Ask any investment novice and he/she will tell you the most dangerous words in investing are “this time it is different”. Yes these are the famous ones.

Let us look at the less famous ones….

  1. We have a new product – the mutual fund industry has done nothing innovative since the SIP was IMPLEMENTED. NO. Not invented, but we copied it well from US.
  2. ‘Our back testing shows us that’ – omg how many times have we heard this shit?
  3. ‘We do think that the time for the passive funds are here’ – every fund house 340 schemes including one index fund.
  4. In the long run, equity will ALWAYS give you better returns than debt – I hate the word ALWAYS. However it is demoralising to do projections with zero percent return in equity for say 9 years at a stretch.
  5. “You need an exposure to foreign markets” -true, but please remember at what level of assets does an investor need this….
  6. For people being lured into trading – commodities, equity, gold – “Our proprietary  computer models show…..”. Seriously, nobody understands this shit.
  7. You must do some Futures and Options…
  8. Worst perhaps ” I am your Relationship Manager…from xyfz life insurance company and I am here to HELP…”
  9. An IFA Saying “I create alpha for my clients by  doing tax free switches in ULIP”.
  10. “As an IFA I can create alpha for you by …..”
  11. As an IFA I can tell you how to increase the SIP amount and reduce the SIP amount and DRAMATICALLY improve the returns..

I was talking to a bunch of enthusiastic IFA and warning them about what could go wrong…and here are some of the things that I told them…

  1. The world may not move towards fee based practice as FAST as they think it will.
  2. There is a lot of work to be done in Financial Planning.
  3. Guessing market direction is great fun, do it for 20 minutes at the weekend.
  4. A financial planner SHOULD keep telling himself/herself that their job is FAR BIGGER than market direction prediction.
  5. IFA must show clients scenario like 1% real return over 30 years to see their reaction to risk of equity underperforming debt over extremely long periods of time.
  6. Negative interest rate is more a signal of the forthcoming recession perhaps than people wanting to SURELY destroy capital over a 30 year period.
  7. Read science fiction – the things in the future are likely to be less and less predictable.
  8. Bangladesh will become a developed country  FAR before we can or will become.
  9. Absolute majority governments are far more arrogant than you wish.
  10. Majority governments achieve less for the markets than coalition.
  11. Market can spring brutal shocks and amazing surprises – which fund managers and IFA could miss COMPLETELY.

How many times did we think that a company was not worth buying at 100x of sales? and find that the client was lucky enough to buy a few shares? Imagine missing all such opportunities. Will the client be interested in listening to you or your fund manager?

How many times have you been right…and quickly turned wrong by time? I bought TaMo Dvr at 90, looked brilliant when it went to 250, now look foolish when the price is 54! The market is called “The Great Humiliator” by Ken Fisher, and not without reason.

If you thought your job is to get ALPHA by predicting markets (oops its a joke, I know), you better learn skating on banana skin.

Seriously, as an IFA or RIA there are far, far, far more important things to do than try to predict markets.

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. sir, for point no.5 – at what level (specifically at what ‘worth of equity corpus’) should an Indian investor consider looking at global markets/ US markets? My sense is they are more ‘mature and stable’ than us in-terms of overall economy, and so, the equity markets ought to be less volatile than ours, no?

Leave a Reply