Most investors wish to live in a certain “la la land” where they want a path that would lead to success. They want to hear what they want to and settle down with convenient truths. It is a refusal to graduate beyond the “basics” and confront cold reality. This means leaving the future of their investments and goals to chance. We need to do better.
Announcement: A new seminar is available: How to construct a long-term investment portfolio – a guide for beginners. You can sign up via this form. This is meant for absolute newbies to start investing in the right way, asking the right questions and not make the mistake of choosing products in the very first step and repent later!
When we discussed the power of compounding and how by construction it is absent in any capital market-linked instrument, in particular, equity (because long-term returns can be, has been, negative) – Don’t get fooled: Mutual funds have no compounding benefit! – there was quite a bit of criticism – from both investors and advisors.
From “advisors”, it is understandable because they do not know how to sell mutual funds if we take out the “8th wonder”. It was particularly surprising to find investors in denial in spite of hard evidence like Ten-year Nifty SIP returns have reduced by almost 50% (this was in Jan 2020 before the crash!)
It is then I realised that most investors want to start a few SIPs “for the long term” and hope it all works out fine. Goal planning – absent. Reasonable return expectation – absent. An asset allocation that is mindful of goals risk profile – absent. Strategy to reduce risk – absent. Investors do and want to do no more than what the mutual fund industry wants them to do. Start a SIP and hope.
Edward Gibbon, an English historian and writer, was popularized by the Nobel Laureate and physics teacher extraordinaire, Richard Feynman in his set of lectures with this quote that has often troubled me.
the power of instruction is seldom of much efficacy, except in those happy dispositions where it is almost superfluous – Edward Gibbon.
Gibbon had noted that most people only relish content if they are already familiar with it. Show them something new and it will only get through to a fraction. In other words, most people – investors in this context – refuse to graduate beyond the basics.
They are happy to consume content (incl mine) that would never teach them anything new. Financial news is polluted by quotes and views from sales guys, insurance and AMC honchos so much that a daily dose is enough to believe the topic of risk is “optional”
I wanted to title this piece, Are investors & advisors refusing to graduate beyond the basics?. Then realised advisors need not graduate beyond the basics because they don’t need to. Financial Advisers need not be competent because most investors are not worth it!
A teacher is only as good as her students. If no student (only one is enough) pushes her, questions her, keeps her on her toes, there is no benefit in becoming better. I have a lot of respect for an advisor who wants to not only teach the client the financial planning process but also want to keep learning. Swapnil Kendhe is a shining example.
They do so because they are wired that way. Not because it is financially necessary. The fault lies with us the investors. We only want to hear what we want. We want someone to tell us, “if we keep investing this way, we will get good returns”.
We do not want to hear, “returns from an equity SIP could be no more than an SB account after 20 years” We do not want to hear, “there are no set rules in portfolio management. We need a plan, but we also need to play it by the ear and adapt. No matter what we do, the risk of not achieving our target is always there”.
We will not graduate to looking past recent returns, star ratings, reading scheme information documents and rely on paid reviews in the media. We will click on thumbnails in our YouTube feed that promise great returns from trading, best stocks, best mutual funds and be happy with the scanty cherry-picked proof. We refuse to put in the effort. We are happy to wallow in our perception of “what will work” with no desire to doubt it.
Some readers have accused freefincal of becoming “stale” and saying the same thing over and over again. This is true. I make no claim of being a “teacher” of anything (incl physics) but for want of a better analogy, if you stay in the same class, the syllabus will not be different each year. The same syllabus is for new readers, not you.
Think of it from my position: As an enterprise, the goal of the site is to reach more and more new people with time. In 2019, 1.86 million people visited the site (about 55% new). This year it is 1.75 million as on date and hopefully, it will cross last years mark. Yes, this old uncle is doing ‘ok’ in spite of the poor site design and a dozen other shortcomings on UX and SEO.
All I need to do is peddle the “basics” on rotation to get more traffic. My only integrity benchmark is to sell pragmatic basics and not happy endings. If you have gone past that, If freefincal is not bringing anything new to you, it is time to move on. Many have.
If you wish to move past from happy endings to a realistic plan, you can begin here: Download Re-assemble e-book: A Step-by-step money management guide and then move on to Investing in mutual funds for beginners: Basic MF questions answered
We now publish both equity fund and debt fund (+ hybrid fund) screeners each month!
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video! ⇐ More than 415 investors and advisors use this!
Unlock the secrets of successful financial advisors and entrepreneurs with our new course!
My new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Join our courses in exclusive Facebook Groups!
- 550+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills and building a community that trusts you and pays you!
- Goal-based portfolio management! Join 2220+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content) in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author
M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] comAbout freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)