Advisor Speak


D.Muthukrishnan (Muthu) is the founder of Wise Wealth

D.Muthukrishnan (Muthu) is the founder of  Wise Wealth Advisors

He is a Certified Financial PlannerCM (CFPCM) and Personal Financial Advisor.

He also holds a MBA in Finance from IFMR ( Institute for Financial Management and Research).

Apart from the above, he also holds Post Graduate Degrees in Commerce & Corporate Secretaryship.

Muthu loves to help people to achieve their financial goals. His objective is to help as many people as possible to become financially independent so that their quality of life improves greatly.

Muthu has been periodically answering queries of the readers in a leading Personal Finance Magazine, ‘ Nanayam Vikatan’.

He has been periodically contributing articles and has given interviews in ‘Gokulam Kadhir’, a ‘Dina Thanthi’ Group Publication.

He has done live talk show in ‘Sun News’ . He has also contributed for Sun News ‘Vaniga Seidhigal’.

He has also done  live  talk shows in ‘Jaya TV’. He  also appeared as the Guest of Jaya TV’s breakfast show, Kaalai Malar.

He has contributed articles to popular personal finance portal Moneylife.

His opinions have also been quoted in various magazines and newspapers.

*Chaser is a loser*

You’ve been our clients for many years. You know that we are completely against chasing performance. We don’t believe in churning portfolio. We make changes, only if it is extremely required. We look for long term performance, consistency, losing less in bear markets and ability to navigate multiple market cycles. We’ve never recommended new fund offers (NFOs), sectoral and thematic funds. We are very choosy about the fund houses we work with.
Why I’m restating the obvious? I sincerely believe the kind of value addition we do with less tinkering of portfolio, preventing you from doing many wrong things and making you do the few right things needs to be shared once in a while so that more activities are not equated with good advice. In fact in investing, a good advisor would ensure minimal activities. More activities are harmful for the portfolio and lead to bad outcomes.
I was reading the current issue of ‘Mutual Fund Insight’. They have taken a period of last 10 years, January 2007 to December 2016. Let us assume you believed in chasing performance and investing every year in the previous year leader (the best fund in large cap category). You would have invested in Rs.1 lakh in Janaury 2007 in Reliance NRI Equity. In 2008, you would have moved to Sundaram Select Focus. Like that you would have invested in ten funds over last 10 years.
As on December 31’st 2016, by doing the above performance chasing, you would have ended up with Rs.1,47,704. An annualised return of 3.93%. You would not have earned even the SB A/C return by investing in equity mutual funds, that too all top performers of the previous years.
Let us assume you instead stayed invested with Reliance NRI Equity for the last 10+ years. As of yesterday, the last 10 year annualised return is 12.84%. This means, Rs.1 lakh invested 10 years ago is now worth Rs.3.35 lakhs.
Do you see the difference? Bad behaviour got you only 3.93% returns whereas good behaviour got you a decent 12.84%.
Never ever chase performance. Out of 10 years, a fund would have 3 or 4 bad years. This is applicable to all funds, including the ones you’re holding based on our recommendations. We have stringent yardstick for both selecting and removing the funds. We are not against portfolio changes. But we’ll do it only rarely, purely based on requirements. I promise that neither we would chase performance nor allow you to do so.
An advisor’s value comes not only from what he does but more so from what all he does not do. We would continue to be less active. We would also ensure that you remain less active. Adhering to this would ensure long term outcome of excellent wealth creation for your family.
I would like to end this with a Buffett quote: We will not equate activity with progress. We don’t get paid for activity, just for being right.

10 replies on “Muthukrishnan”

Important lesson to learn from this ‘An advisor’s value comes not only from what he does but more so from what all he does not do’

Very informative and apt. It is a fact most investors are chasers. It is the duty of Advisers to educate and guide investors. Thanks for sharing

Physical activity I churning funds gives a less or lose. Brainy smart activity gives decent returns. Do invest in right fund. Do your duty and let the fund do it’s duty. Patience always pays. Chasers Are losers. Useful article for All.

Wright lessons for all IFA how to manage your funds don’t do agreesivly change portfolio give a long time & watch.
I am also agree don’t invest on NFO & sectoral.

Good Take Aways!
Switching to best performing fund does not guarantee good returns.
Nice example shared on how an investor may loose by regularly switching at shorter duration.

Sir wat a wonderfully insight on ivestors mind set, as these days the investors are clearly chasing returns and falling much much short of there goals do we need to blame the rating agencies as they have to rate differently every time they come out with an article.
One thing an investor needs to know he has to have a sound sleep once invested in a good fund and allow little time to grow, instead of keeping a watch eery time market corrects he should watch the funds performance only once in the market cyclic period ie every 5 years.

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