Intelligent Investor: Chapter 9

Hello friends, I am Laxman, Today article we see chapter 9 of an intelligent investor book name Investing in Investment funds. In this chapter 9 of the intelligent investor book, the author advises the average investor they don’t understand the financial concepts and the balance sheet. this type of person can be invested by hiring a well-knowledgeable person in these fields i.e. investment fund management.

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Investing in Investment funds:-Intelligent Investor: Chapter 9

When investing in an investment fund, you have to set your mind if not the investment broker leads your money with his style and gives you different ideas of stocks to buy, and increases his commission so this type of time you can also get the headache of tax.

and also the author says they are good at analysis but they are not good to know about the future.

So so many people are expecting a bigger return from the stock by hiring these guys. so the broker uses these expectations from him they charge you a higher rate for his work.

In my opinion, the author is saying is good and we have to put money in an investment fund for the five or more of you.

so this type of situation happens for this purpose, we have to follow the following obstacles faced by investors.

Obstacles faced by Intelligent investors: Chapter 9

1. Migrating managers: When you choose some investment fund and doing an investment in the fund. In form of SIP. After one year you get a good return. The manager lives their job. This happens commonly and we have to face it. In this situation, you can ask the question to the fund manager or your broker about his contract with the investment funds.
2. Asset elephantiasis: There is common human behavior that if some broker does a good result in one year with his limited money, then lots of other people also do the investment in these funds so the broker has the maximum money and they don’t have the opportunities to invest so they buy the great company with average return company stocks. Then return falls for that broker because of Asset elephantiasis.
3. Increase in expense: When some investment funds give a good return but actually they also take higher charges from the investor. (Intelligent Investor: Chapter 9)
4. Sheepish behavior of funds: This type of behavior happens from the investor because when two investors meet each other and discuss their investment return from the funds, if one of those has a higher return then the other investor called the broker and asks him about the return and they say if you can’t get the result of another fund then I will take me all money. So this behavior very well knows the fund’s manager so they do the proportion invested in the popular company and get the all are the average return. (Intelligent Investor: Chapter 9)

So This obstacle is what should the intelligent investor do? for this question author gives one piece of advice i.e. Buy broad market index funds.

So if you can do investment in index funds, then you have to check the quality of the broker which is as follows.

Qualification for funds that beat the market:

1. Managers are the biggest shareholder: Simple philosophy is that if someone’s money is in his funds they try to get the maximum return from his investment. so check for the managers as are the biggest shareholder.
2. Charges low fees: Also check his fund’s charges and other hidden charges, and get the low-charge investment fund with the first qualification. (Intelligent Investor: Chapter 9)
3. Dare to be different: If the manager has the power to handle funds with his technique and tries to be for the maximum return.
4. Prevent asset elephantiasis: to prevent asset elephantiasis you have to check the fund’s performance and its asset for this purpose, by asking simple questions.
5. They don’t advertise: If someone is good at his work, and also see they try to advertise the funds with a big return.

After this qualification, you have to select the funds by watching the following point.

Selecting Funds;

1. Past performance: Check the five years of the past performance of returns and also the charge returns.
2. Manager reputation: Check the manager’s reputation and how he stays with his reputation and how much they go in deep for the reputation. (Intelligent Investor: Chapter 9)
3. The riskiness of funds: this check by asking the question to the broker and manager about his financial fear, and risk.
4. Operating Expenses: Check on the contract of investment or you can check to buy by asking them.

If you can watch this thing, But in reverse order click the logic of funds. (Intelligent Investor: Chapter 9)

After this author gives some advice on when to sell.

When to sell:

• Unexpected changes in strategy.
• increase in expenses
• Increase in tax bills
• Suddenly erratic return

if this type of happening in the funds then, you can sell your investment. but you have to check the real problem.

After this you can invest in Investment funds, So this is about chapter 9 of the intelligent investor book name investing in investment funds.

Elementary worldly wisdom from Charlie Munger

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