Here's the entire rationale I share with investors when I tell them that they should never invest in mutual funds. Go through it, and if you find the message relevant, feel free to download the presentation from the link given at the end of this article and use it when you talk to investors and prospects. Bottom line - if you really want your investors to be successful in their investment journeys, please pass on this message: Never invest in mutual funds!
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You (Investor) have been investing in RD from Bank or Post Office and have been getting so called Guaranteed Returns, where last year "Better Scheme" gave phenomenal returns, almost 3 times of RD and that too tax free...
Note for fellow distributors: Here, the data taken is of an actual equity fund - let's call it XYZ Equity Fund. Period considered is Feb 2007 to Jan 2008 - when investing on the basis of last 1 year return was at its height. Data shared for your understanding
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Note to fellow distributors: Data for the same fund for the period Feb 2008 to Jan 2009 - the period immediately after he started investing after seeing great 1 year returns.
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So you stopped investing thru SIP and also withdrew the money and invested back in FDs and started investing in RD again.
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Note to fellow distributors: These are returns of XYZ Equity Fund (all actual returns, only name masked) for the period Feb 2009 to Jan 2010. The investor exited in Feb 2009 in panic.
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Note to fellow distributors: Returns for the period Feb 2010 to Jan 2011 - the 1 year period after he started investing again
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Note to fellow distributors: Returns over the 2 year period Feb 2010 to Jan 2012 - the 2 years of his investment journey in his second round as a mutual fund investor
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So now you again withdrew the money as markets were weak, wasn't giving returns at all in last 2 years, in fact made your money negative. And only one question was hitting you badly…
So where should one invest for good returns?
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Had you invested in the "BEST SCHEME", you could have made tons of money… You have started thinking that you can now hit a Jack Pot.. this is what you were waiting for..
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Note to fellow distributors: Same XYZ Equity Fund, SIP returns over a 15 year period.
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All that investor wants is to get the BEST SCHEME. But even best scheme failed to give returns to investor. The above scheme regarded as Tendulkar of our Mutual Fund Industry with amazing track record over 19 years. But when analysed in detail, folio return, that is the real return which real investor got, was not even 25% of the overall scheme return. The point is that even if you happened to get the best, you may not make the best return.
As one of the Greats have quoted..
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This is a very important point. In the Mahabharat war, Krishna gave away his entire army to Duryodhan and only he went over to the Pandavas, as their coach, their guide. During the course of the entire war, Krishna's focus was only in guiding the Pandavas in general and Arjun in particular about what not to do, about the pitfalls he should avoid. And this guidance was in essence the difference between victory and defeat. So also, a good financial advisor guides an investor on what not to do, what pitfalls to avoid - and it is this proactive guidance that is often is the difference between a successful investor and an unsuccessful one.
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If you want to share this message with your investors and prospects, if you really want them to succeed as investors, feel free to download the entire presentation from the link below and tell them boldly and confidently: "You should never invest in mutual funds!"
Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.
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