Feb 18


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A long break. Actually nothing exciting happening on the economy front but a lot happening on the behavioural finance front. In the last one month I have received six queries about which mutual funds to invest in, Or is this fund correct for me? Or I have these these funds in my portfolio and my advisor has asked me to switch the schemes as they are not performing. What should I do? Or simply, Which next fund do you recommend apart from PPLTVF?

These seem to be simple innocuous questions. Where is the behaviour part in this? Yes, they are simple queries. But the timing of these queries is what brings the behaviour into play. In the last couple of months the Nifty has climbed back to 8800 levels after a sharp fall. And as the markets are rising, my readers and friends think that they are missing the bus. This missing the bus part is what is behavioural. More and more investors flock when markets rise whereas logic says that when things are cheaper, people should buy.

Don’t worry , you are not alone. Till 6 years back, I was doing the same stupid mistakes.

Brigadier Cheema had spoken to me 6 years back and at that time I had only repeated Benjamin Graham’s famous words to him, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

And then what I suggested to him was what the Oracle himself said,  “By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. — Warren Buffet

I told him to buy Nifty BeeS every month like a systematic investment plan (SIP). But due to his son’s educational commitments he probably could not help stopping his investments, as a result his investments have not given him the returns they were supposed to give.

I will repeat this ad nauseum, do not invest in mutual funds/stock markets with money which is needed for essential commitments. You may like to revise my first blog on Need vs Greed.  Secondly, the beauty of SIPs lies in discipline. Passive action. But if you take active action, ie stop the SIPs when markets go down and restart when they look up, you would never make money.

For the present MIRAE Emerging Blue Chip Fund Direct Plan Growth  and DSP BR Micro Cap Fund DP-G  seem to be worth investing in.

And if you want to save taxes through 80C route and ELSS then go for Axis Long Term Equity or HDFC Long Term Advantage.

And please do not keep more than 5 schemes in your MF Portfolio. Give them time. More may not be better.


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