So, I have the usual financial consultant ‘baraati’s’ coming to my doors (baraatis are the dudes who walk to the brides house in a hindu marriage – typically dancing along the way)
They pitch to me:
– High net worth banking services
– Portfolio Management services
– All kinds of ‘structured’ deals (most of them sound like eating radium pills and then going to pluto).
Initially I used to poke fun at their ‘churn your clients money and get rich syndrome’
But now I’ve stopped presenting all these arguments.
Whenever the Armani and Calvin Klein suited men and hot banking women come to my office, I present a simple printed chart to them (from mutulalfundsindia.com)
I ask them to study the numbers and to take their time and FILL IN the names of the funds on the left side that march the returns on the right.
ALL OF THEM SAY – ‘ Alok, it could be ANY MUTUAL FUND OUT THERE. Maybe the first fund that earned 25 % is HDFC or something and then the rest are the usual suspects’
hahahahahaha- just as they are say it, they see the smirk on my face and also realize that their PITCH JUST GOT KILLED.
I tell them what finally massacres them:
All these funds are publicly listed. I can take 15 lacs and spread them into 15 of these funds and then drink champagne all day long while these HARD WORKING FUNDS pay out 20 % (Blended) IRR for me – COMPOUNDED EACH YEAR. (Honestly, very few legitimate businesses turn out 20 % IRR each year) !
SO if you wanna work for me and suck up my money – Guarantee me that you will GET BETTER RETURNS than these for me – AND ALL MY MONEY IS YOURS.
If you can’t then GET LOST – coz I have no reason to humor you.
So far, 5 years and counting – NO ONE has accepted my challenge.
And the reasons are very simple:
– ONLY FOOLS think they can make money in ‘stock trading’. They are either trading because they don’t have a job or they are bored or they are mentally unstable.
– What turns profits today turns losses tomorrow – net net all stock traders barely afford to pay for their meals.
– Most private banking services only churn money via deals because it makes them fees
– Most clients of these private banks LOVE INSTANT gratification of DOING DEALS – buying, selling, trading etc etc – they don’t realize that they are lending money to these bankers to churn; generate fees and then pay their own salaries.
– MONEY TAKES TIME TO EARN.
If you don’t believe me – ask your grandfather. Stocks are no different.
My approach is to keep investing as and when I get liquidity, in the top listed mutual funds in the large cap ONLY EQUITY basket, and then SIT, SIT, SIT and SIT.
Waiting is the virtue of the rich. Ask Warren Buffett.
And then as the years stroll by, when I need money, I look at my portfolio and just shave (like parmesan cheese) some of the Mutual fund’s that I have HELD in the past 7-10 years and it allows me to buy my new car, my foreign trips etc etc
So, fire your bankers and stop wasting your precious time in trading.
Just invest in the top mutual funds for a MINIMUM 10 year horizon and the DO NOTHING
Unfortunately no one will ever give you this advise – because it doesn’t suit their purpose.
But its THE ONLY WAY TO GET RICH with your investments.
Oh yeah, and just to add a cherry on this cake – read How Soc Gen scammed me (which really also inspired this blog)
First Published on: Nov 28, 2011