How should I invest in equities?

IPO or secondary market? Direct equities or mutual funds?

Mutual funds or PMS? SIP or lumpsum? Why not a ULIP?

Frankly these are not questions that are easy to answer. The media does not make things easier. In fact I have not seen such a discussion on TV. No clue why.

I have not been able to answer this question for myself – forget answering this question for others. There are 2 big company CEOs who constantly have their portfolios reviewed by me – the equity portion of it. One of them is in financial services.

There are 3 fund managers who talk to me at least 6-7 times a quarter about the markets. Then there must be a dozen brokers who chat up about their investments.

Largely it is to get an unbiased view about what is happening – and this after I have semi-retired. What one super HNI told me was interesting. He said “There are 20 competent Hedge fund managers in the world and there are 1000 funds. In Indian conditions too, there are 10 good fund managers but we have 42 mutual funds”. Damning, but knowing this guy, should be true.

Feels scary to tell people – go only to mutual funds. Feels scary to send people just to index funds. ULIPs are not an insurance vehicle at all – the upfront charges and not being able to come out half way are HORRIBLE constraints. PMS horror stories are unprintable. What should the retail investor like you and me do? Mirror the index? One friend has a solution – completely American though – of starting a paid website (annual charges Rs. 100,000) for allowing you to track some brilliant souls who invest in the market. Not a high cost website development – but putting the risk document in place is really a nightmare, but I think it will fly.

What is my gain? He thinks I should provide equity content. LOL. Not a bad deal?

I do not think even that is easy. Explaining about equity is difficult. Personalizing it for a huge audience is really tough. Especially if you are not talking to all the investors.

So learn some reverse engineering. See the cost of the fund, see how much is the lock in and find out how quickly you can find liquidity for your exit

Not easy perhaps, but hey, nothing in life is easy, right?

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  1. Those who experience, don’t explain. And those who seek explanation, can never experience … the joy of investing in equities

  2. A detailed comparison and broad recommendations on index ETFs would be a big help. Not seen much of that, except a vague mention that “…many Indian ETFs have high tracking error…”

    Your critical views on all the biased financial advice that is rampant are very useful but the Dont’s are much, much more than the Do’s 🙂 It may be intentional but in case you are holding back to avoid getting misinterpreted, please do share–you can trust your readers to be judicious in applying the advice.

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