Best thing for investors

In 1993/4 when mutual funds were being launched in India, I admit that I did not understand the ‘trail commission’ at all. I saw the charges in the USA and wondered how would a unit holder ever make money. The SALES LOAD – the one time charge for investing (believe me even for reinvesting dividends) was 8% (yes you read it right) and the annual charges ranged from 1% to 1.5%p.a. I worried about 8%, and not about 1.5%. I GUESS IT WAS JUST LACK OF UNDERSTANDING OF COMPOUNDING – which I accuse bankers, chartered accountants and doctors of!!

Now in the USA investing costs have come down dramatically. Annual charges are 0.03% in an index fund, the brokerage rates are a fixed amount (and not an ad valorem charge) and even in India you have brokerage rates tending to be zero.

Is this the best thing to have happened to investors in the past 25 years? NO. The best thing to have happened is the easy access to awesome quantity of intellectual work in the field of investing. I seriously mean that, no jokes. Today at the switch of a button you have access to work done by Graham, Buffett, Soros, Bernstein, Motley Fool, Zewig, Pragcap, …and all of that free. The blessing for which I’m thankful is the HUGE availability and own ability to learn from those who are wiser and have come before us.

“If I have seen further it is by standing on ye shoulders of Giants”, an expression that Sir Issac Newton adapted from great thinkers who came before him! So even this quote is taken! Individual investors today can read, think, reflect acnd create their own strategy. In 1993 when we did research about company performance, we marvelled at those who had the ability to COLLECT BALANCE SHEETS, news paper clippings, and had an army of clerks to organise the data. Making the cash flow, calculating the ratios, and doing a ‘SAME SIZE ANALYSIS’ – of reducing everything to a %age could take 3 days for a company like Supreme Industries – and this was much simpler than companies like Reliance Industries. Today all of this is available free. Of course by 1998 we had access to data bases like CMIE, for a fee – and it saved tons of labor.

Among Indian Investors only Parag Parikh (late) has made some attempt at writing – so our dependence is still on the American authors even for behavioral finance. An Indian book is long overdue. If nobody writes it – I mean the likes of Vallabh Bhansali or Chetan Parekh, I threaten to write a poorer cousin! Seriously, there is not enough serious Indian literature on investing. It is surely overdue, at least to kill the porn that is going around.

Today we know more about the world at our finger tips than Socrates or Aristotle would have known in all their lives. We should celebrate that. In all this can we forget to thank Bill Gates, Mark Zuckerberg, LinkedIN, Twitter which helped us access all this numerous amounts of world knowledge? And to put such huge computing ability at our finger tips. The youth of today may not understand all this – imagine a person born in 1920 thanking the world for electricity, telephone, and the railway line. Our gen born in the 1960s took this for granted. We saw the advent of television, computers, and a telephone. The kids of 1980s saw the telephone they day they were born. They had a phone and a personal car.

Think of it. So much to be thankful for. In fact I would be happy to do Thanksgiving every month. Except the turkey of course.

Whom have I not mentioned? OMG that would be a another post.

 

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3 Responses to “Best thing for investors”

  1. Since Subra will not include his own self for thanksgiving, I take this opportunity to thank him.

  2. So,

    when can we expect the “poorer cousin”?

  3. yet another great article. Thank you so much sir.

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