Fund Managers need stories to sell the fund to the investor. Will they ever, ever say sell equity funds and wait in liquid funds?

No. Will they sell equities and wait in cash on your behalf. NO. They cannot and should not. This is exactly where a PMS can step in. However I would recommend PMS only with brilliant fund Managers – no I am not naming them – and for reasonably hi net worth customers who can put Rs. 2-3 crores (about half a million dollars) in a PMS and take a 5-10-30 year view on this part of their wealth.

So if the fund manager has to get the ordinary Rahul, Mangesh, Madhuri and Bhargavi to invest he needs to invent some tales. You need tales (fables) to tell people….so here are a few tales which is normally used. Trust me, most of these stories are real, but in the world there have been long periods of time when these HAVE NOT WORKED. You can surely pick holes in all these stories….

a. In the long run equities will make money: There is a caveat. For you to make money in equities over long periods of time the country has to have democracy (hear hear Pakistan), YOU should have money to do a SIP for this period of time, YOU should not need to draw down (withdraw) when the markets are low. Sadly none of the fund managers ever tell you the other things that I have told you!

Also a salesman’s long run is 4 years, a fund managers long term could be 10 years. You meet the salesman, unfortunately.

b. Keep investing when the market is high or low: The essence of SIP in a portfolio is to avoid timing. However if the market downslide is matched by your inability to remember this or by a cash shortage, YOU will suffer. Do remember though staying out of the market when the market has many scrips at a p/e of 100 can benefit just as much. Unfortunately at that time you have to use your discretion, the fund manager is busy showing his immediate past performance! If you see over a 30 year basis all the so called highs and lows are just a blip.

c. Only investors earn money, traders ALWAYS lose: And they will quote great investors taking a pot shot at traders! truth be told I am not sure how many people reading this have meant REAL TRADERS. I am not talking of those guys sitting in front of the screen all day and pressing F1 and F2. I know traders who have dealers sitting on the terminal. They have strategies, charts, and have seen them earn crores. Warren Buffet, Deepak Parekh, Uday Kotak, Vallabh Bhansali, Fisher, John Templeton, Mark Mobius, etc. have all earned millions of dollars in different markets, different time periods, different countries and with different currencies. Remember it is your brain that makes money for you, not markets, not strategies. I have seen investors with poor exit strategy – and this caused them to lose tons. I have seen traders who have earned millions.

d. You are too dumb to invest directly into the share market: Well it is in the fund manager’s interest to tell you that. My take is a little different. Are you doing enough to equip yourself to deal directly with the equity share market? Invest in learning, invest in emotions control, build surplus cash, have adequate insurance – all these are necessary to make money in the equity market over a long period of time.

Do not be stuck by ANY dogma. Market is a great teacher, but sadly expects to be paid in advance and normally in blood. If you see blood on the street…remember many people have paid a price.