Unique Investment Proposal: - You will invest X amount / 100% loss is yours / I will take away 60% of profit. Will you invest?

Tuesday, July 4, 2017

Unique Investment Proposal: - You will invest X amount / 100% loss is yours / I will take away 60% of profit. Will you invest?

Greetings from Hitesh! June has been great and we have started July with a GOOD NOTE. I was thinking that NORMAL guys are smart guys. All MBAs and CAs are super smart guys. More successful a person is in terms of money – it is normally assumed that he is a smart guy.

I have a simple investment proposal as mentioned about. My question is will you invest in that or not? I am 100% sure that 99.9999% of the guys will say NO to that proposal. But having said NO to me – does not mean that you will not do above kind of investments in practice. In fact, most guys might have done this kind of investment for one reason or the other. I am talking about mutual funds, I am sure many of you must have done.

Let me share an example.

Let us look at the SENSEX return and see what happens when we invest in mutual funds.

Let us take a journey of SENSEX for understanding. We have seen worst scams / droughts /political instabilities / wars / bop crises and things like that during last 38 years.

Sensex has moved up from 100 to 31000 during these periods. If you calculate point-to-point compounded return for 38 years – you have a return of 16.25% per annum. In other words, your money was doubling every 5 years.

Suppose, if you have done investment of Rs.1 lakh directly in the BASKET of SENSEX companies in that proportion or in SENSEX – you would have got Rs.31 lakhs at the end of 2017. Your one lakh became close to Rs.31 lakhs at 16.25% CAGR.

Now, let us see you have invested in MUTUAL FUND in 1980.

Say, you have invested in a mutual fund, which is managed by STAR FUND MANAGER, and he is also producing 16.25% return all over the last 38 years. You have invested Rs.1 lakh with him and he is CHARGING just 2% as management FEES every year as FUND MANAGEMENT FEES.

Many of you think that it is just 2% and it’s okay. I am not talking about any HIDDEN CHARGES or NON-DECLARED CHARGES. SEBI has recently asked to declare the remuneration of FUND MANAGERS to all fund houses. For my calculation, I am assuming your cost as just 2%. How much will you get?

If FUND guys take just 2% every year from your yearend corpus as management fees – you would have Rs.14.17 lakhs in your account at the end of 2017.

It means you made Rs.13.17 lakhs ( Rs.14.17 lakhs – Rs.1 lakh) in last 38 years on your investments of Rs.1 lakh while MUTUAL FUND made Rs.16.83 lakhs (Rs.31 lakhs – Rs.14.17 lakhs).

In the above case…..

1  You have made the investment

2  You took the risk of loss

3  You had paid the fees of 2% whether He made the money or not.

4  You took the TAX liabilities.

5  You made Rs.13 lakhs and he made Rs.16.83 lakhs.

6  He earned 56% return without ANY RISK of LOSS.

In all FAIRNESS – I have assumed that MUTUAL FUNDS are generating at least Market RETURN. Most MUTUAL FUNDS are not doing that much also!! So, you have a loss in terms of FEES and in terms of PERFORMANCE. What’s more – I have assumed just 2% as a cost but, the cost is much higher. So, you will end up making Rs.10 lakhs and he will make Rs.20 lakhs.

Will you accept this proposal?

Many of you had said blunt NO to my proposal while reading title of my post. But, look at your investments – have you invested in mutual funds / SIP or not?

This is a simple calculation – you can do it in EXCEL and see yourself also.

The point is – why you are doing this blunder?

From the time, you can remember – mutual funds are being marketed as follows.

General pitching of the Mutual fund guy is – the market is complex / dynamic and it is not possible for a NORMAL guy to analyze all the data and do the investments. So, let us give our money to the EXPERTS and as they are well placed to handle these complex markets. So, let us give our money to him and RELAX.

It’s irony that most educated guys earning in lakhs and millions, having a very high EGO for their SUCCESS and their POSITION in the CORPORATE or BUSINESS WROLD – do not feel insulted with such a DIALOGUE. They simply SURRENDER to this dialogue. This is the power of marketing.

We have seen the super marketing of MR. NARENDRA MODI’s political campaign in 2014 for ACCHE DIN. Recently we have seen marketing of Demonetization and GST. You all know what is the ground reality of our country and our positions as of now. 

If you are getting carried away by their marketing and giving your money to them for investments, I would say - May GOD BLESS You.

WHAT IS A BETTER WAY?

There is a beautiful saying in GUJARATI – it says – “you must die if you want to go to heaven”. Same applies to your money also. You must learn to invest and manage your money. You are the best person who can take care of your money.

At Destiny Management – our goal is to equip our client with proper investment and money management skills. Once the client is educated and trained properly – he can go all out and do whatever he thinks is best for him.

Just be with us for 3 years and I guarantee you that you would never need to rely on anybody for your money management.

You have a choice - pay tuition fees for 3 years or pay 60% of your profit. Make your choice.

Have a SMART INVESTING.

Follow me on Twitter @hiteshmparikh or on Whatsapp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.