Fund Managers/ Fund gatherers aka Asset management companies and their agents 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 like Chetan Parikh – and for reasonably hi net-worth customers who can put Rs.3-4 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 are 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. You need to have tor0 have patience and the ability to sit calm over long periods of sideways or negative movements. Sadly none of the fund managers ever tell you the other things that I have told you!

Also a salesman’s long run is 2 years, a fund managers long term could be 10 years. Mine is 15 at least. 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 down slide 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 hurt just as much. Unfortunately at that time you have to use your discretion, the fund manager is busy showing his immediate past performance! There are times when there is a crying need to NOT INVEST – no fund manager is asking you to stay away. Meditate on such thoughts.

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 asset classes, 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.

Remember fund managers make money if they GATHER more assets, not PERFORM better. There are 2 ways of increasing assets – by good performance in managing AND by performing well in GATHERING. India’s top fund houses have very strong sales arms – bank branches. Two good fund houses without a good strong sales arms are DSP and Franklin Templeton. Says something right?

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.