Blog for the book - Riding the Roller Coaster - Lessons from Financial Market Cycles We Repeatedly Forget

Riding the Roller Coaster

Chat transcript - www.moneycontrol.com - 16th July, 2015

Transcript of my chat at www.moneycontrol.com today

http://www.moneycontrol.com/master_your_money/view_chat_transcript.php?cat=&chatid=2419

Live chat on 16th July

Live chat on www.moneycontrol.com on 16th July, 2015 at 4:00 PM to 4:30 PM

Transcript of my chat on www.moneycontrol.com on 7th July, 2015

http://www.moneycontrol.com/master_your_money/view_chat_transcript.php?cat=mf&chatid=54

You can pre-order the book at various websites

https://ridingtherollercoasterthebook.wordpress.com/2015/07/06/you-can-pre-order-the-book-at-the-following-links/

Should you invest in stocks directly or through equity mutual funds?

Read my article on whether it makes sense to invest directly in stocks or through equity mutual funds

http://epaper.gujaratimidday.com//epaperpdf/gmd/06072015/06072015-md-gm-12.pdf


The English translation is as under:

“Should I invest in stocks directly or through equity mutual funds? Which of the two can generate better returns?” A participant asked in one of my investment seminars. This is not the first time that one has faced this question. This question keeps cropping up periodically.

There are quite a few investors who think they can easily generate higher returns than most mutual fund managers. Many also quote some of their successful stock picks. Such examples could be quite attractive, and seductive sometimes. The result being, some individuals start thinking that beating other investors is quite easy. When one sees someone making money (or hears about such a story), the above question is raised.

What should one do? The question is straight forward, and so is the answer.

One has to go back and understand what a mutual fund really is. A mutual fund is an investment vehicle offered by an asset management company. An investor investing in a mutual fund is outsourcing the activities related to investment management to a professional fund management and administration team. This professional fund management team takes up certain tasks on behalf of the investor, e.g. analyzing and identifying for investment opportunities, managing the inflows and outflows in the fund, taking care of investment administrative activities, valuation of the portfolio and calculation of the NAV, etc.

If an investor has to do all these activities, one would need three things, viz. (1) skills and abilities to manage money, (2) time required for various activities including investment research and administration, and (3) liking for all these activities. In the absence of one out of the first two, the performance could turn out to be disastrous.

Investment management is a full time job and requires one to devote time towards study of balance sheets of companies to understand the businesses one is buying. It is surprising that so many investors buy stocks of companies without knowing the business of a company. Let us understand that one becomes part owner of a company by buying stocks. The owner of a company is entitled to profits of the company in proportion of the shareholding. If one is looking at becoming shareholder of a company with this understanding, it is important to buy stocks of companies that can remain profitable for long. In order to understand whether a company would be profitable or not for long, there is only one way – study the business of the company.

During one such discussion, one gentleman looking for buying stocks asked, “How many people know how to read a balance sheet of a company?” His question is right. However, there is a bigger danger if one really understands what is happening. Anyone looking for buying stocks should read the balance sheet. However, if one does not know how to read one, is trying to invest one’s hard-earned money without realizing where the money is going. Isn’t that a bigger danger?

Well, in the absence of abilities one would be better off taking professional help. This is where mutual funds come on.

Very often, we tend to look at things, which are less important and ignore things that matter the most. In the question of managing money, whether direct investment in stocks would be more rewarding than investing through mutual funds, one often misses out the amount of time and effort one has to put in. there could be better utilization of one’s own time – spending time with the family, pursuing some hobbies, etc.

Enjoy life!

Amit Trivedi

The author runs Karmayog Knowledge Academy. The views expressed are his personal opinions.

Riding the roller coaster - lessons from financial market cycles we repeatedly forget - what is the book about

Riding the roller coaster - lessons from financial market cycles we repeatedly forget

Events spread over a period of five centuries and involving four continents; vehicles of investment or speculation ranging from equity to fixed income to derivatives to real estate to…hold your breath…tulip bulbs!
The market prices of instruments fluctuate wildly during these events, giving rise to numerous theories on what could and should have been done to preempt them. But why do these events keep recurring from time to time? Is it possible to foretell such episodes? Can they really be preempted? 
When such market tsunamis occur, large and small investors, alike, burn their fingers. Governments and regulators try to intervene with measures that seem too little, too late. Great nations are brought to their knees while they seek out someone to blame in the aftermath.
Against this backdrop, what should investors do? What are the lessons they can learn? 
A veritable page turner, Riding the roller coaster is packed with information and insights on the subject and yet extremely lucid to read. It talks to simple investors, narrating, cautioning and advising in its uniquely wise and witty tone.
As a “seat-belt” for the next financial market roller-coaster ride, and all those that will follow, this book remains evergreen and begs revisiting from time to time to ensure that we refresh our memory of Lessons from financial market cycles we forget.