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Trust me, most of these stories are real, but in the world there have been long periods of time when these have not worked.
Fund managers need stories to sell mutual funds to investors. If the fund manager has to get the ordinary Rahul, Mangesh, Madhuri and Bhargavi to invest he needs to invent some tales. Here are a few tales fund managers normally use to get investos shell out money.
You can surely pick holes in all these stories...
a. In the long run equities will make money
There is a caveat. For you to make money in equities over long periods of time the country has to have democracy (hear, hear Pakistan); you should have money to do a SIP for this period of time; you should not need to draw down (withdraw) when the markets are low.
Sadly none of the fund managers ever tell you the other things that I have told you! Also a salesman's long run is 4 years, a fund manager's long term could be 10 years. You meet the salesman, unfortunately.
b. Keep investing when the market is high or low
The essence of SIP in a portfolio is to avoid timing. However if the market downslide is matched by your inability to remember this or by a cash shortage, you will suffer.
Do remember though staying out of the market when the market has many scrips at a PE of 100 can hurt just as much. Unfortunately at that time you have to use your discretion; the fund manager is busy showing his immediate past performance!
c. Only investors earn money, traders always lose
And they will quote great investors taking a pot shot at traders! Truth be told I am not sure how many people reading this have meant real traders.
I am not talking of those guys sitting in front of the screen all day and pressing F1 (buy) and F2 (sell).
I know traders who have dealers sitting on the terminal. They have strategies, charts, and have seen them earn crores. Warren Buffet, Deepak Parekh, Uday Kotak, Vallabh Bhansali, John Templeton, Mark Mobius, etc. have all earned millions of dollars in different markets, different time periods, different countries and with different currencies.
Remember it is your brain that makes money for you, not markets, not strategies. I have seen investors with poor exit strategy -- and this caused them to lose tons.
I have seen traders who have earned millions. Do not be stick to any dogma. Market is a great teacher, but sadly expects to be paid in advance and normally in blood. If you see blood on the street... remember many people have paid a price.
Photograph: A still from the movie The Wolf of Wall Street
