A letter to my fund manager

Dear fund manager, I am an average Indian investor who, over the last 30 years, has found myself on the wrong side of every bull market. I am not totally dumb. I do make money when the market rises, but in the final frenzy, I lose my sanity and go all out to make money. I just can’t seem to time my exit well. In the process, I have not made big money from the stock markets. In fact, my returns are so poor that fixed deposits return far better. And I am not even going to compare it with gold’s performance.

I am not sure whether it was my age, or lack of wealth creation, or perhaps a bout of uncontrolled greed that led me to equity funds. Professionals, I was told, do far far better. I believed that. So, I bet on you. I bet on “mutual funds sahi hai” (mutual funds are right!).

Now that I am on the brink of completing another five-year cycle of investing, I thought I will assess my performance. By that, of course, I mean assess your performance. Please do not take anything to heart, after all I am an inconsequential retail investor.

First, my mutual fund investments, especially those made at the start of this investment cycle, have yielded solid returns. So, thank you for that.

Second, I have noticed certain peculiarities of being a mutual fund investor. You see, I started off by investing in a limited number of carefully chosen funds. But, as time passed, the number of schemes in my portfolio kept growing. Many of these were newly launched schemes. Perhaps it was my greed or something else, I wonder. I do recollect getting calls from your team and being invited to many webinars about some hot new ideas.

Third, I now realise my mutual fund portfolio is as large as, if not larger than a typical stock portfolio. And I am referring to the number of schemes, dear manager. Not the amount. I was told the mutual fund is a vehicle for diversification. Now it appears, I have diversified the diversification to such an extreme that I perhaps own every liquid stock in the market. Will that work better for me?

Fourth, sticking with performance, it appears some mutual fund schemes I own move more sharply than individual stocks. I am not kidding. Is this the high risk–high return segment of my mutual fund portfolio, if there ever was meant to be?

To be honest, at this stage, it appears that I have created a “stock portfolio” of mutual funds with allocations et al!

To be honest, my mutual fund journey has taught me that I may not be a bad stock picker after all. I offer you a few reasons:

I punted on IPOs, like you do.

I am almost fully invested in the market, like you are now, even though it is clear the market is overvalued.

I kept investing new money at the peak of the market, like you now, even when the rational thing was to hold cash.

I can share more, but I hold back. After all, I am just a retail investor.

Then there are SIPs. Well, dear manager, I finally figured out what SIPs truly are. They are often times an instrument to divert, bit by bit, my savings into the newly launched racy mutual fund schemes.

In the end, I am invested, via SIPs, in schemes not suited perhaps for most investors. The incessant calls and webinars got me investing in peak markets, and this, I believe, will result in a long-term track record that is perhaps only slightly better than my personal track record.

Having said all this, I feel like I have yet to realise the investing nirvana that mutual funds seem to offer a retail investor like me. But I am so glad you were part of the journey.

In conclusion, I think you have done slightly better for me than I would have done for myself, dear manager. So, a small thank you for that. Why not big? Well that’s been taken care of by the big money that was paid to you for this average journey.

But then what do I know?

Rahul Goel is a finance and publishing professional with over 25 years of experience in the industry. You can tweet him @rahulgoel477.

You should always consult your personal investment advisor/wealth manager before making any decisions 

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