Few scattered random musing on mutual fund investors, mutual fund industry, etc. I'll probably get somethings wrong :)

If there's another 10%+ market fall or if they stay depressed for a long time, all the weak hands (dumb retail investors) will be shaken out.

This buying the dip euphoria won't last. This is probably, the overzealous investing crowd rushing in just because there's a dip. Of course, there will be rebalancing, etc. But it's hard to sift that. But from my vantage point, a decent chunk of the investors are just buying

the dip, just because there's a dip. A lot of industry folk keep saying "Investors have matured" because SIP flows have remained intact, that isn't the case. A good chunk of the retail investor will remain dumb weak hands that chase performance & returns and end up losing money

never to return to the markets. This SIP closure ratio is correlated to the market. That last spike was when the mid and small-cap indices fell by 15% & 20%. Moreover, SIPs are sticky money, don't think everybody would login to check their accounts at the same time to panic.

And advisors/distributors, whatever you wanna call them might also be at hand to stop people from doing silly things. & we're just into the first month of the correction, there is a lot of euphoria with people deploying cash, valuation sensitive guys jumping in, rebalancing, etc

I'm seeing plenty of switches from Liquid/UST to equity, particularly mid and small-cap funds which have just fallen off a cliff since 2018. The more they fall, the more the retail crowd generally tends to invest. Just like Yes Bank!

Look at the jump in cash market volumes, close to double the volumes In March. DIIs have been net buyers throughout the market crash. We don't yet have the March MF industry data but flows in Feb remained positive even as the markets started cracking.

As for the SIP flows, they're the biggest free lunch for the MF industry. And given the harrowing times, we seem to be in for due to Corona, I am skeptical if the flows will remain above the 8000cr mark. If the economic picture worsens, inevitably this will feed into MFs,

unless the situation improves dramatically. We are in the "buy the dip" euphoria phase and as we enter the "trough of despair" investors will have a lot of "enlightenment now" moments. There are a lot of first-time investors who've jumped on SIP and buy & die bandwagon who'll

discover what the markets are. If they stick around, they'll be better off because starting investing during a bear market is an incredible advantage in my view. These people will grow a thick skin and inevitably, probably not end up doing dumb things down the line.

As for the advisors and fund houses, this is the time to earn their keep. If advisors manage their client behavior and ensure they don't much up, they'll come out really well on the other side. As for AMCs, now's the time to walk the talk about, "we care about investors",

"We won an award for "investor education" etc. Time to do the actual education directly and through distributors. Bear markets are also like enemas for the asset management industry, a lot of cleansing is bound to happen. A small chunk of investors will wake and probably realize

they've been mis-sold, are holding really crappy funds, fund managers aren't delivering what they promised, all the talk of process and philosophies was just smoke and mirrors and will switch funds (I hope they move to low-cost index funds, but they won't).

I'm no financial analyst but the asset management is a profitable business, more so at scale. Check out the profit margins of HDFC AMC and Nippon MF. HDFC AMC is minting money. Higher equity AUM = higher margins. But if the market is down 30%, the AUM is also down 40% and so are

the revenues. If there is a prolonged bear market, will it mean that expense ratios will go up for funds? My guess is yes, but it remains to be seen. But coming back, I think AMCs should stick to manufacturing products. But for those AMCs claiming to have won awards for investor

education, I got a message. Investor education is not some silly 2-minute youtube video on what an MF is or some random blog posts or PDFs. Any monkey can do that. Investor education is more holistic than that. If you don't want your clients to flee in droves, now's the time

to do actual investor education. Or stick to manufacturing and empower distributors to go do that. These AMC videos are horrible. They can be used for interrogating criminals. But I think they should just go overboard everywhere and figure out ways to talk to investors and soothe

their nerves without saying "BUY THE DIP". And for investors, buying the dip just because there's a dip is stupid, a sin even I am guilty of. It's like buying a raincoat and an umbrella and new underpants in the middle of summer just because it rained for a day!

The best thing you can do is to stick to your plan or maybe rebalance. https://twitter.com/Rick_Ferri/status/1247163215412367360?s=20

And next, I just tweeted this in the morning. Bear markets are a perfect time to review your portfolios. People get lucky in bull markets, it's hard in bear markets. Figure out if your manager, for whose services you are paying dearly is delivering what https://twitter.com/passivefool/status/1247393372823666688?s=20

he said he would. If not get rid of those funds like a bad smell in your bedroom. Next, IF YOUR ARE INVESTING IN REGULAR MUTUAL FUNDS, STOP YOUR INVESTMENTS, NOW! Unless your distributor is providing value. If not switch to direct funds NOW! Why the hell would you pay ~0.5-1%

extra for nothing? If you are so rich as to throw money, there are plenty of worthy charities. For God's sake, COSTS MATTER. The less you pay, the more you keep. It's not worth paying ~1% for some really horrible MF recommendations. Any monkey can recommend funds.

If you are DIY'ing, stop using regular funds. Switch to low-cost index funds, get your asset allocation right, and live a happy life. If you need help with your asset allocation and don't know what the hell it is,

I highly recommend this book by @Rick_Ferri
https://www.amazon.com/All-About-Asset-Allocation-Second/dp/0071700781
Next, stop chasing fads, thematic bullshit funds, small-cap funds ETC, you don't need 10 funds, you don't need 5 either!

Costs matter
Good advice and solutions are worth paying for. Don't be penny-pinching idiots.
You don't need shiny funds
Stop checking your portfolio 37 times a day. The more you check your portfolio, the higher the chances you doing really silly and DUMB things. Don't take my

word for it. Here's actual research.
Stop performance chasing
ASSET ALLOCATION DRIVES A VAST MAJORITY OF YOUR PORTFOLIO RETURNS!! Spend time on it.
Learning how to DIY your investments is probably one of the best investments you can make in life. https://www.betterment.com/resources/high-frequency-monitoring/

To round it all up, thanks for reading this incoherent rambling. Wear a helmet when investing and pants too!