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This post is part of the Why Index Fund Series ( Read Case1 and Case2 before this )

Case 3: My Financial Advisor will minimize my losses

“We may not outperform the market but we will make sure to take active measures to protect you when the market is down”

– Financial Advisor and I charge exorbitant fees for this.

If we look at the Fund performance when the tide is high this rosy picture that they paint looks very real. In a market downturn like 2008 and the recent ending of 2018 all Mutual Funds have had a blood bath.

As soon as the Fund performs badly the client hurriedly picks up his/her phone and tells the Financial Advisors to switch the Fund amount into a better one. ( Have seen this happen right in front of me and I don’t stop them from doing it, Some lessons are better learned the hard way ). Everytime you switch a Fund your corpus attracts at least 4-5% . That’s a lot of capital lost if one repeatedly does it.

Best advice is to spend your valuable time with your loved one’s. Don’t break your head trying to time the market , find the best Fund and track the market for the best possible opportunity to double your money.

The world’s top 10 fastest growing cities in terms of GDP are all in India !! 

– Oxford economics.

Most of the World’s economy invests in Index Funds of India. Did you know that even Life Insurance Companies and Public Provident Funds invest in Nifty 50 ? This allows PPF to guarantee the steady return of 8% ( and are making 12% by investing in the market ). Insurance companies do not guarantee any kind of growth for your money and hence is one of the worst investment vehicles !

Insurers don’t pay out all the money they collect right away. Rather, an insurance company will collect money in the form of premiums, invest that money, and then pay out claims as needed at some future date. The difference between premiums collected and claims paid out is called insurance float. This float used wisely to invest in good businesses is what made Warren Buffett one of the richest in the world.

Investing in an Index Fund allows you to put your money in auto pilot mode , do a SIP every month and come back to it when you want to retire. Forget all the turmoil that happens everyday and the non stop news channel discussions by so called Market Experts about which stock tanked and what will do great.

Look at the chart for Nifty 50 since its inception , there have been gut-wrenching crashes, but the market on a longer run has always moved up !!

Hope this insight on Index Fund has helped realize the benefits of Investing in an Index Fund. If one still feels that Active Funds are the best way to Financial Freedom , please try it out for a year or two. Then a couple years more until you come to a realization that nobody can beat the market on a longer run.

High Risk = High Returns : There is no such thing! If you were told High Risk meant high chances of losing money… this small change in wording, would create panic and every last paisa would be pulled out of the market. Fund houses and leeches will give you this common anecdote “even life does not have guarantee, so how can we give guarantee on the returns”. Simplest answer to them should be “losing all my money because of your stupidity, might result in losing my life” .

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