People think that looking at their portfolio everyday – or 5 times a day helps them be in control of their portfolio. Great show. Completely wrong.

The current boom in the market is not so ‘professional’ driven. It is driven by people who think that they can read websites and be their own fund managers. Of course they can.

What I like about this boom is that the investor (his own WORST enemy) lost his money without any professional help. He really did it himself. He was being advised by the media. It is easy to sell the theory that “you can visit websites, watch television, and create your own portfolio. Well the “exciting” part of the portfolio worked very well.

Disintermediation worked very well in almost all industries. A place where it really worked was in airlines, and then in financial services. The ad said “why go to a full service brokerage house”. Great Schwab.com and Icicidirect.com were great hits. Amazon.com was a great hit – so the person went to Schwab.com and bought Amazon.com. Again it  was misinterpreting Peter Lynch’s famous statement “buy what you know”. What Lynch meant was “research what you know” not “buy what you know”. I used to use ‘VIP’ undergarments, and use Jockey now. I own shares of VIP, Rupa, and Page industries. Of course Page is the most profitable!

The logic sold was “do you need an IFA to buy Hdfc Top 200, you can do it yourself”. That worked too. Then they were told you do not need superstar fund managers, you can prick the index fund. The client went and filled up the form which was a sip…after all he did not need advice did he?

He was then told he did not need an IFA because he could get all the advise online and in blogs. Great.

Online trading firms went further. Like Airlines, banks and intermediaries too went online. India’s largest Economic daily, banks, etc. became IFA and started selling Mutual funds, albeit very slyly. I found many investors say “we invest directly though Icici Direct”. They tried to blow the traditional brokerage model to bits. It has surely worked partially. One has to see what happens further. With no need for physical branch offices, no in-house research (most brokerage houses are willing to give ‘free’ research) not much of investment banking, they had one thing to offer their customers: the ability to trade at will. Most customers enjoyed this ‘illusion’ of being in control of their portfolios! Now the client did not need any opinion, view or of course second opinion! This became very easy for big corporate to rig and place shares. Still works well. For the investor, that degree of freedom might have frightened investors. Blogs were encouraged to say that investors will OBVIOUSLY have their own best interest. The ad was “who can be more interested in your money – you or your IFA?” Given that IFA are not really great at communication,  Investors were encouraged to believe that the magnitude of their portfolio’s return would be directly proportional to the amount of attention they paid to it. And if they saved professional fees, that was awesome.

this story requires…a follow up I guess!!

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