Mutual Funds, online gyan, criticism and more...

Advice on investing is free and fast on online media and the noise is as much as it is on TV and mainstream media. Gyan for the day is common and everyone with their own agenda, viewpoint  gives gyan (some of it very useful). Many statements are made and with real conviction. Yes, we do do require several view-points and many of these statements, make me re-look at my processes for investing

Some of the things I hear often are given below. Decide for yourselves if you agree with these or not.

Don't go by past returns/ performance

These words are sometimes bandied about on twitter and FB by themselves without adding, what is to be done. Shouldnt one check the performance of the fund when selecting? The actions of the fund manager are captured in the returns and investors measure the returns over various periods, the rolling returns, SIP returns to get an idea the scheme's and fund manager's performance. I do check the rolling returns  and the SIP returns over various periods among other things when selecting a fund for myself.

There are other parameters I check, other than past returns and more about that in tweets or in another post. 

Glorification of DIY and vilification of IFA

While I am all for DIY, which will save one in intermediation costs, how many are really ready for DIY investing? I have met a DIY investor with 42, I repeat, 42 funds in his portfolio. When he learnt  that it was sub-optimal, he took help. Intelligence is in taking help if you need it and it is upto to you to choose if you are knowledgeable enough to DIY or need to take the help of an advisor, intermediary. 

Vilification of IFAs

Running down IFAs is a special pastime on online forums. This is mainly done by DIY votaries. It often seems that those engaging in this, grudge the intermediary IFA/ advisor her income.  Someone nicely said in a tweet – You don’t rise by putting the other one down. Leave that to the elevators.

Having conducted a few financial planning workshops over the last couple of years I found that hardly 5% of those attending have invested in mutual funds and know about funds. Many who attend want help and guidance and some are even confused with SEBI's advertising code and the word RISK prominent in the ads. Young and old investors want to understand what it means and how funds work. In such a case, they may come to an IFA / or advisor for help who can handhold them till they learn. 

There is nothing wrong in either going to a registered investment advisor or to a distributor of mutual funds if you need help in investing. Only, do not hesitate to ask her questions. There should be willingness to answer every question asked. 

Do not listen to the "grudge" comments. Advisors do advise on asset allocation, allocation within the asset class and on monitoring and rebalancing. 

If you do believe you can DIY, you should go ahead. You own up the decision making process.

 To SIP or not

A few investors on online forums criticize SIP regularly! Yes, there is more to investing than just regular investing.  Yes, you have to allocate among different asset classes and within an asset class like equity, you have to diversify. You have to monitor. You may have already allocated your funds among real estate, gold and may want to start / increase allocation to equities. I have found personally that SIPs are a good way to do so.

I personally consider SIP as a great way to invest in equity mutual funds, but I know what to expect and what I should not:

Using SIP as a tool:

1. I do not have to bother timing the market

2. One cant get rich quick with an SIP, BUT ONE WILL BUILD WEALTH slowly SIP by SIP.  As one spends more time in the market, one will see the effect of compounding.

3. Doesn't mean that if I use SIP, I cant do a lumpsum when I choose to. I use both.

4. SIPs work over the long term 

5. I will not stop SIPs when the market is down.

Critics of SIPs dont provide an alternative, simple method for professionals who start with small amounts to save every month for whom I consider automation of the process, the best. 

  

All those reading must make their own choice regarding all the above since personal finance is "personal".

Disclaimer: I have been conducting investor awareness workshops and have been approached by many of those attending, for help. Therefore, I have registered with AMFI and became an IFA recently to advise those asking for help.