I like and love mutual funds and have earned a lot of money because of the MF industry. Even the training that I do in banks or for doctors is based on the fame and fortune I made in the direct shares and mutual funds! However, blogging has its own risks …and I have made a lot of enemies.

One concept that the advisors and the employees of mutual funds do not understand or accept is the word ‘volatility’. So when I wrote about the ‘bucket’ theory of withdrawal there was a lot of criticism and feedback largely saying:

  • withdrawing from a balanced fund is possible
  • the debt portion allows me to withdraw from a bal fund and it has given me good returns over the past 2 years

Let me come to my objections. By the way this advisor sells SIP and according to some of his friends he ‘promises’ 18% (minimum) if they do a SIP for a 5 year period. More of that in a later post.

What is wrong with this theory of “Invest Rs. 10,00,000 and invest Rs. 10,000 a month for the rest of your life theory”. Well I do not like it, that is all.

It is amazingly stupid to make 10 year projections. Period. Full Stop. Repeat It is amazingly stupid, super stupid, to make 10 year projections. And a Retirement plan can last 30 years. None of us can make such long projections and hope it to be right. Unless of course you are a pink paper which can run a headline “Funds which will give you CONSISTENT double digit returns over the next 10 years”. It takes some guts and some foolishness to do that.

So if you take 19 months data and say “I withdrew 1% every month and I think it will work for the next 37 years” – you have to brave, and damn foolish. I am not saying that people do not make statements, only thing is I find it amusing.

Let us say you invested Rs. 1,00,00,000 in a balanced fund in 2015 and waited for 2 years befor you made your withdrawal of Rs. 100,000 per month from Jan 2017 and continued till say 2020..and the principal remained at Rs. 99,08,900. Great there is not much of a dip in the principal that you invested and you got your return. Now take 3 years return from 2020 to 2023 as -3%, -1% and -18%. What happens then to the theory? say the corpus drops by Rs. 36L..all thd withdrawals are coming out of your principal.

NOW TELL ME HOW WILL YOU FEEL ABOUT THIS DROP IN PRINCIPAL? Will you panic? what if you have ONLY Rs. 65L left after this draw down and you are just 70 years old? Remember your money has to last till your age of 100 years.

What is you panic, want to throw up, pull your hair…AND WORST OF ALL…REDEEM the whole amount and decide to put it in debt funds. Or bank fixed deposits?

Volatility is not a risk of what market does. It is a risk of what you do in response to what the market does.


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  1. “Volatility is not a risk of what market does. It is a risk of what you do in response to what the market does.” – Killer statement sir.

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