If you thought Madoff scandal would serve as a reminder against buying shit financial services you thought wrong. Simply wrong. Ego of the successful man is far easier to cater to…he/ she will fall for it much much faster.

Sadly I know some of these ‘event managers’ , wealth managers, brokerage houses…and others who organize such functions. I also know many rich people who attend these functions as well as wannabes who attend them. Recently I have got invited to one which i am not attending – even though it is good fun attend one or two to see how it goes.

For example one person with a net-worth of Rs. 3 crores (Rs. 30 million) who wanted to invest Rs. 50 lakhs in a mutual fund (fund of funds) with a 5 year lock-in, a 4% upfront load, fund selection cost of 0.07% p.a. + amc charges of the fund house! I used to be amazed earlier about such deals. Now I realize that this is how human beings behave. The only thing that i can do is sigh. This is because by the time they ask me, the cheque is already gone.

The event itself was a grand function arranged in a 5 * hotel. He was told that he had been selected for a big Wealth event – his relationship manager had called him 7-8 times to confirm. They were asked to come in formals for a lecture on Wealth management by an expert. At that lecture he was told ‘SIP is a good concept Sir, but that is for the person earning Rs. 25,000 a month – NOT FOR THE RICH like you’. His wife was stunned by the sho sha that was put up.

So even though this person was running many SIPs he felt (my assumption) that ‘Yes, maybe I have outgrown – and maybe Subra is still treating me like I am middle class’.

However in this case my ‘friend’ was not allowed to give the cheque without asking me – his wife did the good deed. I just re-engineered the transaction and he recoiled at the total impact of costs. However this happened because he did not part with the cheque at the event itself. Also analyse your own financial personality. If you are the easy to part with cheque kind of a guy, go to such meets WITHOUT your cheque book – remember if it is your OWN bank they can just get the papers signed, they may not need the cheque leaf..

If you are rich (or about to get rich)  and wish to invest your money – a) learn about investing – if your ego does not permit you to learn, understand that you do not understand b) invest in an index fund

Indexing is not the most efficient way of investing – but it protects the downside well. If you had invested Rs. 3000 in 2002 it would be worth Rs. 17000 – not bad is it? You would have paid out some money in fees, but got more than that in dividends – so overall you would still have your 17k. The result would of course been far better if you had done a SIP – thanks to the sharp downturn and recovery of 2008 and 09. Almost all fund houses have an index fund – would be happy to help you select :) .

This is much better than fixed deposits or other debt instruments…and by a mile.


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  1. Good one Subra. People don’t realize the hidden agenda. This blog reminded me of my bank rel manager inviting me to TAJ back in 2008 which I turned down. I totally agree with point a). Thers nothing like it. I beg to differ on b). In the last 5 years, the index has not gone anywhere. And I don’t see improving in the near future. Thats too long a period. You need a very big bull marker to make up for that opportunity cost. ( In the same time a lot of quality stocks have given tremendous returns). If one doesn’t understand equity, I think they should either consider pure debt investment or invest in a mix of FMCG stocks. Yes even at this stretched valuation..

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