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SAINIK

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27 Aug, 27 tweets, 5 min read

1.The MF Mafia's Motto : Mutual Fund Sahi Hain

2. MFs have convinced its target Audience through constantly repeating that they don't have KNOWLEDGE ; TIME, EXPERTISE & EXPERIENCE .

3. KNOWLEDGE : The typical target is a well educated, successful individual who is trying to explore alternative Investment Avenues other than traditional Bank FDs. He/she has investible surplus & has the capability of seeking knowledge easily during these times. Google, anyone ?

4.TIME : However busy anyone could be, surely they can spare half an hour /week to take care of their Investments. And its an exciting way to spend time, Right ?

5. EXPERTISE : There is no "expert" in a dynamic environment like the Capital Markets especially Equity. Expertise comes over time .

6. EXPERIENCE : Only by trial & error can one gain experience. If one needs to make less errors there is no dearth of Knowledge/Experience available on the Social media.

7. First a little bit of History : MFs started in India in 1963 through UTI , Nearly a quarter century later SBIMF came into being. Pvt Sector made its debut through Kothari Pioneer in 1993 & the foreigners came in through Morgan Stanley in 1994.

8. UTI ruled the roost in the early 90's, shady operators were beholden to the CEO (Pherwani), & was involved in the 1992 Scam. Did not learn its lessons & went bust in 1998 resulting in the arrest of the MD.

9. Kothari MF was rechristened as FT which gave the sheen of a Foreign Fund but which continued its shenanigans to this day. When the heat was on the CEO was transferred abroad & the current FM redeemed his family's holdings leaving the investors high & dry.

10. Even in the DOT COM Boom the MFs were in great demand among scamsters since it was easy money. Questionable practices abounded. One Star MF Manager bought K-10 stocks in his FMCG Fund and justified it saying HUL uses technology

11. Something similar to what some funds did in the ZOMATO case & probably are doing in other IPOs too. Zomato's misadventure was ok since it gave them an exit but what about other IPOs which are opening below issue price & what happens after lock in period if the price is lower?

12. While SEBI has been quite diligent in trying to reign in the skulduggery employed by these FMs, it too finds it difficult especially when you have a "Firang" name, they then would cock a snook since India needs FII Investment.

13. Not that everyone is indulging in these games, but there are enough to give the Industry a Bad name & make you feel " Mutual fund Sahi NAHIN Hain"

14. Take the case of NFOs. They convince the retail investor that the Fund is at PAR. This is rampant among Bank sponsored MFs, that investment would be at PAR, they would get better returns then their FD. Here is one example :

15. Remember Max NFOs come when Mkts are overheated

16. Have you ever seen an Insurance Agent aggressively selling Term Insurance or a MF advisor doing it for INDEX Funds. Very rarely, right ? Term Insurance & Index Funds are the most appropriate for an individual. Yet.

17. In terms of returns, studies have shown that most MFs ( 60-75 % ) do NOT BEAT the Benchmark Index. Here is some evidence:indexheads.substack.com/p/the-delusion…

18. And here : indexheads.substack.com/p/like-a-kidne…

19. And here : fiduciaries.in/wp-content/upl…

20. Check this out : freefincal.com/four-consisten…

21.DIVERSIFICATION: Studies have shown that an optimal portfolio should have between 15 -20 stocks. For instance Buffet has 82 % in his TOP 10 stocks & his TOP 20 has 93 % , whereas typical Equity MFs have between 50 to 60 stocks 😳. Why ?.

22. Here is the evidence : moneycontrol.com/mutual-funds/b…

23. CONCLUSION: I was one of the first to get an ARN yet I have not recommended any Equity Funds, only pure Debt funds since DIY is difficult in India since we do not have a well developed Retail Debt market. My advice to prospects is JAGO GRAHAK JAGO . Thanks for the patience.