Transcript of Podcast :
Hi I am Arjun Parthasarathy speaking and this podcast is on “HNI’s, Please Donate to Charity Instead of Donating to the Financial Services Industry”
Warren Buffett is categorical when he says stick to simplicity, which is low cost ETF’s that mirror the movement of the equity index that they track. However, if HNI’s (High Net Worth or Wealthy Investors) listened to Buffett, there will be a huge flux in the financial services industry as a large number of financial product manufacturers and sellers of financial products will not have any buyers for their products or services.
HNI’s are a targeted audience for the financial services industry looking to earn high returns from selling expensive financial products. After all, HNI’s are rich, they can afford to make others also rich. HNI’s invest in high cost actively managed public and private funds, derivative products with opaque cost structures and pay off’s, exotic investments that are good only for talking about in parties etc.
A simple comparison between just investing at least 80% of their money in an Index ETF such as a Nifty or S&P 500 index and investing 5% each of their money in other financial products will show that ETF’s win by a wide margin. The only view that the HNI need take is the direction of markets and enough analysis is available for HNI’s who are by nature expected to be smart and savvy investors to judge the market direction.
Risk of investing in Equity Index ETF’s such as Nifty or S&P 500 is also much lower than investing in stocks, leveraged funds and illiquid products. The financial crisis of 2008 brought about the worst of investments made by the wealthy who lost huge sums of money in highly leverage derivative products, ponzi schemes, flavour of the day theme products etc.
HNI’s have the right to do whatever they want with their money as they have earned it the hard way unless its legacy wealth or through a lottery. However by investing in products that are sold to them with the intention of the product manufacturer and distributor of the product making more money off them, HNI’s are doing themselves a disservice. After all through hard work they made money and they are giving it away free to the financial services industry.
The biggest wealth creators in the world from Zukerberg to Gates, Buffett and India’s Premji have all pledged their wealth to charity. Donating to charities helps the underprivileged, improves lives of many, enables governments to fight poverty and diseases and provides many other benefits to the overall global society as a whole.
HNI’s, next time a product is sold to you, please evaluate diligently and check its benefits against low cost investments that may prove much better. Remember you can donate to charity instead of donating to the financial services industry.
Subscribe to our Buffett Style Investing for Your MF Portfolio for just Rs 1200 plus service tax per year. Call Neelima at +919819770641 or visit our FB page Investors are Idiots or tweet us @right_mf to subscribe.