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TRADING & INVESTING - PART 6 - MF Contd.In this part, I will share my experience with MF investments in greater detail, what worked for me and what did not and where I stand today as regards MF, and finally, what I propose to do in the time to come. Regardless of the time or the year in which you are reading this series, the basic principles would remain the same only the finer points would have undergone some changes to keep pace with the changing times. My MF Investments As I have mentioned earlier, I am a disciplined person in terms of money management. In the olden days, dividends or interest warrants used to be received via postal mail, and depending upon the time of the receipt of the mail, I used to immediately walk over to the bank - 15-20 minutes away and deposit the cheque over the counter, get the acknowledgment and file it safely. Given the above traits developed from my school-college days, I started whatever amount was possible for me to save into MF after I was introduced to India Infoline Ltd. I had a good RM who used to keep me informed on more than once a week basis and I used to follow his guidance in making new investments. One very important thing I did was that I never withdrew any amount from any of these investments and used it for consumption or any unproductive asset. As I kept evolving, I realized that some MFs stall after a period of a few years and then do not give that much incremental return than the earlier years. I used to exit the profit portion of such MFs and place them in NFOs of sectors that were in the running or were the hot picks. The above process helped the gains compound over a period of time and I followed this process at least twice in a year. Another point I used to do as far as new funds investments were that as and when an MF scheme used to announce that it would declare a dividend of X%, I used to buy the scheme’s units, get the dividend income, and invariably, once the NAV used to go ex-dividend, it used to go even lower than that and at that time, I used to reinvest the dividend amount received in the same scheme. After a certain period of time, the NAVs used to be back up and way above the exit level, and thus, I was able to not only compound my investments in my unique way. My RM was also surprised with the approach and he then started recommending it to his other clients. I was fortunate that almost the entire suite of MFs that I had invested in worked well for me and some of them I am still holding as there is no reason for me to exit - the investments have given me excellent returns over a long period of time that my capital has become “free” or I am using the market money to stay invested. Now, no more MF investments for me However, I have stopped making any new investments in MF for the last 3 years as I have during the last 3 years, become active in the stock market and have realized the famous response that the legendary trader Paul Tudor Jones gave to a question - Where would you prefer to invest your spare funds? His answer -- There is no better place than investing in my own fund/schemes or strategies as there was no better fund manager for his funds than he himself. Initially, I thought it was a bit arrogant, but over a period of time, I have realized that what he said makes more than 100% sense as there is no one on the earth who understands my money better than myself. So, I now make my own investments in terms of positional traders' indirect equity and manage them in line with risk and money management principles. It is only when I feel that the funds that have been released from direct equity cannot be deployed in the market either because there are no suitable opportunities per my approach or the market is not conducive, I park such funds in to debt or liquid funds from where money can be removed and credited to the demat ledger in 1 working day. Another type of investment This is something that is somewhat complex so I will avoid the discussion at this stage and would take it up as the last part of the series. I hope you have found this part to be insightful and in case you have any questions or queries, please do not hesitate to ask. Thank you & Happy Investing, Umesh 8-8-21 P.S. Disclaimer - The views expressed here are purely for educational and informational purposes only and not a recommendation or advice in any manner. I am not a SEBI regd., so please consult your financial advisor or be your own decision-maker as you may deem fit.
BSE:NIFTYBEES
by AVENUESOFINVESTMENT
TRADING VS INVESTING PART 5 - Investing In Mutual FundsThis is the classical form of Investing that we may have come across as a complete novice to the concept of investing or investments. Even my introduction to the world of investing was done through the Mutual Funds or MF route. I was aware of the share market but had no clue about it, but due to my interest in making money and thanks to my childhood habits of Savings I was interested in anything that helped me see the money grow. So when I started earning, but also had some amount that could be spared, I started looking at the various options where I could invest the funds. Even though I am using the term funds, my investments were not exceeding 1,000-2,000 per tranche and that also looked big to me as those were the days - early 2000. I accidentally came across an office of India Infoline and I met someone who was in the original team that was involved in set up and is now having his own MF distribution business. He suggested that I make an investment of 1,000 in an MF scheme and the money is likely to double in a few years. Those days, Indira Vikas Patra and Kisan Vikas Patra were very popular forms of investments as after a certain number of years the money used to double. Also, these investments were made via Post Offices which meant Govt backed and the money was safe. Later on, I realized that IVPs were like a currency note at that time and the bearer could encash the same if s/he so desired. So it was a refreshing change to see some other instrument also giving an opportunity to make money grow like IVP-KVP and that is how I started my journey with the MF. If my memory serves right, it was either the Aditya Birla MF or some well-known fund house. So I felt that the money was secure and that there was no issue with the capital that I had invested. Irrespective of the amount, for every investor, the capital investment is always priceless. MFs have since come a long way and I have also evolved as an Investor. The fund houses have record-breaking collections from the retail investors, but thanks to my experience, I have realized the hard way that the caption - MF Sahi Hai, is not always the case. The blind faith with which I had invested thousands of rupees initially was all in good faith as with God’s grace, no casualties were experienced by me in respect of the investments made by me except that some depleted in value on account of whatever reasons. On account of my involvement in the stock market in the last few years, I have realized that MFs are actually a more dangerous form of investment than investing in stocks of companies that are known to us. The reasons are simple -- As a retail investors, we may not have an idea about who actually manages our money. As a retail investor, we do not get to know when exactly the Fund Manager invested in the shares of various companies so we do not know if he ended up buying at the bottom or at the top of the rally. As a retail investors, we do not have access to various types of information that may be getting used in the Fund Manager making a decision to invest in a direct equity market or a bond market or Govt backed securities or in the debt market or in the direct corporate lending. As a retail investors, we also lack the bandwidth to read, understand and interpret all the data that may be available for our consumption. In most cases, we may not be even competent to perform such an analysis. The latest instance of Franklin Templeton debt fund - where the investment went astray and the unitholders ended up receiving only a part of the capital. Unfortunately, based on the track record of the Fund House, I had parked some amount temporarily in one such scheme and ended up booking a good amount of long-term capital loss just a few days ago. Given the above, I have come to believe that unless you have absolute knowledge of the MF industry, it is best to invest where you understand things or at least where you can track the value of your investments on at least once a week basis. No doubt investing is a long-term play, but the times have changed and if you simply ignore the investments made and let them follow a Buy & Hold approach, you may also end up incurring a loss like how I ended up. In my case, just 2 days ago, I had spoken to someone who knew the issues that FT may be facing and had moved part of my investments in it to some other schemes . I forgot to realize that I had also made a part investment in the same scheme on my own and when I informed him, it was too late. Instead of such MF investments, I prefer direct equity investments as I get to choose the company in which I would like to invest and there are many ways to invest in direct equity which we will cover in the posts that follow. If you have not yet one of the best ways to get started in the world of Investing - voa the IPO way, please go through the part of this series that relates to Investing Via the IPO route. I will talk some more about MF in the next part before concluding it and please be rest assured, I am not here to advertise direct equity as I have also immensely benefited from the MF investments made by me and more about that in the next part. Thank you & Happy Investing! Umesh 01-08-21 P.S. Disclaimer - The views expressed here are purely for educational and informational purposes only and not a recommendation or advice in any manner. I am not a SEBI regd., so please consult your financial advisor or be your own decision-maker as you may deem fit.
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by AVENUESOFINVESTMENT