Friday, December 1, 2017

BITCOIN....FUNDS DOUBLING....IGNORE THE HEADLINES


It is the job of Media to keep posting ATTENTION grabbing Headlines and they spare no efforts in ensuring that.


Let us look at 2 examples both of which were shared by my investors..


FIRST INVESTOR :

This investor...named Mr.VM wrote
"Srikanth Bhai...
Look at this headline...and sent a link to an article which proclaimed FUNDS THAT TRIPLED INVESTORS MONEY IN 4 YEARS!!!
You did not recommend this fund....See this Escorts High Yield Equity Fund it has given 23% CAGR for the past 5 years"

I said "Cool down VM bhai..

Yes.
Tripled! But at what risk?
For Ex: Escorts High Yield Equity fund has an AUM of a paltry 7 crores!@!
7  CRORES FOR A LARGE CAP FUND!!!
(Large Cap as per the image shared....however Value Research puts the fund in Mid Cap Category and Moneycontrol puts the fund in Diversified Equity Fund category)
Even then 7 Crores is not a AUM which gives me comfort.
Here I request you to invest in funds which are some decent size to begin with.....It should be at least 70% to 80% of the Average AUM in its Category.
Also.....Expenses tend to HIGH for such very small funds which could definitely impact performance,especially when the markets tank and stay bearish for long periods.


Will you invest in such a fund?


Just imagine...if an BIG investor (or a group of investors) in that fund having Rs.50 lakhs decide to redeem all investment in one go....the impact on the NAV will be CASTROPHIC!!
About 14% of Fund Corpus will go out in 1 single day.
The Fund Manager will be forced to sell his BEST STOCKS to honour the redemption.


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Lets take 2  more example :
UTI MID CAP FUND..
True it has doubled....nay tripled in 4 years but has been an underperformer compared to its peers and is ranked a lowly 60th out of 94 schemes.
This particular fund has actually UNDERPERFORMED its category both for 1 year and 3 years.

Lets take one more example
HSBC MIDCAP EQUITY FUND 
This fund which has been highlighted at 4 row has been such an UNDERPERFORMER that it has failed to beat its Category for 3 years, 5 years and even 10 years!!
10 YEARS OF UNDERPERFORMACE.
And, just 1 or 2 years of good performance has taken it to some top position and ATTENTION GRABBERS feast on such a bonanza and gullible investors who go DIRECT are trapped.
In Fact, Value Research says this fund is ABOVE AVERAGE in terms of RISK
and BELOW AVERAGE in terms of RETURNS.
Which means...by investing in this fund YOU ARE TAKING ABOVE AVERAGE RISK FOR A BELOW AVERAGE RETURNS.







As I said...numbers can be presented as one wants.
Attention seeking is the name of the game.
Do not fall into such a trap. 
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Now..lets move to the
CRAZE OF THE MILLENNIUM .....the BITCOIN!!

Then comes one more investor Mr.MPS and sends me a Newspaper clipping which says BITCOIN gained $1000 in 1 single day and asks me 
"Why did you not recommend me this....??
You are talking about SIPs which give me returns after 10-15 years but look at this...it has given in 1 day what your SIP will not give even in 1 year"!!!
I said :"MPS Bhai...


Is Bitcoin regulated? My God....NO!!!

Is Bitcoin a commodity? ....NO!!

Is Bitcoin backed by any Tangible Asset?....NO!!

Is Bitcoin a Currency?....NO!!
Try paying your Income Tax with it and you will understand..

Is Bitcoin easy to understand?...NO! Even JP Morgan's CEO Jamie Dimon acknowledged that he didnt understand Bitcoins and says Bitcoins is worse than Tulip Bulbs!
If Global Banker doesnt under BITCOIN...will you and me understand it?
Do you want to buy something you dont understand?? NO...right...then why SPECULATE..

Is Bitcoin regulated?? ....NO!!!
No SEBI, No RBI, No FED to regulate...If someone frauds you in Bitcoin...you dont have anyone to turn to complain to and get back your investment..... You want to invest in something where there is no one to go to in case of a fraud?? NO...right..then stay away
Even RBI in its Feb 1, 2017 release has clearly stated that it has NOT ISSUED LICENCES TO ANY COMPANY TO TRADE IN ANY VIRTUAL/DIGITAL CURRENCIES. 
RBI has rubbed its hands off the matter by clearly mentioning that those doing so will be doing at their own risk!!


Finally, Dear Investor....BITCOIN or for that matter other Cryptocurrency are being used by Hawala dealers, Terrorists as its very very difficult to track those who trade in them. 
So...if you want to contribute to the TERRORISTS...go ahead and invest in BITCOIN. 

Having said this....Cryptocurrency could become legal going forward and could come under regulation but till then I follow the principle of A BIRD IN HAND IS WORTH MORE THAN 2 IN THE BUSH!!

For me, BITCOIN is a game of GREATER FOOLS THEORY. 
Someone buying only in the hope that there will be another person who will PAY MORE for it and this cycle as long as its running the dance goes on. 
The moment the music stops we may well see LOTS OF BLOOD on the street.



You seem to be trapped in the FOMO syndrome ....FEAR OF MISSING OUT ....This is where majority of people lose money....
The cream is already gone...who knows whats in store


Remember the Japan Stock Market....
It has still not touched its Life Time High even after 28 years!!!!
You could just get trapped in exactly such a case


Relax. 
Play a game of Pokemon Go or Angry Birds and enjoy the weekend. 
Lets talk about some REAL investments next week!

Let the excitement settle....
Let the regulations set in place"""





As I said...numbers can be presented as one wants.
Attention seeking is the name of the game.
Do not fall into such a trap.

IGNORE THE HEADLINES.
STICK TO THE BASICS
STICK TO YOUR FINANCIAL PLAN.
STICK TO WHAT YOUR MUTUAL FUND DISTRIBUTOR TELLS YOU.


He knows what funds fit into your risk profile, time horizon.

Good luck,
Regards,
Srikanth Matrubai







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 https://t.me/MutualFundWORLD

5 comments:

  1. Thanks Srikant,
    For sharing your clear thoughts on Bitcoin and various funds.

    ReplyDelete
  2. Dear Srikanth, once again you have written an Excellent article, which throws light on current situation in the market. It gives very useful insight on how easy it is to fool investors. Your suggestion to 'Better stay away from the noise' to be followed.

    ReplyDelete
  3. Srikant ji, Excellent article, very nicely written. Such articles are like light house for retail & small investors in the big sea of stock markets. Such informative articles are always welcome.

    ReplyDelete
  4. Very lucid and logical explanation Srikanthbhai. Industry needs many saviors like you who can guide investors in right way and save them from incurring the losses

    ReplyDelete

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