It actually is. Protecting your money from undue influence is equally important.
There are several entities out there to rob you of your money in a very sophisticated, legal way.
You deal with them on a day to day basis and in some cases trust them blindly.
The one at the forefront of this robbing act is your bank. Once you enter in bank’s official records, it is hard to come out and it is even harder to resist their advances.
It reminds of the famous Eagles song – Hotel California.
The famous line from the song – “You can check-in any time of the year, but you can never leave.”
The song is one of my favourites but for different reasons.
Now, let me recount a brief story to you.
“Hey, great news! AMFI, the industry lobby of mutual funds, has been able to seek a big concession from SEBI.”
When a colleague broke this news to me, I instantly asked:
“Will it make it easier to invest in mutual funds?”
“NO”, he said.
“Will it make mutual funds simpler to understand?”
“NO”, he said again.
“Will I finally be relieved of the post sale trauma and get better service?”
“NO, NO, NO!” By now he was irritated.
“Oh! Then what is this big thing for?”
“It is not about the investor. It is about the fund industry. They finally got SEBI to relent and allow celebrity endorsement.
Soon, you will see an Amitabh Bachchan, Saina Nehwal, Virat Kohli, Vijender Kumar, Geeta Kumari Phogat talk about mutual funds and their benefits.”
“Ah!” I felt disappointed with this revelation.
The conversation ended but my thoughts didn’t.
This article assumes that you understand active vs passive funds. Click here to read the primer.
Index funds as well as ETFs or Exchange traded funds are very popular in US and Europe. So much so that Vanguard, the largest mutual fund company in the world, offers only ETFs.
ETFs follow a passive management style. They simply mimic the index in terms of its holdings and produce a similar return too. The cost of these funds is very less since there are no fund management charges or active trading involved.
Now, seeing the popularity of these funds, it comes as no surprise when the investor, more specifically, the NRI investor comes asking for ETFs and Index funds to invest in.
The reasoning is clear – beating an index consistently over a period of time is a difficult task. The investor is better off investing in an ETF based on an index thus save expenses and improve his returns.
Let’s test this hypothesis as of today.