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Why Mutual Funds Won't Survive On The Planet Mars

As an investment, mutual funds are a 'strange' species. In fact, I wonder if we should classify them as an investment at all.

Rather, they should be referred to as a "process"... whereby a large number of people hand over their money to an expert, to manage it on their behalf.

It is the job of the fund managers to invest the amount so accumulated. They do this to the best of their Expertise, Experience and Aptitude. And, depending on the objective of the particular mutual fund scheme, the corpus is invested in Equity, Debt or Gold (or a mix of the same).

This being the true nature of mutual funds, let's understand why they will die a quick death on the planet Mars; why they will remain as an alien idea to Martians.

REASON ONE
To the extent we know about Mars, it is a totally deserted place. There aren't any living beings on the so-called Red Planet, as Mars is often referred to. If that be so, there won't been too many people around, looking to 'productively' invest their savings. Therefore, the concept of pooling the resources would not exist. No pool of money, no money manager required! As such, unless they are on a vacation trip from Earth, Mars would be completely devoid of the fund managers.

This, I guess, should be one reason why you won't find any mutual funds on planet Mars... there are no experts who can take 'good' care of our money.

>>> In fact, this is also the reason, I strongly recommend mutual funds for most investors. As an amateur, you are just not qualified or experienced to 'correctly' manage your money on your own. This increases the risk of losses. It would, therefore, be extremely unwise not to let your money be managed by the specialists. Thankfully, there are quite a few brilliant fund managers on Earth, with proven outstanding track record.

REASON TWO
Having a pool of money, is not the sufficient condition for a mutual fund scheme to be born.

The corpus would be pretty useless, unless the fund manager has ample opportunities to invest it — and make money on it.

Unlike our planet Earth, there is practically no (business!) atmosphere or environment on Mars. Hence, it would be impossible for the fund manager to find sufficient number of investment options. If that be so, s/he won't to be able to build a diversified portfolio. 

This would defeat one of the key purposes of a mutual fund; which is to minimize the investment risk by spreading the total corpus across many securities (either stocks or fixed-income instruments).

no-mutual-funds-on-mars
Mutual Funds would be a totally ALIEN concept on the planet Mars.

As you would have rightly guessed, this is the second reason why you won't find mutual funds on planet Mars... lack of appropriate environment, to create a well-diversified and risk-adjusted portfolio.

>>> In fact, this is also the reason, I strongly recommend mutual funds for most investors. You cannot build a well-balanced portfolio with your limited resources. Concentrated portfolio increases the risk of losses. It would, therefore, be prudent to invest in a mutual fund as it offers wide diversification even with mere Rs.500 as investment.

REASON THREE
Living on Mars is likely to be pretty one-dimensional. There won't be much to do except probably the scientific experiments. Entertainment opportunities such as pubs, restaurants, movie halls, theatres, malls, etc. would be non-existent. Nor would there be any places, friends or relatives to visit.

As a result, people on Mars will have ample time to manage their money. Moreover, it would also be a break from the dull and boring routine.

Given this scenario, it is unlikely that people will need the help of a third person to manage their money. Hence, no shortage of time becomes the third reason for no mutual funds on Mars.

>>> In fact, this is also the reason, I strongly recommend mutual funds for most investors. Our vocation, job or work on Earth has become so fast-paced and hectic, that we even struggle to spend quality time with our near and dear ones. In such a scenario, it is not difficult to understand, why most people often defer their money management to another day. Lack of timely action too increases the risk of losses. It would, therefore, be prudent to invest in a mutual fund as it is actively monitored on a day-to-day basis.

REASON FOUR
In addition to the physical aspect, living on Mars would be mentally challenging too. While, the scientists have done a lot of commendable homework and experimentation, going to Mars and living there would be full of uncertainties. There are hundreds of things that could go wrong. All this would require quick and innovative thinking, practically every day.

Only those with deep mental strength would be able to cope with the hostile environment on Mars. As such, most people going to Mars would be risk takers, and have the right mental framework for managing their money on their own.

Hence, the fourth and final reason — investors with the right aptitude —  for no mutual funds on planet Mars.

>>> In fact, this is also the reason, I strongly recommend mutual funds for most investors. Business and political environment across the world, too is extremely uncertain and difficult. This is sure to unnerve and create panic among people with not the right aptitude. As such, mutual fund remains the ideal option, as fund managers are the right people to handle such extreme volatile conditions with calm and composure.

Well, settling on Mars is still some decades away. So presently we need not worry about the fact that mutual funds would probably be an "alien" concept on Mars.

Instead, let's focus our attention on the bundle of opportunities available on the planet Earth, more particularly in a growing economy like India.

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