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Why Did The Beggar Refuse A Rs.2000 Note?

One fine morning, Mr. Rich was travelling to his office in his chauffeur-driven car. Last evening he had received the confirmation from US for an order worth Rs.100+ crores, which he had been pursuing for many months.

Given that he was in such a good mood, Mr. Rich offered a Rs.2000 note to a beggar when his car stopped at the red signal.

To his utmost surprise, the beggar refused to take the same. However, when offered a Rs.100 note, the beggar readily took it and went away happily.

Why was the beggar ok with Rs.100 and not Rs.2000?

Well, it's the same reason why many people happily buy moneyback / endowment insurance policies or invest in fixed deposits, but continue to avoid investing in mutual funds.

Due to ignorance, the Rs.2000 note appeared to be a fake to the beggar. He had never seen a Rs.2000 note. So he presumed it to be a plaything that children often use in games. He was familiar with the good old Rs.100 note and so had no hesitation in accepting the same.

Likewise, many people prefer the comfort of good old insurance policies and fixed deposits. They are ignorant of the multiple benefits of the mutual funds.


Every month, insurance companies are selling lakhs of new policies. Every month they are collecting thousands of crores as premiums on these new policies initiated. For example, as per IRDAI report on the First Year Premium of Life Insurers, 24,52,573 policies were sold in Aug 2018 and premium collected was a whooping Rs.18,640 crores. And this story repeats practically month after month.

Lakhs of crores are lying with banks as fixed deposits. Lakhs of fixed deposits maturing every month are automatically renewed. For example, as per RBI Statistics, total term and savings deposits with Scheduled Commercial Banks in Q1 of 2018-19 aggregated to nearly Rs.105 lakh crores.

These are staggering sums indeed.

Both options unfortunately earn measly returns. That too is often eaten away by inflation and taxes. This effectively works out to a loss, as the purchasing power of the money is depreciating day by day. At best, they may break even.

As a result, most people continue to remain poor. I find no difference between them and that poor beggar who refused the Rs.2000 note.

Do you keep your eyes closed to new investment styles and remain a beggar?

On the other hand, the informed investors — who have made efforts to understand and appreciate the advantages of mutual funds — are on the way to join the league of Mr. Rich. Sooner or later, even small amounts judiciously invested in mutual funds, will make them rich... very rich.


Suppose you had invested Rs.1 lakh in the following schemes on the date they were launched. Then, today that Rs.1 lakh would be worth a gigantic amount as detailed below. (For comparison, in brackets, I have given the present value of a Rs.1 lakh FD say at 10% interest).

- Rs.21 lakhs in Aditya Birla Sun Life Frontline Equity Fund after 16 years (FD - Rs.4.60 lakhs)
- Rs.45 lakhs in Franklin India Bluechip Fund after 25 years (FD - Rs.10.70 lakhs)
- Rs.21 lakhs in DSP Equity Opportunities Fund after 18 years (FD - Rs.5.77 lakhs)
- Rs.10 lakhs in Principal Emerging Bluechip Fund after 10 years (FD - Rs.2.57 lakhs)
- Rs.13 lakhs in Tata Equity PE Fund after 14 years (FD - Rs.3.90 lakhs)
- Rs.29 lakhs in ICICI Prudential Multicap Fund after 24 years (FD - Rs.9.86 lakhs)
- Rs.32 lakhs in HDFC Index Fund - Sensex Plan after 16 years (FD - Rs.4.70 lakhs)
- Rs.1.02 crores in Reliance Growth Fund after 23 years (FD - Rs.8.95 lakhs)

I know, many would find fault with this comparison as they believe that FDs are "safe" whereas mutual funds are "risky". Well, if you too belong to that school of thought, you are no different than the ignorant and poor beggar. You need to read the following points VERY CAREFULLY.

1. This is just a representative sample. There are many (many) schemes which have delivered similar performance. In fact, out of hundreds and hundreds and hundreds of mutual fund schemes, on a 10-year time horizon NOT A SINGLE SCHEME lost money (except two and they were, by the way, gold funds... gold being another favourite investment among Indians).

So, it is a myth that mutual funds are risky. IF YOUR STRATEGY IS RIGHT (see point 2 below), it is highly unlikely that you will make a loss.

2. For convenience in calculations, I have assumed one-time investment. Whereas, monthly investment for at least 10 years through Systematic Investment Planning (SIP), in a well-balanced and diversified portfolio of mutual funds, is the most desirable and recommended strategy.

So what's your choice?

Do you wish to continue with same old investment style and remain a beggar?
Do you aspire to multiply your savings with mutual funds and become financially independent by the age of 45-50?

Your financial destiny is in your hands.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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