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Worldwide, there is a lot of hue and cry over high expense ratio that investment management firms charge for generating better than market return. Globally, funds are moving out of active strategies to low cost passive investing. The logic for these flows is often cited that value addition done by active mutual funds is small and uncertain vs the fees charged by them.
Talking in the Indian Context, The Securities and Exchange Board of India (SEBI) wants to review whether Indian mutual funds are overcharging their customers by imposing a high total expense ratio (TER).
Fishermen depend on luck, and the Vegetable Farmer depends on tending to the investment continuously to bear some result. Both have short-term perspectives and require continuous engagement. But here’s the catch – It has been proved that the probability of earning returns in the short-term is more like tossing a coin with 50-50 chance of getting the positive result. This is more like a computer picking up a stock for you.
All of us perhaps do both, but we can’t deny we have a preference, a natural inclination. But it is not difficult to find out if we really fit Category 2 – just ask yourself when was the last time you made a real (not mental) list of things to buy before going shopping. Chances are that most of us will realize we belong to Category 1.
However, men, we suspect will be shouting in their heads, Category 1 describes women shoppers aptly, and we can’t belong to this category. Think about the stuff you buy and ask yourself did this feature on your shopping list.
Most people dont know what they want in their life, want to own, to achieve, to do, to become before they die, kick the bucket. In short they dont have a Bucket List. I just love the movie with this title and how my two favourite actors Jack Nicholson and Morgan Freeman bring out the insights about what one values in life. But both were old men in the movie and meet in a hospital before they decide to have a Bucket List for the rest of their life. My question is why do we wait for so long and for a harsh reminder to focus on what’s important in our lives.
The biggest challenge for anyone with a day job and wanting to invest in stocks directly is lack of time. The chief culprit, which makes Retail Investors feel that they have lost even before they begin, is the large and ever-changing amount of information.