No
matter how much investors would like to know, for many financial products they
should not be asking how much returns they will get...
Some
time ago Maruti used to run an advertisement campaign where the person asks
“kitna deti hai” (how much (mileage) does it give?).
The
same question—in a different context--
is asked by an investor too—how much return will I get or kitna milega?
While
advisors try to answer it in their own way, we believe that there are no
definite answers to the question if the investor intends to invest in stocks or
mutual funds. Advisors idea more
often than not is to quote a number that is likeliest to close the sale while
not being a commitment.
Investors have to realize that equity does not
carry a definitive return matrix. If the investor wants a definitive answer as
to the %age return that he can expect, then we believe that the fault lies with
him. If he does however expect a particular figure before writing out a cheque
for investment, then he should restrict his investments to products that carry
an enforceable commitment in black and white. This means bank fixed deposits,
postal savings; PPF and so on.
Asking for an estimate or an informal promise on
returns from any product that is inherently linked to a market-- be it stocks
or anything else-- is inviting trouble. Either you won't get an answer or
you'll get a dishonest answer, simply because no real answer exists. In fact,
if a salesman is willing to give such an answer, then that itself indicates a
problem.
If
you are planning to invest in a mutual fund, or any other market-linked
financial product then the process that is followed and the earlier track
record is actually the best you have-- no matter how hard is it to get used to
the idea.
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