Why the Passive funds will overtake Active funds Unnoticeably

 Why the Passive funds will overtake Active funds Unnoticeably

There is a concept of efficient markets in international finance and Capital Markets.

This refers to the true and transparent valuation of all the companies and the same data being available to everyone who is interested, in real-time across the world.

In the market there are a lot of stories and rumours and perceptions regarding various policies of the government and the corporate world. In the developing economies like India due to the various Nexus between the corrupt government officials and the corporate world this information is not circulated and rather the Mis information is spread widely.

If you will notice the developed economies do not have many public sector units like India in fact their Federal Bank which is the central bank like our own RBI is also privately-owned .

This results in fewer people having access to internal happenings of a particular company and even if they have such information, the controls are so strict that no-one would consider indulging in insider trading.

In a developing economy due to absence of sufficient and deterrent penalties even if such practices are uncovered the punishment is largely like a slap on the wrist.

In developed economies like US, the relevant public vigilance body has sufficient incentive to keep snooping upon people with grave misconduct and the penalties are severely and sufficient deterrent. Best example of this is Rajat Gupta the founder of ISB Hyderabad and A very respected name in the US corporate circles and his Srilankan accomplice.

In India so far even if sach malpractices are discovered the penalty is largely monetary as was in the case of HDFC MF front desk trading.

Because of this information being available to some select people and the fund managers, they tend to leverage this information and hence the active funds which they manage, perform or try to outperform the broader market and the index funds which are dependent on it.

However things are changing and SEBI has become a toothed tiger and has started observing and handing out penalties and in the same fashion RBI is also becoming sufficiently aware.

Recently the prize for reporting (whistle blower) successful insider trading has been raised from 1 CR to 10 CR.

All these small steps will lead to the information being reported on the portals regularly as is presently being done by every company to the stock exchanges and SEBI.

PSU companies like IRCTC are reporting even the running and stopping of trains to SEBI and the exchanges.

I distinctly remember as late as 2018, the heads of most of the mutual fund companies and also Dhirendra Kumar of value research used to say that active funds will still rule the roost for a decade whereas I was very sceptical of their stand.

In 2007 when gold bees NFO was introduced, I knew that the change had arrived.

Few of the AMCs who introduced the etf and other passive funds did it in imperceptible way that few noticed the arrival.

Now you can see the steady rise not only in the AUM of index and ETFs but also the trades volume.

Passive funds did take the market by surprise after March last year but me not continue to do so in the shorter term.

And now slowly you will not only have asset funds for equity but also debt securities.

About 10% of the employees provident Fund money is channelled into SBI Nifty ETF.

Even though Nifty BeES is an older ETF, because of the above reason it's AUM is smaller but traded volume is much higher.

Strategies: even with the short history of passive funds now you have various mutations and combinations to think of e.g. whether to go for Nifty and junior Nifty separately or just invest in nifty 100.

All should you invest in nifty equal weight.

Should you invest in NV20 or in Nifty low volume.

Soon the choice will become even more.

With the clear choice of the investor to directly invest because of technology , the process will be simpler too.

So please be vigilant. Something which is simple can also lead to mistakes.

Do your own research; take in the articles that you read as information and not knowledge. Knowledge will be what you will do and achieve on your own.

Since the field is new the advisors will know as much or as less any of you.

God speed thee.

MOST IMPORTANT THING IN THIS PANDEMIC

 In 2014 I lost three of my dear friends in just one week . I was so crestfallen that I gave up my sailing career and decided to  find alternative life.
The past seven years I spent trying to make myself useful to other human beings.
The past week outdid 2014 by a miles margin.
I lost more than 12 people very close to me in just one month.
Despite my proffering unsolicited advice two friends and colleagues most of these gentlemen and ladies did not make any preparations for their departure.
I used to categorically tell them to prepare a comprehensive list of their assets and emergency information.
Needless to say they used to scoff at me and now the family is in total disarray.
So ladies and gentlemen all those who are reading this piece please sit down tonight and write about information as if you are not there.
I know it will be a depressing thought in the middle of all this Mayhem and chaos.
But it is a one time exercise which will come in handy whenever you are out for work or whatever.
Please start with writing about the passwords of your email ID and internet banking and most of those financial sites/ aggregators which you visit.
Please include the details of your bank accounts, FDs, insurances details of where the policy are kept because 99% of the people have not registered them with depositories.
I don't want to add to all this because once you sit down from write you will think of much more than what I can write.

Please do it tonight.
Also write your will.
In short that is all I can say.

Live Like a Tortoise...

 In Indian mythology ,literature and religion tortoise is used as a symbol of stability, longetivity, body and mind control.
Its ability to withdraw into to its shell at the sign of any danger has been mentioned and quoted in various places.
In fact the stress and the reference given to a tortoise is so strong that  Vishnu himself is said to have taken the Kurma Avatar.

I'm surprised that it was not chosen as the National animal despite it's amplified inspirational importance in our lives .
Today when we are faced with a  pandemic of the same proportions as it has attacked in every century for time immemorial... This is the time to to take a lesson from the creature which has the ability to survive the longest, which has the ability to stand all dangers, which has the ability to control its body and mind...
Let us be like a tortoise, slow and steady with breath ,mind and body control... Let us stay within our shells  ...
Latest stay within our means without adventuring too much till the  danger is over and we can emerge to live again...

OF YOU AND ME...

 Few Observations and lessons
The human mind and the body must never remain idle.
Last week I underwent what could be called as a culmination of a long delayed medical condition into a surgery.
Though it was what the doctors call a minor surgery but since it involved anesthesia it actually can have some serious connotations.
As soon as I knew about it before going to the hospital I made a few preparations and also during my stay in the hospital I realised some very important points that I would like to share with you. These points have nothing to do really with your financial independence or medical insurance as you may think, but they are definitely a big part of it.

First thing that I realised is that, during such times however your family may be whatever be the size and however well placed the relatives maybe only people who come helpful are your immediate friends near your house and your neighbours. Whether you are a Mariner or not, it is very important to develop good healthy circle and tolerate your neighbours even if they are not so kind in normal Times.
Having a good social circle and regular touch with friends is your blessing.
Next is the fact that do not hesitate to ask for help from your friends or neighbours.

Secondly what ever be your financial position, however big be your investment portfolio, however fantastic maybe your insurance plans, they mean nothing  if you have not familiarised your family with the procedures to be followed for getting that money.
Even if you have made the best arrangements your post survival but all that information is in your laptop or the cloud it means nothing. Ensure that all the login passwords for email accounts apps net banking are written down in a small diary and kept safely with the person who will look after you in case of an emergency.
Ensure that however young you may be  write out a will and have it attested by two witnesses who are known to your family . (As suggested by a friend of mine one of these witnesses should be a doctor.)
A simple hand written will in simple language without any ambiguity ,clearly mentioning the person or persons as your legal heir is sufficient, there is no need for it to be written on a stamp paper or be registered even though doing so it's desirable.
Thirdly ,I felt that one should make out one's survival kit having the necessary medication ,toothbrush ,spectacles, undergarments ,a spare charger, for such emergencies.a small amount of cash can also be kept with this emergency kit.
Fourthly, the diary that I mentioned above can be kept in this emergency survival kit and the first pages must have the entire information about yourself.
Fifthly: if you your spouse or family member is a diabetic ,or allergic to anything then this fact must be displayed in a small card and kept in the wallet or displayed on the emergency kit. you can have a small card printed out and laminated and stuck to the survival kit for the entire family if it helps.
Apart from these few things
you can add to this list which includes the card for cashless hospitalization or numbers that need to be informed in case the person is admitted in a different city.

Apart from this I realised the fact that I had been ignoring the medical insurance that we seek and take for ourselves is actually very minuscule.
Earlier I used to suggest super top up policies but having utilised my time in the hospital to search for better products I feel that the high sum insured products should be considered as they do not really  hike the premium.
I will wait for your feedback to update this article.

Journal 21st March 2020

This weekend presents itself with a unique opportunity!

Two days  of complete introspection;  two days when you can actually and officially cut yourself off from everyone around the world and dwell into your self.

You can check what and how things in your life are actually beyond your control.

You can also check your Financial preparedness and the effect that past 1 month has had on your reserves. When the market or any event is in action one is not able to think objectively.

Not able to plan for future.

The Friday that was yesterday was starkly different from the previous Friday the 13th.

If you like to make any inferences out of it and draw lessons out of it, it would be hugely rewarding in future.

Point 1 : when you see the market going up you normally only check the broad-based sensex or Nifty and declare when the market is up.

 However for broad based and an all encompassing rally or rise in the market you must check the other indices also like the mid Cap and small cap indices; Nifty 100, Nifty 200 and of course the Nifty 500.

If you will check yesterday's induce, all across the board there was a 5% + increment. This is actually very heartening. Because it shows that even in the face of such adversity there was an all round interest in the market.

 

Point 2: These incidents in the past month or even the past week give you an opportunity to to check the beta of your portfolio against the  market conditions. Beta means that  that for one unit of rise in the market how much did our portfolio rise or fall.

Point 3:

This is also the time to check the individual funds that you hold as to how the rise and fall on daily basis against the benchmark index that they follow. Mutual funds houses may adopt a benchmark which is more suitable to their results but from your point of view you have to see where you are getting better returns or are losing more money than others.

If you will check the various funds and how they gained yesterday you will find that index funds and the index ETFs did better than most of the funds.

Finally of course if you wish to interact with me  and other members of the group then this weekend is a better time to do it.

We can even hold video conferencing on WhatsApp for upto 4 people at a time.

Have a happy weekend and productive isolation.

A JOURNEY INTO LOSING MYSELF

My journey into losing myself

Yesterday was 16th November.

As I woke up I was staring at the ceiling... I remembered something and smiled to myself.

Slowly I made my way to the  drawer and took out the dusty folder and gingerly opened my CDC.

The Last entry declared 16th November 2014...5 years...

5 years is a long time in any human beings life and certainly in the life of a sailor who loses all relevance to the life that he has known for over three decades.

The journey started in a quest to lose myself and my ego .

It was certainly not any easy decision for a person who loves the sea as such and certainly admires the ship and its life on board.

It was certainly not an easy decision since people always heard me saying that I would sail till I can and then till I can't. 

Today , as I sit completely relaxed in my massage chair pretending to be 10 years older than I am...

I find these five years  to be an equally enchanting journey into completely different kind of self discovery.

There have not been many moments in these 5 years that I worried about earning anything or endeavouring  to earn money in any way.

Most of the days and hours were spent in working for people who are not related to me or my family.

I discovered the enormous and insightful world of of charity and living for others.

I can't claim that I ever dreamt or missed the life on ship or the bridge or the machinery of engine room.

I have forgotten the insides of the purifier and the crankcase but learnt more about the insides of human souls.

I have learnt more about human greed and selfishness and what it makes people do in their lives.

I have learnt and realised how difficult it was for my wife to spend those 24 years alone. I realised that she worked no less, rather much more, at home with my daughter and parents then I did on board.

I celebrated my silver wedding anniversary almost as if we were getting married and I renewed my vows with her and promised to be at her side finally...

... though this post is meant for my friends and colleagues on the financial groups of seafarers I must tell them that it is not about money alone...

It is certainly necessary that they gain financial independence as soon as possible but it is even more important  to gain understanding with their families. It is necessary that they develop understanding of life and develop hobbies and pastimes and passions which would keep them working past those golden years.

It will not matter when you will give up this enchanting ,charming and wholesome life at sea but it will matter how you will like yourself to be seen in those years.