How Small Investors Can Earn More
In this blog, you will learn How Small Investors Can Earn More.
Warren Buffet once said that if today he was a Retail investor if he was not a very big investor. If he was a little Retail investor then his returns should be doubled. He is earning less because he has become an Institutional Investor.
Why did he say that? Now if he has told it then there must be something. And can you and I be Retail investors also Mutual Funds, PMS Institutional Investors, and all of them can we earn more returns? How? That is what we will know today.
Does it sound a little weird? Because we have always in our minds that if someone is an Institutional investor, take Mutual Fund's example, they have many advantages.
What advantages? Directly with them that company in which they will invest the CEO of that company talks to them. Calls them to the factory and shows them their plant. So those Mutual Funds have more knowledge.
They have access to management and they can clear their doubts one to one. It's a very big advantage. Second, they have a good research team with lakhs of salary and people from IIM. They have a very good research desk and software.
So after all of these things, a small and normal investor, how can they defeat them, my friend? So now I’m going to tell you how in comparison to all of these advantages big investors like these have more disadvantages. And as a retail investor, you can defeat them.
First -: Performance Pressure
When the entire world is scrutinizing you, the pressure to work well under that pressure is very difficult. Think that there is your portfolio no one knows what you are earning in it. You can peacefully make a loss in it and make a profit in it. 100 people to you teasing you, irritating you, shouting at you no one is going to come. It's your own money, who cares if you fully drown or double it?
But a fund manager always has the sword on their neck that he must increase people's money every time. People however have saved it and give Rs-500, and Rs-1000 as SIP to them. So in that, they have to keep on bringing performance.
If they have any mistakes then all the Mutual Fund's portfolios are in public. If any of their shares drowns the number of abuses that fund faces whatever abuses.
I am just saying for example Of their funds are good. Motilal Oswal was very bullish at one time on their favorite beverages. Who makes mango sips? They have a very good weight. And Motilal's share was doing very well at that time and the reputation was very good. One favorite beverage Mango Sip bet went wrong, some problems came to the company and there was a problem with the fund's reputation. AUM started to decrease on that fund The fund manager also had to face criticism.
This much pressure on an individual will never happen. We can sleep peacefully. Mistakes are made under this pressure. And there is an extended point to it. Know what? Just think about the fund manager. Which stock is going? What is everyone watching? So it's pressure. In that case, they will not take risks.
He will think that "Man I should take Infosys. Tomorrow if it falls Infosys is lying in more than 1000 Mutual Funds schemes. If people will abuse, everyone has to hear it, and not only I will get stuck in it. Why would I take a share which no one has which no other Mutual Funds have? If it went wrong then everyone will tell me that You wanted to be a big hero why did you take that share? no one has taken it. So I don't want to take such a risk.
Second -: They Play Safe
Job is dear to everyone. Everyone has to bring home money to take care of their family. What's wrong with it? Now if they have taken a risk and the share flipped then their job is gone. So it's better not to be a hero and go safely.
See what Mutual fund is A taking, what Mutual fund is B taking, and what Mutual fund is C taking. I will take what everyone is taking. I will do an average performance and my job will be safe. What will I get if others earn more if my investors earn more?
On the other hand, if I make a loss then everyone will make me a villain and abuse me. I don’t want to become a hero, I will just keep on giving an average return. So most Mutual funds aim for safety and average returns.
This structure becomes so much pressure and the greed to save their job becomes so big that they can't do anything unique or different. Where no one is going there they cannot go.
As a Retail investor, you are completely free my friend. You can go wherever you want and take some risks with a little money. You can do as you want to depend on your risk profile. It's not like you risked all the money, but if you want you can go there where Mutual Funds can't go.
Third -: Biased Management Access
I have talked about an important advantage of Mutual funds. That they have Management Access they can talk with the management. Is it a matter of benefit or loss?
The benefit is that you can ask them doubts that can be cleared. Sometimes we read about companies we don't understand. Should we take that company or not? So if management access is there, then you can talk with them.
But now think the opposite way. They are the company's owners. If you ask the company's owner that, how's this company? Then he will tell well. If you ask any parent, how's your child? then parents will always see good things in their children. Just ask their teacher or friends how they are. Then the truth will come out.
So it's the same thing that if I ask questions to a company's owner then they will tell only good things because they are very good salesmen. That's why they made such a big company which is listed in the share market. They are very good salesmen.
On the other hand, they will show me good things and they will convince me why you must invest your Mutual fund's money in my company. They want to increase their company's share price and they want more and more Mutual funds. "Invest in my company" so they are selling me their company.
So I was thinking my doubts will be cleared and he is sticking to his product. Just as salesmen do, they are sticking their share to me. So what's the benefit of this kind of Management Access? On the contrary, it will only harm.
Fourth -: Restrictions
They have big research desks and many intelligent people with lakhs of IIM packages. What's the benefit? When you have tied their hands. It happens a lot in Mutual funds. Think there is a Large-cap scheme now SEBI says that it's a Large-cap scheme, my brother. You have to invest your money from these 100 stocks.
Now no matter how good that Research Analyst is they cannot get out of those 100 shares. They have to invest only in those 100 shares. Then where will they bring returns from?
As an Individual investor, you don't have this limitation. Let it be a Flexi-cap fund, a Multi-cap fund there are also many restrictions. Sometimes restrictions come from the AMC level. That company's minimum credit rating should be this. Only then will we think of it as investment worthy. Or it can happen that this scheme mandates valued stocks.
So don't go with growth if there is growth then don't go with value. Many restrictions come even if those people are smart but because of the structure of this much formality, hierarchy and restrictions come that no one can openly show their talents. And the funds are governed by the rules and policies.
Now I am not saying that it's wrong, Mutual funds are safety oriented. People invest their savings money. So having this structure even if the returns are a little less to buy people's money the priority is to keep them safe.
So this is not wrong, it must be like this. I am not criticizing Mutual funds. But I am saying that because of these reasons an individual gets the chance to learn if they learn in-depth investing.
Fifth -: Unfair Advantage
This is our most unfair advantage. It is always said that only big people get big advantages. The world is not fair in the stock market, small investors, Retail investors have the advantage. And big people are at a disadvantage.
They have a loss, we have profit. This is a very good rule, do you know what? If a Mutual fund invests in any stock then it's important to be disclosed to the public. In any company, if someone is of more than 1% of its shareholder above 1%. Then they get disclosed in that company's financial statements. Meaning any big investor is buying a lot of shares of a company and they have more than 1% of their holding. Then they will come to that company's results.
We can spy on them but they can't spy on us because what company do we have 1% of ownership in? If we have a few shares then disclosing is not necessary. That means we can see what they are doing. They cannot see what we are doing.
Think if it was a war and in war, we have a third eye and we are seeing all of the enemy activities. Where they are hiding, running, and what they are planning. And the enemy does not know anything about us. Then who will win? Maximum chances are that we will win. It's just like that. In the stock market, we are our enemies, who are the big investors. We can spy on them like Big Boss. And they can't do it.
0 Comments