Biggest Mutual Fund Investment MISTAKES & How to Avoid Them 

Loved ur description.....keep it up

My investment journey started 3 years ago after watching all your ETMoney videos and it helped me avoid all the mistakes you have covered in this video. Really grateful to all the wisdom you have been imparting to us over the last few year. I never miss a video from you 🙏

Apart from 1 and 8 have made all other mistakes 😅. Good thing started rectified those also.

I do have actively managed large cap. While I haven't sold it, but buying index to reduce the % of that. Others, thanks to videos like this in RU-vid, fortunate enough to not make those mistakes

@@yezdighost 6/8. Good, so I have company. ​ We both have sinned too much :)

Ouch 😂

🤣

Most welcome, Ritwik. Happy to play a small role in your ever-improving financial journey

Hello Sachin. Welcome! Wonderful to have you on my own channel .. and expecting the same fervour of feedback & suggestion you used to give on the ET Money channel. Thanks for your appreciation!

Thank you. On your last point, the data shows that 35-40% of the actively managed funds do beat the benchmark-based index fund in any given year. Ofcourse the active ones may not do it consistently in all years but that's fine .. it's OK to have 3, even 4 years of below benchmark performance as not everything travels in a straight line. In my opinion, this should not become a firm rule .. and having a mix of active and passive funds is one strategy that an investor can examine.

@@shankarnath great advice. I agree to that. I liked your research insights that you used to present before. Expect more like that especially in these current challenging conditions how are the different mutual funds performing.

@@shijotg Also Active Bluechip funds helps when a market is going down for long term for if something bad happens

I appreciate that! Thank you

🙌 Will try. Thanks for the visit

My pleasure!

Glad I could help!

Thanks a ton, glad you liked it

Welcome aboard!

🙌

All the best Shriraj. Happy to be of help in your financial journey

Most welcome! Glad to have you onboard this channel

Thank you very much, Tissy

Thank you very much, Bhuvan. Happy to play a small part in your financial journey through these videos. You're young, you'll make mistakes along the way .. but good investing (and living) is about falling 8 and rising up 9 times. Wishing you the best!

@@shankarnath Thanks 😀

Thank you so much, Raul. It's a great suggestion, I'll certainly work on it

Thank you very much. Happy to be a small part of your financial journey

Thanks for the suggestion, Yukteshwar. It's a good topic to talk about. I will be surprised if there isn't an India specific mutual fund or ETF that's offered by financial institutions. If I remember right, Kotak has a tieup with ALPS on some India-only MF. These will ofcourse be denominated in USD/CAD. Maybe you can enquire from there + they should have a clear idea about taxation aswell.

So nice of you. Most welcome Vinod

You are welcome!

Thank you Anil, glad to be helpful. I like replying to comments .. it also gives a glimpse into how individuals think i.e. are they coming from a positive/negative framework, how trusting are they of you, are they point based or story based, are they looking for motivation or answers etc. With enough comments from an individual, a pattern emerges.

Thx Amit. I've observed some AMCs give combined expense ratio while others don't reveal underlying asset expense ratio. I had made a video on this some 18 months back on the ET Money channel. There was an excel sheet I had painstakingly compiled with this including-excluding information. Have a look at that, it will give you some useful insights. Link: shorturl.at/cCOU0

Hello Pavan - In my opinion, the regular plan SIPs should be stopped immediately. The cancellation can be done online via the AMC website, MyCAMS or MFCentral. Next and almost immediately, start an SIP under a direct plan. Again, this can be done online using the 3 platforms I mentioned or platforms like ET Money, Groww, Zerodha, IndMoney etc. There is a lot of material on this over the Internet and on RU-vid. Do read up more. Wishing you the best

Glad to hear that. Thank you very much!

My pleasure! Thanks Ranjeet

Thank you very much Jayash ji. Happy to play a small part in your financial journey

My pleasure

Most welcome. Glad you liked it

Thanks for the sub!

Glad you liked it, Charanjeet. Kaise ho? Long time!

Most welcome. I (not RU-vid) created a thumbnail with an injured face .. it matches the title of the video i.e. mutual funds are INJURIOUS to your wealth

@@shankarnath Yeah :-), Since I watches your RU-vid videos on a regular basis; The algorithm suggested this video, but I didn't recognised it was from you 😁 as I quickly skipped 🤕😁

Most welcome. There are no odds during NFOs so I skip it. The only exception can be index funds but here too, it's better to go for funds that have an AUM of atleast 100 crores as it means the tracking error can be better managed and there will be a dedicated desk for the workings of that scheme

My pleasure. Much appreciated!

Thank you

Most welcome!

Thanks for sharing Anujoy 🙌 .. I use Hangseng bees ETF myself (not because of expense ratio but more tactically in assessment of the Chinese market)

@@shankarnath is Hangseng ETF good investment at present?

Thank you very much 1. No, please dont do it all at once. In my scenario, I eased my way into it. It's not like summer and winter. You shed your T-Shirt for a sweat-shirt, then a sweater and then you go for a jacket. Hot to cold to hot will make your condition worse .. so I'll prefer as glide path. 2. No, don't worry about LTCG. You will eventually have to pay LTCG so paying now when the odds are in your favour is better than paying when it is not as rosy Hope this helps.

@@shankarnath Thanks for showing the way, so happy to hear from you 😊🙏

Much appreciated

My pleasure

You are most welcome! Glad you liked it

Most welcome. Glad it was helpful!

Thank you Srinivas

Thank you 🙌 . Will try to do that video, thanks for the suggestion

Glad to hear that. Very happy to play a small part in your financial journey

Thank you!

Glad you found it helpful

My pleasure!

Thanks for sharing 🙌

Thx. I'll add your suggestions in my content queue

So glad! 🙌

Thank you, Akhil 🤗 .. happy to know you're liking the content. If you have any feedback or suggestions for me, do type them in the comments box. I read and reply to most comments.

Glad you liked it! Thanks

Thank you Gunjan 🙌 I'll add it to my content queue, thanks for the suggestion.

Thank you so much, Rahul

My pleasure! If you found it useful, do spread the word by sharing this video with your friends, relatives and colleagues over whatsapp, facebook, twitter etc. Thanks!

@@shankarnath already shared with my daughter. Thanks.

@@balasubramanians7886 Thank you very much, appreciate it

Hello Saj - I nailed it! Let me use this as an illustration to the three things I said in the video: 1. More marketing -- I hope you can see the marketing angle now. Tata & Taurus have used the 4Ps brilliantly here - positioning, product, promotion and populace. 2. Reasoning & story-telling -- Every individual has some reasoning for investing into a scheme. If a story is said well & repeated often, people start adapting to it. In my view, life before a Make-in-India, Ethical, Next-Superpower fund was complicated as it is. But that's my view. 3. Extra Care -- And I concluded the point by saying in cases where funds are non-standard in nature, one has to be more careful in it's evaluation. At the end of the day, it has & it will come down to what you think. I even know people who categorize "large cap funds" into cool & clueless -- and its impossible to change their mind. Now, I don't even try & I let it be. Hope you see the content for what it is

Thank you Abhijit. 1. Trailing returns can be found on any platform (ValueResearch, ET Money, Groww, Zerodha Coin, Upstox, Fisdom etc.) 2. Rolling returns are not that common. VRO offers it but I think its behind a pay-wall. Pls try out AdvisorKhoj .. they were giving rolling return (without charge) on their website.

Hi, 1. The decision on "which MF" will depend on your goal, time horizon, risk capability and fitment in portfolio. Many investors (me included when I was younger) make this mistake of adhoc selection of funds which later leads to unnecessary irritation. Due to lack of details, I don't have an answer for you .. but there are many videos on RU-vid who claim to have figured out the "best mutual funds" formula, maybe those might help. 2. I have not researched Axis Blue Chip Fund 3. In my opinion, if wealth building and retirement corpus building is the goal and one has 10+ years, then mutual funds is a better choice of investment than fixed deposits. Ofcourse start with MFs, track the valuations periodically and when one is approaching the last 2 years of one's goal tenure then start moving money from equity MF to debt MF/fixed deposit.

Thank you Sayed. I'll queue it up, thanks for your suggestion

@@yviruss1 .. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-V28LpTApAww.html

Thank you 🙌

Apologies, you are not likely to see a video from me on "BEST" mutual fund .. even if that costs me a lot of views and subscribers. Two reasons: 1. I can't predict with any level of certainty what the fund manager will do in the future 2. More importantly, over longer periods of time, I have seen that this "best MF of the year" doesn't add as much value as one expects from it As a matter of fact, I approach my investing in terms of choosing the best portfolio i.e. the ideal mix of large, mid, small, debt, gold & international equity. This opens up more opportunities in terms of choosing index/active/factor-based funds .. based on what my portfolio needs are.

Thank you so much

Thank you. I'll certainly come up with a video on selecting mutual funds for long-term returns in due time. However flipping of mutual funds & predicting which MF will do better in the future is something I don't really understand. I find it remarkable that some people can even claim knowing that.

@@shankarnath sure, will wait for the video. But just to clarify, my doubt is not deciding when will small cap beat index and vice versa, it’s about choosing AMCs within given category of mutual fund.

Yes Mayank, I understood your question. Choosing which AMC's fund will do better the next year is a remarkable skill in itself. Btw, I did a small exercise last week -- very relevant to your point. As you know, lots of brokerages make stock recommendations during Diwali. It got be intrigued .. and I picked over 200 such recommendations spread over the last 7 Diwalis. This study covered 150 different stocks and 30 different brokerages. I've put it together in a video which I'll release next month. The results were quite interesting and surprising .. do look out for it!

Most welcome. Apologies, I don't operate in terms of specific schemes so won't be of much help here. However there are dozens of websites and youtubers who are giving this information which you can access. I build my wealth as a portfolio which looks at goals, returns, volatility etc. and in a manner I am comfortable. You can examine that approach here : ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-bN5QdxY3RVs.html

Glad you liked it

Thank you! Yes, a category of funds called the balanced advantage funds does that i.e. move from equity to debt if valuations are out-of-whack and vice-versa.

@@shankarnath Thanks

@@shankarnath For a BAF to have any effect on the portfolio level, one would need to invest most or all of their money in one BAF. If there are four or five equity funds along with it, how useful is the movement for that smaller amount?

@@meghanaabhyankar9151 You have a point. However BAFs have some constryct issues too that you will still have to consider like 1. no international equity exposure and 2. large cap heavy exposure

Hello. I have not come across any research or study on whether older funds do better than more recent schemes. Personally and ceteris paribus, I'll lean on the 10 year scheme as the fund/fund manager would have seen more booms and busts along the way and would have learnt from that experience. Ultimately, when one invests in a fund .. the investor is actually investing in the fund manager's intuition and experience

@@shankarnath Thank you so much for the quick revert. May i know which one is better for 25 years of SIP investing for building a retirement corpus - Multi asset funds or Index funds

Hi, while I can't generalize or speak for other ... I prefer keeping the retirement corpus in equity (aka index) instruments given the long 25 year runway. Ofcourse, I'll have a glide path once 20 year are up & over the next 4-5 years, I'll focus on reducing volatility which might need apportioning money to other assets like debt & gold.

@@shankarnath Thank you so much.

Thank you. There are many videos on how to select a mutual fund across categories on RU-vid. Is there a particular question that you are seeking an answer to which is not available or hasn't been answered sufficiently?

Most welcome. Yes, my count is higher

Hello Mithun - I haven't done any research on this scheme recently but here's something that has helped me when I face such a situation: 1. I try to understand in which periods has a fund (like Axis LT equity) performed better than benchmark. This will help you gauge if there are certain times (bull market, bear market, market shock, range-bound market etc.) when the fund manager's strategy does wonders 2. I also try to understand the other side of the coin i.e. if this fund is performing poorly then which fund is performing well & why is it doing well i.e. which stocks was it invested into and therefore what is the fund manager's investing strategy I should also mention that it is very difficult for a fund manager to try out a different strategy. E.g. Axis mutual funds have a reputation of investing in growth stocks & you'll generally see them having high PE ratio/high ROCE stocks in their portfolio. And on the other end, Prashant Jain would lean more on the value style of investing. It's next to impossible for Mr. Jain to suddenly change course and become a growth investor -- so you might want to factor this when you do your assessment.

Thank you very much. I'll add this to my content queue. Thx for the suggestion

Thx!

Hi Abhishek - I've not had a particularly good experience with relationship bankers due to the frequent churn amongst them. Very rarely has the RM assigned to me lasted an year so there is no follow-up or review of portfolio and the schemes are all regular plans In my opinion, what one needs to be moving towards (if one can't DIY) is a fee-only financial advisor i.e. someone who works for you in a format that he/she gets a fixed sum of money for advisory service. This means no commission which means the funds advised will be direct plans and the advice would be without any bias towards active/passive plans or particular AMCs. There is a chance of this prejudice creeping into a for-commission regular plan advice because of the old adage -- incentives determine behaviour (you would have seen it at home, in office, in policitcs and elsewhere) Financial advisors can help with financial planning, retirement planning, taxation matters, product advice (like gold, government bonds, sukanya samriddhi) etc. They are very patient people & help clients from understanding smaller matters and to not make ad-hoc moves.

Thank you!

Will try .. thanks for your suggestion

Most welcome. Thanks for your suggestion, I'll add it to my content queue

Hello. 1. I don't think that far as an index bubble. As long as the underlying asset is companies which continue to earn profits (which is the case), I don't see any reason to worry. 2. Yes, I prefer to diversify across assets (domestic equity, international equity, debt, some gold, some real estate) and even within assets. For instance - I have a 50:50 mix of active and passive funds.

@@shankarnath thanks for replying.

Thanks a lot, glad you liked it

Hello Praveen - I think there are 6-7 reasons why redeeming or switching funds are warranted. Just because the scheme has crossed 3 to 5 years is definitely not one of them. I'll take this as a content idea and queue it in my videos-to-create list. In the meantime, may I request you to check some articles on the Internet on this. It's an important point you have raised

Thx 🙌

Thank you for your suggestions Ashwin

Hi Chirag. I think timing the market is a very complicated phrase. Let me try to make it easier to understand (for a younger me). So logically more T-shirts are sold in summers and in winters, more sweat shirts are sold. This is something you and I know. The question is - how do we know when to buy a T-shirt and when to buy a sweat-shirt before the season has arrived? The method I prefer (which is what I explained in the video) is to go with any understanding of temperature and what people do. For example - historical data tells me that people start buying T-shirts when the temparature starts crossing 20 degree celcius (so it is not summer yet) and they start buying sweat shirts when temperature goes below 25 degrees (so it's not winter yet). This is the same principle I used in the large cap, small cap video. Now, because this was done over many years, you are likely to be ahead of the curve in most occasions. To put it differently, don't work on a 20% probability of being exactly right. Instead work on an 80% probability of being almost right. This is what investing really is .. and as Led Zeppelin almost said, it's the stairway to financial heaven Hope this helps.

@@shankarnath Damn. Amazing Explanation Sir. Very hopeful for 21yr old. Hoping to learn a lot from you. Thank you very much Sir.

@@chiragsanwal2789 Most welcome. Ab isko Instagram ya Linkedin mein mat copy karna :)

@@shankarnath Haha, arey nahi sir. Abhi tho aapse aur seekhna bhi hai, looking forward for it! 🙌🏻

🙌 Thanks

Thank you very much Anand. I wouldn't encourage anyone taking a loan for pursuing a speculative activity like equity investing. The reason here is a bit analytical .. and shows a risk-return mismatch. Like the premise for you would be to take top-up at say, 10% and earn 12% over the next 15 years -- so the gains are not high on the additional capital invested. Now on top of it, there are other potential risks like emergencies, change in loan rate (MCLR increases), stock market lull periods etc. In my view, use leverage when the value one gets out of time is excruciatingly high & one would regret missing out on it. Meaning .. if I take a 10 lakh loan for growing wealth, it better be able to deliver me 5 crores over 15 years.

I think we should not generalize anything in terms of good or bad. If it helps improve your portfolio returns/volatility, then it's good .. but if that comes at a 2.5% expense ratio then it may not be that good. As an investor, we need to examine them for its pros & cons.

Ok. Then I think my holdings are fine. Having HDFC Developed World Indices FoF - 0.21 ER and ICICI Global Adv FoF - 0.44 ER. Holding both the funds for global diversification the with former having higher (almost double) weightage

🙌

Thanks a lot 🙌

Most welcome

It's your call but my allocation is a lot similar

@@shankarnath thanks i prefer the same allocation

@@ameymohal8791 Check out my video on "My Long Term Investing Portfolio" (the thumbnail of me wearing a monk's clothes) .. for more specifics on my allocation

@@shankarnath sure thanks

Hi Nishant - In all honesty, we don't really choose a fund. You are actually choosing the fund manager's investing style .. so that's the first step. Be comfortable with his/her investing style .. everything wont work every single time. There was a time when every fund of Axis was assumed golddust & HDFC MF esp. Mr. Jain's funds were looked down upon. But those were a function of the times but it doesn't take time to the winds to change direction. For me, this is selection criteria number 1.

@@shankarnath Thanks

Thank you. Apologies, I have not analysed that particular scheme

Thank you Neeraj. For the record -- main kahin maar khake nahi aaya 😂

🙌

Please make videos on ETF it is way better than MF. I have stopped trading in stocks and doing swings in ETF's. In India ETF is underated.

Hi Vikrant - seems you find ETFs better than MFs but I've also come across others who prefer the latter. In light of that, a video explaining the pros, cons & investor suitability will be more ideal. Anyways, thx for the suggestion.

Thanks Ranadeb and welcome to my new channel With re your question: 1. My own investments I've made via ET Money and MyCAMS are very much visible in the AMC's portal. 2. For tracking my mutual funds, I use ET Money or ValueResearchOnline. 3. An app's closing down is not a botheration unless there is some fraud. You see, the MF units you own are in a central repository which is managed by CAMS and Karvy. Infact, you can go to camsonline.com anytime and download the consolidated account statement (this is something I do every month now). If the units are there, then the transaction has taken place properly. Please have a check yourself and if there is any discrepency then connect with the respective platform and in a worse case, you can always complaint to SEBI Hope this helps.

@@shankarnath Hello Sir, Firstly thank you for your response. This is exactly what i was hoping for , somewhere where i can track my MF units allocation made across different apps and something which is independent of these platforms. I will surely make a point to cross verify my allocation from camsonline with the allocation made via the apps. Thank you very much sir.

Dear Amit - thanks for being upfront about your status. As an educator, I have the option of not taking sides but yes, I will have my preferences and biases. But please allow me to elaborate my views. 1. Let's start with my video and at 01:56, I said "I'm not saying an agent has no value to add in my financial journey" and I stand by it. I often suggest investors to take the services of a fee-only financial advisor to get things started with financial planning, taxation, retirement goals etc. 2. I also believe a financial advisor is a great asset to: a) help with unplanned infusion of money e.g. annual bonus, proceeds of sale of property, ESOP cashing out etc. Typically, the investor is confused what to do with the money esp. which debt fund or hybrid fund to apply b) help the investor with asset allocation, annual rebalancing and tax harvesting. In my view, bankers are not adept at this and an FA is the ideal person to fill that gap 3. The only area where I think the FA/agent's role is exaggerated is with selection of SIPs for long-term wealth building. The data shows that over a 10 year period, the performance of most funds converge. For example - in case of flexicaps, barring Quant Flexi which is an outlier, the next 10 Flexicap SIPs have delivered between 16.3% to 14.5% over 10 years (source:AdvisorKhoj). A good FA/agent will advice investors to keep money in SIPs over the long run but with performance numbers so tight, I can't see why the advice requires 10 to 12% of the capital gains generated to go to the distributor as regular plan commissions I think you and I have the investor's same best interest in mind. You are doing it using 1-to-1 interactions while I've taken the 1-to-many approach. I always love to understand the other point of view .. and thanks for sharing your views on it. PS: I'll make some videos around investor experience and how they achieved their wealth. These will be actual investor interviews and I'll be sure to talk to both sets of people i.e. a) help of an advisor and b) DIY. Thx for the suggestion 🙌

Thanks Shankar Your response is mature and reasonable. The problem I see is that outcome of efforts being made is often judged mostly on the basis of investment returns. The fees being charged is often extrapolated over several years in future but value an advisor brings is not. Over my 15 years of experience as a mutual fund distributor I have learnt that product is not important but fundamental and sound investment processes are much more important for wealth creation. Humans are slave to their emotions which also affects investment outcome so my point is that I agree that not everyone needs an advisor BUT most of the investors do require an advisor no matter how much fees is involved and no matter how much return advisor can potentially generate. I have lost aprox 5% clients to direct plans but I observe that they are doing worse than regular plans because they fail to handle the challenges of investment process. They seem to believe that chasing the best returns is the essence of investing efforts which you must agree is not true. You are doing absolutely amazing job, no doubt about that, but a reasonable comparison should be made between direct and regular plans. Direct plan is not win win situation. Not returns or expense ratios but overall outcome and its quality is what matters.. Thanks Amit

@@amitgulati2726 I guess this is a part & parcel of an investor's evolution. Just like some clients might move from regular to direct plans .. the reverse will also happen as some investors find that direct plans are not working out. Likewise something different might show up like a fee-based financial advisor. Or a fourth options like an artificial intelligence based platform. As an educator, it will be my privilege to watch all these developments in action and help investors understand the pros and cons. Thank you very much for your kind wishes.

Thanks Shankar, I believe if you make a dedicated video on the need and pros and cons of engaging an advisor will be very helpful for investors.. All the best for your future endeavors..

@@amitgulati2726 Thank you very much!

Will try, thx for the suggestions

Yes, they should be. Just understand the charge structure properly. I did an analysis of expense ratio some 17-18 months back on international funds for ET Money. The link (excel sheet) is still active although the data is not updated. This will still give you an idea .. you can download it here: shorturl.at/cCOU0

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