Leaches

Mutual Fund advisers are F*&^i%g Leeches.

Mutual Fund advisers are F*&^i%g Leeches.

on a SIP of ₹5000 / month over 25 years assuming a 15% CAGR return, your friendly harmless adviser will pocket a whooping sum of Rs 28,00,000 (28 lakhs)

Barring a few (who time the entry and exit based on either momentum or value), all other mutual fund advisers earning trail commissions are leeches

Yes, you read that right, LEECHES , you know those parasites who suck the blood of very host they live on.

Let me explain.

These set of jokers advise their client to, BUY and HOLD, come what may, continue your SIP in good days and bad, up and down , summer and winter.

The whole premise of this advise is to keep averaging while the upward bias undercurrent of equity catapults everyone in the long run.

and for this buy and hold parroting service, they charge a trail commission. See the first para to get an idea of blood sucking we are talking about.

But there is a PROBLEM, a BIG ONE.

and it has HIDDEN IRONY in it.

The problem is the assumption that by throwing a bit of behavioral finance thaler giri (Richard Thaler) , they can ‘Nudge’ retail investors to become STOICS and withstand a drawdown of 50–60–70% from the peak, and not only that may be “add more”.

This is a JOKE. And here is the IRONY.

For once let us presume that you are that 1% of the population possessing that STOIC like demeanor to take that kind of HIT in your stride and not be affected by it.

Is it not fair to assume that some one who is that ‘RATIONAL’ would also be “Intelligent” enough to know the power of compounding and blood sucking trail commission that these jokers are earning !!!!

Let me go a step further, why would such a rational person be averse to direct stock market investment.

The usual excuse that I get on this is that professional retail does not have time to handle their finances.

To which I have 02 suggestions. If you have 1 hour per month for your finances, simply run what we do here at MysticWealth. Run a dual momentum between your chosen equity fund and debt.

One decision per month will change your equity curve from a buy and hold baloney to something meaningful.

and suggestion 02 if you don’t even have that 1 hour. Find a fee based adviser for god’s sake or buy directly on COIN.

You see, it is all about incentives. I have said this before and i will say this again. If your salary depends on killing someone, you will find yourself in a pool of blood with dagger in your hand.

All this happens at a sub-conscious level. If the agent is given enough trail commission, he will consider Buy and hold to be EPIPHANY from GOD.

 

and that is my last point, don’t think that Mutual funds are not party to it. When you create such an incentive structure, you invite such behavior.

 

If a mutual fund is not responsible for its draw-downs, and adviser is paid on trail commission, where does the buck stop.

 

The story continues after each cycle of boom and bust, new set of bakras get ready to be butchered by the cartel.

 

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Disclaimer: My bad if I have offended anyone at a personal level, that was not the intention. I don’t have any personal animosity with any one.

These are my views and i reserve the right to be wrong and biased.

This Post Has 11 Comments

  1. DEEPAK BAKSHI

    Disclaimer was a cherry on the cake. 🙂

    You have every intention to hurt on every level.

    You are an aware soul and DIY client , does not mean , everyone is. The benefit that unaware investors have got from MF advisors ” leeches” services over last 10 years of keeping them invested and their money gone up 2.5 times , is enough for these Lost Soul investors , I think and they would think so too.

    Your biases are toxic , but thats the way of the world , specially due to Right to free speech. 🙂

    1. admin

      Not True Deepak. Disclaimer is precisely what I feel. my intention is to hurt the system, not any individual.
      and hollow system it is.
      Ideal system should be as follows.
      A) Mutual funds should be accountable for drawdowns, they cannot be reckless buyers at all prices.
      B) If not, advisers should time the market for clients and charge a reasonable fee for that and not trail commissions and
      C) all other are leeches sucking on retail blood.

      The benefit that unaware investors have received in last 10 years is a myth my friend. Any mutual fund industry data will tell u that, an average investor return is pathetic because he joined at the peak and sold at the bottom. and that is not his fault. that is what humans do, and u cannot nudge them to rationality by hollow MUTUALFUNDSAHI HAI slogans.

  2. R.Vivek

    SIP brings discipline in investing and removes emotions in decision making. It is not the best solution but easiest & simplest way to save for future and financial goals. Retail Investors have been doing SIP in Bank RDs and Gold Schemes , so mutual funds is one more avenue to save their hard earned money.
    Not every Investor is Market savvy and nor has time & knowledge to time the market (again lot of emotional bias will distort rational thinking).
    Reg draw downs : Investors have never lost the purchasing power of their money by investing in mutual funds. They have earned return that beats inflation on post-tax basis. And this is what everyone aims for.

    1. admin

      SIP brings discipline in investing and removes emotions only in good days. In bad days your true human nature takes over. and besides the main point of my blog is that for instilling SIP habit, advisers can charge a fee, not install a straw in their body (trail commission) to suck the last drop out.

      Investors have never lost the purchasing power of their money by investing in mutual funds:-
      this is a statement of a romantic. Please see data, not any data, data from mutual funds themselves.

      avg investor has sold in 2008 bottom and bought with #mutualfundsahi hai ad at the peak.

  3. DEEPAK BAKSHI

    I beg to differ. My own experience has been that my Advisor kept me on track and did not let me stop the SIPs started in 2007 . he was with me holding me to my goal ( both his and my interest were served and I am OK with that ) . he made his trail and I made 19% pa. Had that not been the case , SIPs would have stopped and money would have been in the bank or Post office with Post tax return of 6% or so. I am thankful to him for his services.
    You seem to be a DIY person , net savvy and young . You should use COIN and ZERODHA. I do not buy the idea that if someone else is making money by doing his job , it is wrong. In fact the theoretical premise that the other guy will make as much is based on the SIPs running for 15 years. Which they do not. This year itself you will see slew of SIPs closing ,if Sensex keep drifting, specially those that have started in 2017.

    I read an article that the Direct SIPs done last year have already been closing in big numbers due to recency bias of human mind. Creating wealth is a psychological game. To have a good advisor on your side is a boon. The art is in choosing the right advisor. Your perspective is very black and white , I just wish we were living in Ram-Rajya. 🙂

    1. admin

      sure, different opinions make the market.
      You gave ur own example, i am arguing u r an exception, not the rule. You are giving far too much credit to your adviser than to the actual hero, U. Same adviser won’t be able 2 convince a vast majority who wud panic.

      majority of mutual fund sellers are distributors and not advisers.

      A) They cannot advise coz they don’t know shit and
      B) They only advise what fill their coffers, which is, be dumb, buy and don’t ever think of selling.

      and that is a cold hard truth, u like it or not. When i write a blog, i write about rules and not exceptions and therefore it appears black or white.

  4. Samir

    “majority of mutual fund sellers are distributors and not advisers.”

    So, isnt your headline wrong ?

    1. admin

      yes, u r rite.
      These distributors have no right 2 earn recurring income on 01 sale. That is my whole point.

  5. vagesh

    Great Article.
    To remove all these problems, An investor just chooses two direct index funds based on two index Nifty and Nifty next 50. UTI and ICICI have both.
    It’s that dead simple…

    1. vagesh

      One doesn’t require MF managers, Advisors, Distributors for your money to grow. Index funds and ETFs enables that. Imagine the amount of money in TERs one saves over a period of 30 years. Just ride the market.

      1. vagesh

        Nifty 50(Uti) + Nifty Next 50(icici) is all an average joe equity investor need. If one is feeling a bit more adventurous they can dab in icici iwin midcap select ETF a small percentage.

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