The best financial advice on a single index card!

Published: September 25, 2016 at 1:40 pm

When Dilbert cartoonist Scott Adams could not find a publisher for a one-page book on “Everything you need to know about financial planning”, he was forced to write a 368-page book – Dilbert and the Way of the Weasels. (Ref: MyMoneyBlog)

You don’t even need a page to hold all the advice that Adams gives. All you need is an index card! To all those who have used a library before the era of computerized indexing, an index card is a 3-inch by 5-inch card on which authors are cataloged.

LA2-katalogkort” by This photo (C) by Lars Aronsson.

This post is inspired by a recent tweet by the New York Times:


The image above is the index card created by Dilbert cartoonist, Scott Adams.

Points 7 and 8 immediately caught my eye. The rest are pretty straightforward – Happy to answer any questions that you may have on these in the comments section.

Point 7 – Minimise fees (essentially)

Since active funds trump their benchmarks by a significant margin, Adams advice for the Indian context: Choose Direct mutual fund plans. 

If you prefer index investing because there is no need  to worry about fund management changes (either personnel or competence or both!), then choose Index mutual funds and not ETFs. Indian ETFs have significant tracking errors and liquidity issues. It can be difficult to find a buyer for your units when you need to exit. The Nifty Next 50 can be considered as an Index Fund replacement fort active multi-cap mutual funds. Other than that, chocies are limited.

Point 8: Choose a planner who charges a flat fee only!

If you are a DIY investor, this does not apply to you. If you are looking for someone to offer you professional advice, I suggest the following steps:

Step 0: Always remember that the financial services industry stinks with regulatory non-compliance. So watch your step.

Step 1: Choose only a SEBI Registered Investment Adviser (RIA) – SEBI has cautioned investors not to deal with others.

Step 1A: Choose only an Individual SEBI RIA – Not those registered as a company, body corporate, limited liability partnership or ‘others’. They are unlikely to encourage direct mutual fund investing to say the very least

Related post: How to choose a SEBI registered investment adviser

Step 2: Tell the upfront that you will only pay for financial advice and will invest in direct mutual fund plans.

Step 2A: If you think fit, you can give consent to the SEBI RIA to access your direct mutual fund statements.  This is not necessary!  You can simply send them your CAMS-Karvy Consolidated holding statement. They could upload this into their tracking software.

Related Post: Pay for Financial Advice, But Insist on Direct Mutual Fund Plans

Portfolio management is possible without AMC Feeds!

Step 3: Tell them upfront that you will only pay a flat fee initially for plan creation and every year for review. Do not accept a fee based on your net worth. You might as well invest in regular mutual fund plans.

Step 4: Invest via MFU or via CAMS in direct mutual fund plans. If you like more convenience than you can consider a private, but independent direct fund portal (many are coming soon) for a flat fee. If this third-party portal has a fee linked to AUM, do not take it.

Step 5:  A respectable and reliable industry insider told me that ‘very few pay for financial advice in India. Even fewer pay bother to review their financial plan’! Creating a financial plan and implementing is just the first step in a long journey. The plan has to be reviewed each year – either by yourself or by a professional.

What do you think?

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About the Author Pattabiraman editor freefincalM. 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 topics of money management. 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 on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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