The Mob called Twitter | Portfolio Yoga

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There are a few movies I am happy to watch over and over again – Gladiator being one of the elite list. It’s not just about the story that makes me watch it over again but about some of the dialogues and the depth you can take the dialogues to in a different world. One such dialogue is this

Twitter is many things for most of us. For me, it has provided me a world of connectivity and knowledge by being able to read the opinions of others. Now, it’s not like I have been a saint myself and while I don’t regret saying many things that led me to being blocked, I do regret the way I did it. I wonder if I could have been better than that in expressing whatever I expressed regardless of whether I was right or wrong.

In the world of finance, building assets under management – either as an Advisor (or Mutual Fund Distributor) or a PMS doesn’t come easy. It’s in many ways the same for building a twitter follower base. In both the cases, it’s the ability to convince others that you provide a service of value that matters.

Most people with huge followership are those who are well known through other media or have made a name for themselves in their respective fields that even if they don’t tweet much, they still command an audience that mirrors on obscenity. 

Then there are guys like D.Muthukrishnan (@dmuthuk). I don’t watch Television much and maybe wrong, but I don’t think he is a guy who comes on TV and says – Buy ITC for 202, target of 212, stop loss of 192. Rather, he uses his personal twitter account to tweet about a stock he holds (and a substantial quantity at that) and the merits of the company. 

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As an Investment, ITC could be a great one or a lousy one – only time shall tell the difference but what ITC is not is it being a microcap company that has questionable financials. He is not alone in talking about his book – any and every decent fund manager does that. Now, if you are any decent fellow who doesn’t take nicely to being said that ITC is a great stock when you believe it’s not – you have two options – Short the damm stock, call it a fraud or maybe like Bill Ackman did with Herbalife – present a 250+ deck to showcase why its a fraud and why you should not hold it, let alone buy the stock.

But that is tough – ITC for all the wrongs it may have done in the past is still a giant cash generating machine. More importantly it distributes a very large percentage of its cash earrings back to its public shareholders. So, rather than attack ITC, it’s amazing how people I genuinely admire have taken on him for his other aspects of his life – his being a Mutual Fund Distributor being the latest.

India has around 1 Lakh Mutual Fund Distributors who account for nearly 80% of the equity assets under management that is held across funds by Investors. A large part of these distributors barely make enough money to make it a worthwhile enterprise. While I don’t have any stats to back me up, I do think that like many other things, even here Pareto Principle works. Basically, 20% of distributors make 80% of the money.

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The majority of investors invest through a distributor because he has convinced them that this is a better deal than having their money in an Fixed Deposit or other asset classes. There is a second set of clients – the HNI kind who go through a distributor not because they don’t know they can save themselves the commission by buying a direct fund but because they believe that at the end of the day, the distributor provides him value for the commission he gets.

Some time back, I was associated with a distributor who has a fairly large AUM. His clients are not of the retail category but one who can write a cheque for a 8 digit investment without batting an eyelid. Having met a couple of his clients, I know they know even better than the distributor himself, so why even bother?

In India, we don’t bucket people by their profession. While we discuss only the core requirements at the beginning stage, as we gain comfort, we want to share our thoughts and views on other things that matter to us and love to have an outside opinion. In that way, HNI’s financial advisor provides a perspective that he might either be missing in a range of areas they feel comfortable sharing and asking for views.

For someone who has come from much humbler beginnings, the one thing I would love from Muthu is about how he went about building the business he did – the up’s and the down’s and the path thereof. I don’t see a reason to crib about his Income is still gross income and not net income and is in line with what you expect someone managing a couple of hundred crores to earn. 

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I wonder if the long period of socialism in India has pervaded to the extent that we feel uncomfortable with those who earn more than us that we need to find a stick to hit him with. On Twitter, it’s easy to call out people – but let’s call our people for their wrongs rather than for being different. 

PS: I don’t know or have met Muthu other than from whatever we have interacted on Twitter. I felt like writing since it’s starting to become real ugly. 

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Prashanth Krish

Prashanth Krish

Prashanth is a Chartered Market Technician who believes in the Systematic Momentum Investing strategy. He runs his own portfolio advisory firm - Portfolio Yoga.
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