Where is your Edge

A friend of mine has a shop selling something which in theory has no moat whatsoever. If you wish, you could easily put up something right next to him and start doing business. Margins are good which means that there is pretty high attraction to getting into his business. Where there were just 2 a few years ago, I now count 6 within walking distance from his shop.

For now, everyone seems to be happy and have enough business, but as my friend knows, the business runs in cycles and there are times when he has hardly any sales. But he has a edge that the others don’t. While others need to make enough to at least cover their rents (and the area is notorious for its sky high rents), he owns his shop making it much easier for him to overcome those dull times.

Mutual Fund and Distributors are these days spending money and time trying to convince you that investing in a Mutual Fund via SIP is the best way to save for your future goals. Theoretically they are right, its much better to save more systematically each month as it all adds up over time.

But when it comes to Mutual Funds, there are literally hundreds of choices out there. How do you choose the one or the select few that you think will help you in reaching those goals.

Stock Advisory is as old as the Stock Market itself – why bother to research on your own when you can just pay a small fee and be provided the stock to buy / sell rather than you having to wade through hundreds and thousands of stocks.

And then there is Insurance. If you were to carefully check out advertisements of Insurance Policies, you would have heard “Insurance is the subject matter of solicitation” but have you thought about what it really means? . Not many customers bother which means sellers have a field day.

What is common among sellers of all the above products?

They all profess that they can help you reach your goals which generally is about making X amount of money by Y time. Some are qualified, most are not but as long as they have the gift of gab and have the ability to make things up as they go, how many will really question things they claim to be true but which aren’t.

When you go out to buy a product, lets take a Cell Phone for instance, we do plenty of research before we even hit the showroom. We ask Friends about the one they use, we browse the internet trying to find out more details and finally figure out the brand which we want to buy.

Having done all that, its still easy to fall to the talk of a sales guy who tells you how great this new Cell Phone is is and how much its been selling in the market (even though before this day you would have barely heard its name). A few years ago, me and my friend went out after doing research to buy a Samsung phone but ended up buying a Karbonn since we fell to the talk of the sales guy who in all probability would get more commission to sell a phone like Karbonn than selling Samsung.

The phone wasn’t as great as it was advertised and after a couple of years using it, my friend junked it for a better one. But while he was unhappy with the phone, he seldom felt the same about the seller despite the fact that the sales guy had the Edge in terms of being more knowledgeable than we were.

The reason we get misled in finance though comes down to our aversion to learn even the basic things about savings and how the various choices pan out against each other.

The web is filled with information that you seek but you need to search it out for it to be of any benefit. While most of us are happy to slog for 8 hours, when it comes to learning / understanding about finance, we are just too tired and want some one else to make the decisions for us.

That some one needs a motivation – it maybe in terms of a trailing commission as in case of Mutual Funds and Insurance or a fixed fee per month in case of stock advisers or a one off payment in cases such as the Real Estate broker who helps you find a house to invest your money.

When it comes to investing in Mutual Funds, how many times have you heard your adviser speak about Quantum Mutual Fund – a fund that   has outshone its peers in recent times and stands among the best even when comparing with others on 5 year returns. How many times have you heard your Insurance agent talk about Insurance not being a Investment and hence you should look for Term plans vs Moneyback Plans or ULIP for instance. How many bank employees have advised you that if you were in the highest bracket when it comes to Tax, you maybe better off with a lot of other debt based assets that yield more after tax than a simple Fixed Deposit.

You don’t hear any of the stuff because saying so would mean cutting off their own money tree and who in the right mind would want to do that. Advisory is supposed to be a Fiduciary duty and yet for most, its what makes their dough that is the biggest concern, not what is right for you.

To say that you need to save more is easy, To say that you can save more by investing better is way tougher because the future is uncertain and non one has a clue other than to look at history and hope that history repeats itself.

If you are reading this, I would guess that you already have a Edge. You know what works for you and what doesn’t and aren’t swayed by glossy advertisements about returns that seem out of the world. You know about the various biases you can fall into them without even our knowing.

But then you are part of the minority (and this applies equally to any country you can think of). The reason for starting this site were many and one of them was to help provide perspectives to investors and traders alike. While I have no clue whether my posts here or my rants on twitter are doing anything, the way it has rattled some tip sellers I hope means that I have hit some right spots.

So, back to the Question. What is your Edge when it comes to Investing? If you can answer that (and hopefully is data backed), you have ARRIVED.