I came into a little money in 2003 after spending close to a year at the International Atomic Energy Agency in Vienna in a senior position. Being a UN organization, its civil servants are paid rather decently. After returning to India, I decided to indulge in my long-desired dream of investment in mutual funds. I had read about this magical path to the world of riches and had dreamt of doing this for a long time. All I required was a little capital.
Living in a place like Ahmedabad, one cannot escape talks about stocks, shares and investment. Small talk with my cousin Jacob illustrated to me the extreme fluidity and turbulence of investing in equity. By integrating over the risks associated with many equities, mutual funds appeared to have a less volatile temperament, which suited my risk-averseness. I decided to approach an investment company in Ahmedabad, to initiate me into this mysterious territory of mutual fund investment. They listened to my proposal very gravely and shared their illustrious history of guiding many novices like me into the dreamland of wealth. I was asked to sign some forms, which I did, and there I was, an investor!
I had only a vague idea about how financial markets worked, and the only way in those days to know how I was faring with my investment was to look at the NAV listings in the Economic Times. I did this for a few days and found it very tedious. Let the markets work their magic, I said to myself and got busy with more interesting things like my work.
After a few months I got a frantic phone call from my investment advisor who asked me to hurry up and go tho their office. It appeared that there was a market downturn and all my investments were turning negative. They said it was better to put the funds into floating-rate funds and wait for the storm to pass. Again I signed the papers put before me.
I realised within a short time that the investment agency managing my funds was rather conservative, seeking the safest funds to put the money in. By this time, the HDFC bank, where I had my accounts had started an online mutual fund investment service which I joined. My observation was that financial advisors from banks would proffer their advise to those who had the least clue about what was happening to their wealth. Perhaps because I was a beginner and not playing with large corpus, they did not proffer any investment advice and I was left alone to chart my progress.
Over time, I came to realize that the best financial advice on investments is ideally generated by the investor himself. There are reports on how financial advisors when asked for advice on and existing portfolios made of perfect low-cost, diversified packages advised on substantial rebalancing of portfolios guided primarily for their own gains in the reinvestment process. Economic Times report that on an average, investors advised by brokers had returns that were lower by three per cent a year. In the US, the current argument is about the so-called ‘fiduciary rule’, a law that says that advisors are legally obliged to put clients’ interests ahead of their own (1).
Dhirendra Kumar, CEO of Value Research, writing in Economic Times (2) recommends acquiring personal knowledge for being guided in financial investments. “Financial services are a zero sum game: the input, product and output of the business is all money. Being in a business, they have to make a profit, and the only way they can earn more is by ensuring you get less of it. For a given type of financial service, and a given competence with which it is run, the only way the provider can make more money is to give you less of it. This drives every interaction you have with your bank, insurer, stockbroker, mutual fund and those trying to sell you their services. The only way to make the right choices when you save, invest, is to arm yourself with knowledge and make decisions yourselves without depending on a salesperson.”
A rigorous assessment of the investment-worthiness of a mutual fund need analysis of the following factors: past performance, consistency of returns, conformity with your long term financial goals, risk associated with the fund, performance of the asset management company, cost or Total Expense Ratio associated with the fund and a host of others. Doing this type of due diligence is a full time task and perhaps feasible only for financial experts, which I wasn’t. Fortunately there are agencies like Moneycontrol and Value Research who do all this analysis and create their own database and allow customers to access the database on payment. Moneycontrol, born in late 1999, claimed to have a single-minded passion to become the country’s greatest resource for financial information on the Internet. It also provided a portfolio service where I could list the funds and watch its daily status.
The other database is Valueresearchonline, started by Dhirendra Kumar, which provides advice and insight to investors via his column First Page and the webinar Investors’ Hangout. The site also brings out the Mutual Fund Insight from 2002. Mutual Fund Insight has helped investors invest in mutual funds with confidence since 2002. It contains information, analysis, opinion and advice on mutual funds and personal finance. Each issue contains a comprehensive scorecard of all Indian mutual funds. This magazine is not for those looking for hot investment ideas. The magazine is a steady and conservative guide meant for those who want to enhance the returns on their long-term investments and savings without taking more risks than they can handle. and Mutual Fund Insight periodicals and the Mutual Fund Yearbook also offer guidance to the newbie investor. There’s a chapter on how to build a portfolio by choosing the appropriate funds. It also tells investors how to use the free online mutual fund portfolio tracker offered by valueresearchonline. com. At a cover price of Rs 695, it is terrific value for money. What’s more, you can buy the online version at a discounted price.
The site provides data on mutual funds, analyses the fund performance and provides a portfolio for tracking fund performance. Their magazines provide valuable information on the investment strategy.
Thus started my investment journey.
The enforced confinement to home due to COVID was a good reason for me to give more time to tend to my investments. I realised that I had no systematic data on how my investments fared over the years. What I wanted to build was a year wise growth of the investment; buying and redemption and the profits/loss account. The scattered account statements collected over the years and filed carefully was the first starting point in building up the investment record. This resulted in some unphysical situations, like the total annual investments going negative!
For the convenience of Mutual Fund investors, Registrar and Transfer Agents (RTA) CAMS and KFintech have come together to provide a consolidated account statement. This statement provides a comprehensive view of the investor’s holdings across Funds serviced by all the RTAs. RTA stands for Registrar and Transfer agents. These are firms registered with the Securities and Exchange Board of India (SEBI). RTAs facilitate record maintenance in mutual fund companies. They act as a single-window reference for the investors. As a result, they can collect all mutual fund investment-related information.
The extended investment history revealed to me that my investment performance has ranged from extreme imbecility to absolute brilliance. I hope that the analysis shall guide me in the future for responsible investment decisions. But transcending all my mistakes and foolishness, I have enjoyed every minute of investing in mutual funds.
The period 2002 to 2023 has generally been a good period for Indian investors, with the Indian economy and stock market both showing growth and development over this time. The Indian SENSEX, one of the leading stock market indices in the country, has seen significant growth during this period, with occasional fluctuations and downturns.
(2) Dhirendra Kumar, Economic Times Wealth, Feb 17, 2020