But the cold, hard fact that is emerging lately is that those who invest on your behalf, while ‘experts' in their field, are not doing what is best from your point of view. Crisil, one of the leading credit rating agencies in India did some research which showed that the benchmark indices perform better in the long run than most ‘professionally' managed funds.
This comes as a bit of a shocker given how much faith we put in the professional money managers. Here you are, paying a professional to do the best job he can, but when you realise that he isn't doing so, as an investor and a customer, it sure does hurt.
The Lowdown on ‘Experts'
Have you ever heard of any fund advisor asking you to sell? You may have always heard things like - Buy if the stock market is going up, it's going to get better! Buy when the stock market is going down, it has hit rock-bottom! It would appear that it is always a good time to buy, but never a good time to sell!
Or for that matter, how many times has your broker told you to buy and sell your shares without offering you any concrete reasons? Buy, because it's going to go up! Wait, wait! Sell, because that's all it can gain!
The skeleton in their respective closets is that fund managers are usually gung-ho about buying advice, since they want their assets under management (AUM) to continuously increase. Brokers on the other hand, earn each time you trade, but get nothing when you hold. This is the motive behind their ‘tips' - to keep you trading. Holding may benefit you, but it does little favour to the little man you trust with your money.
Only the exceptional advisor/fund manager will ask you to keep a tight stop loss to preserve your capital or to sell and book profit, but remain in cash if conditions are not favourable. So, while the growth of your wealth is ultimately linked to the capital markets, advisors/brokers earn when they get you to trade. But any losses in the stock market aren't theirs. Those losses are yours and yours alone.
Please note we're not saying that all advisory personnel look after their own interests. But you would know best when you review your own fund/stock investments performance in the past. Has it been good? Or were you disappointed? Could it be that you felt used and cheated?
Are you happy with this whole situation?
The situation, where you are a pawn of the money managers who dictate your every move and don't even offer a decent explanation? The situation that keeps you in the dark about the ‘complicated workings' of the stock exchange? The situation which demands you pay a fee to the money managers, without the assurance of better gains?
I don't think so! It's ironic that our community, which bargains with the roadside vegetable vendor over every Rupee, generously puts big money in the hands of suited-booted ‘experts' without thinking twice! Infact, listening to experts is almost like an addiction that most of us have and it is imperative that we get rid of it.
Is there a Solution?
Of course there is! You take pains to earn your money and it is imperative that it deserves to be treated with respect. It needs your attention. And it needs a little bit of your time and energy to grow faster.
How? Investing in stocks yourself is the way out! And the best way in getting transparency on your investment activity is to do it yourself. You define your risk appetite. You decide where to put your money. You decide what rate it should grow at. You decide which stocks are the best ‘fit' for you, keeping in mind your expectations. And you remain the master of your own money! Long term investing in stocks is one of the few ways to comprehensively beat inflation and get more from your hard earned money. If you go by the principles of value investing, you not only simplify the activity of investing but you can watch your money grow faster and better.
But isn't investing in stocks ridiculously difficult? Absolutely not!
The general misconception about the stock market is that it is some sort of Einstein-like complex equation which only a gifted few can understand. However, we at MoneyWorks4me have always believed that stock investing is not rocket science . It is a simple activity based on fundamental principles which anyone can learn. We wish to empower our average investor friend on how to make the most of their money, through safe investing. If you invest in fundamentally strong stocks at a discount to its intrinsic value, you will see higher growth in your investment with minimum risk. You can with a few simple lessons which will help you understand what value investing is all about, you could be looking at comprehensively beating the mutual funds in the long term.
So yes, we do believe that investing on your own is the best way to get ‘more Rupee per Rupee'! It takes little time to learn the ropes, but the gains you can make through the practical application of the value investing concepts are phenomenal!
This article is by MoneyWorks4me.com - A unique portal that empowers retail investors to beat inflation & create wealth from stocks. We equip investors with robust yet simple to use online solutions,based on quality & unbiased research, so that they can make the Right investment decisions. We now have over 1 Lakh users who invest in stocks safely & successfully using our offerings.
The original article was written by MoneyWorks4me Team and can be found at their Stock Shastra blog here. The translation has been done by OneIndia.