MWM Completes 5 years.
Reason to celebrate but also ponder!!!
Momentum is a Buzz word these days, it wasn’t the case when we started. See below the CAGR returns of various benchmarks Vs MWM.
While the results are very satisfactory and in line with our expectations. This is how any half-decent momentum product is supposed to perform. (Capture the upside, fall lesser in the downfall and make you cry in range-bound markets) We have done ALL 3 successfully.
But, there is another side to the story. A dark side. Something we advisors have to live with. My friend Abhinav from slack channel asked me,
any data how many (absolute or %) of your clients stayed with you for 5 years.
The answer to this question is 29.
and even these 29 are friends and family who have either outsourced the execution to me or did not exit due to sheer sympathy or आँख की शर्म
The majority of MWM members joined in the euphoric times of 2017 and 2021. And a whole lot of them left us at the bottom of 2018–19. This is a sad truth of our industry and it cuts through all mediums, be it mutual funds, smallcases or PMS.
If there is one thing I wish to change, it is this stat. It is like a चिराग तले अँधेरा, More people need to be part of our success.
Recency bias plays a BIG role in stock markets. AMCs and PMS become fat after a stellar last-year performance.
Take MWV (MysticWealthValue) for example. We were rejecting money back in 2014 after clocking 40+% cagr since 2011. Now there are only a few takers.
Jesse Stine said it the best
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
Those MWV members, who are just sitting tight are going to have the last laugh. Factors are cyclical in nature. Every dog gets its chance.
But don’t get me wrong, I am not mocking my clients, it is not easy. You are overwhelmed with choices. Aggressive marketing bombards you with countless offers!! For every factor, be it Value or Momentum or Low Volatility, you have 500 products to choose from. How else do you decide where to park your money but to see which one has done best.
We wrote a blog on how biases play a big role in your selecting your fund manager. You either fall for narrative or recency bias.
There is no 01 right answer to the points I am raising above, and nothing changes overnight anyways. It is an evolving process. And things are changing!!!
Through mistakes, you evolve to realize that selection of a fund manager or anything worthwhile in your life should be done objectively and outside the grip of social/psychological/peer pressure.
Through mistakes, you evolve to realize that once you have made your selection, you should play the entire cycle giving it a fair time and chance before giving up on the idea
Things are changing, DII are becoming a force to reckon with and the SIP power is clearly visible. This SIP money buys the dip and is not scared of corona or russia/ukraine conflict.
But, I do not want to raise your hopes too high. Even with all the awareness and investor education, this gap will remain. That is human nature.
Fear and greed are emotions as old as hills and will play themselves out again and again.
Pareto law will always play out, only a handful of us will be able to earn handsome returns. It is not supposed to be easy, compounding your money doesn’t require high IQ or writing/oration skills, but a Strong Gut.
Comments are welcome.