What are the barriers to wealth creation?
Mostly it is in the brain. Man has 3 parts in the brain – one is the simple brain that we got a couple of million years ago. This knows very little. It has simple needs – food, shelter, sex. This brain is a tribe loving brain. It is very much concerned about food (eat as much, what if there is no fire tomorrow?), have a big cave (safe to be inside, no sabre tooth animal can get you) and be worried about what others think.
Then there is the dog brain – needs love, affection, etc.
Then there is the human brain – politics, racism, etc.
So when you get an investment proposal it is your lizard brain which says ‘is everybody else doing it’, ‘will I look like a fool if I did it’ or ‘will I get rich doing it so that I can buy a bigger cave and have more food to eat’ kind of a question. Most of the world population is here. They are still in the wild forests worried about the tiger – even though we have moved into the cities where dangers much worse than tigers are out to kill us. The brain does not recognize many of these dangers – it is not wired to think of the dangers of over eating for example.
Now if there is something that if you do the BFSI will love you. Do you think this will make you rich?
One of those things is doing a sip in a big fund house scheme. Fund houses are happy if their aum increases. So when their performance is good, they want you to invest more. When the fund performance is not good, they want to remind you about ‘investing in difficult times’ and ‘return to the mean’. All the fund houses have done very well in 2015. Make no mistakes. Hdfc continues to be the biggest asset management (gathering) company, but Icici is strongly chasing it, and by May 2016 we may have a new leader. The smaller fund houses like Motilal Oswal have also been rewarded, and old fund houses with new vigor like Kotak have also done well. Is this attributable to Nilesh Shah, I have no clue. L&T Mutual fund, etc. have also improved their standing, but Templeton has not. Its good performance did not help in improving the gathering!
SIP is a very good thing to do, and it is a great habit. Keep at it, but keep looking at costs, that is the only thing YOU can control. So if newer funds with better track record beckon, go. As for the Aum game, it has not changed much. The top 10 fund houses still have 80% of the aum. I have no clue of how the concentration is when it comes to just the equity funds, I do not expect it to be very different.
Remember SIP will get you money for your goals etc – the lizard brain. However for getting real rich, you may have to be a contrarian.
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