Attended a gyan session by a fund manager who said why we should be buying equities NOW. Of course I have never heard any fund manager say ‘do not invest now, markets are overheated and over priced’. Never.

NOR do I hope to. After all in an aum based rewarding system even vegetarian fund managers with monthly expenses of Rs. 30,000 and annual bonuses of US $ 1 Million WILL not be allowed to say this. It is the CEO who runs the fund, is it not.

However when the PRINCIPAL tells his agents collectively, at the wrong time, it is worth chuckling. Loudly.

I did not hear the Principal say ‘The market is at a P/e of 21, a ridiculously high figure. We will not accept money now..in fact if you are exposed more than 80% to equity please take some money off the table – esp Infra stocks which are quoting at a p/e of 100.’

I am sure NONE of the IFAs heard this brilliant piece of advice, BECAUSE it was NEVER given.

My broker and I had discussed and sold off a few banks and infra companies SIMPLY because the p/e was too damn high when the index was at 21k…NOT BECAUSE THE MARKET WAS HIGH.

Nor did I hear another fund house say ‘Subra FMCG stocks are doing well because there is no regulator s….ing up the industry…however p/e of 122 and dividend yield of 0.90% is not the greatest number if that is what you are looking at…SO WE ARE SHUTTING DOWN acceptance into that fund…’ Well life goes on.

If you are a fund manager running BUY ONLY FUNDS…why the f… are you not putting a disclaimer and say “I will tell you all the buying opportunities, BUT will never, ever tell you when to sell” I have a vested interest in the aum being high ALWAYS…if the market is up I get more fees and less if the markets are down”.

Sad Satyam (truth) may be Shivam (bitter) but rarely Sundaram (beautiful)….LOl

  1. Hi Subra Sir,

    That’s a good observation, as usual – No fund manager ever says it’s bad time for fresh investment or it’s good time for redemption.

    Yet they say, retail are most susceptible to greed and fear – “buying high and selling low”

    Also, please clear one of my doubt’s, if i understand the AUM and expense ratio concept correctly, If one invest’s Rs. 100/- in a fund.

    Positive Scenario
    In year 1 – the fund expense takes away roughly Rs.2/- of it as expenses.
    In year 2 – assuming the fund get’s a return of 20% on the rest 98/- i.e., 117.6, the fund expense again eat’s away another (2% of 117.6) Rs. 2.35 from the 117.6 ultimately making it 115.25.

    Negative Scenario
    In year 2 – assuming the fund gets a negative return of 20% on the rest 98/- i.e., 78.4 , the fund expense again eat away (2% of 78.4) Rs. 1.56/- so effectively leaving 76.84.

    Is this understanding correct ?

    Regards

  2. Subra, I do not want to digress, but I want to point out an interesting/pleasant piece of advice I got from ICICI Pru life. I had invested in their ULIP starting fom 2004 in SIP mode. My fund allocation was 100% equity. During Jan 2008, when market was at peak, somebody called from Pru life and advised me to switch to 100% debt, and lock the gains, since the market was at peak. Now, by that time, I had grown suspicious of anything that was told about ULIPs, and I als considered myself a long-term investor. So, I told him that I would just continue with the same allocation.
    I think this was a good customer service by ICICI Pru.

  3. Sir,

    But I found IDFC Premier Equity which won’t accept subscription all the time. They are saying that they accept the subscription only when the fund manager find some buying opportunity. But anyone can start SIP anytime on that fund. It also gave positive return last year

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