Essential Mutual Fund Investor Education


When To Invest In Mutual Funds

wealthymattersRetail behaviour is a very contrarian reliable indicator of market movements. There is never any meaningful retail participation in low P/E markets. Rather retail has invested large amounts in high P/E markets. For instance,in 1992, after the markets had moved up 10 times in the previous four years and P/Es were at a record 45 times, a single scheme collected nearly  4,500 crores (20,000 crores at today’s prices). In 1999, IT funds and IT stocks attracted very large sums of money at three-digit P/E multiples. In 2003, at record low P/Es of less than 10 times, the net flows in all equity funds in the country were around 100 crores in one year. In 2008, at high P/E multiples again of 20-25x, inflows in equity funds were 50,000 crore in a year. Since April last year till date, nearly 20,000 crores have been withdrawn from equity funds at P/Es of nearly 14 times.

Equities are a great compounding vehicle (Sensex is roughly doubling every 5-6 years in line with nominal GDP growth rates since inception in 1979) and investors should simply practice low P/E investing. Past data suggests that investments in equity mutual funds made in low P/E markets (say a P/E below 15) have done well over 3-5 years; on the other hand in high P/E markets (say a P/E of more than 20), investors should be cautious.

The Interesting Case Of Sadashiv Phene


Yes I do have my monthly SIPs and I do have a mutual fund portfolio,but long term readers know I lean towards investments where I have a greater degree of control and in general I like to keep things simple and predictable.And I like to invest directly into an asset rather than buy derived products.To me,mutual funds are savings products or places to park cash till better investments turn up.

Today I came across the story of Sadashiv Phene. Here is a gentleman who has built up a respectable net-worth on the basis of mutual funds.Do read the links below.I guarantee you ,you will not waste your time.

I enjoyed reading his story because it opened my mind to new possibilities. Read more of this post

Benefits Of Going Direct

wealthymattersHere is a graphical representation of the benefits of opting for the direct plans of mutual funds.

So think twice and do the math before expecting your MF adviser to work for free.There are no free lunches and you will pay one way or the other. So do the math and see what works better for you,paying a fee to your adviser directly or expecting your adviser to be paid by the asset management company.

%d bloggers like this: