Knowledge Can Make You Richer!

I have always been a big fan of knowledge. It has helped me create wealth in a fun, simple and interesting way.

Make An Extra 2.5%!

Even in the world of Mutual Fund investing, the power of knowledge can help you grow your wealth. For instance staying updated on the latest rules and regulations implemented by SEBI (Securities and Exchange Board Of India) can help you save your entry load of around 2.5% on every investment you make in a mutual fund directly.

This means if you invest in a Mutual Fund directly, without a distributor or broker, either online or by visiting the AMC (Asset Management Company) you end up saving 2.5%. And as they say money saved is money earned.

Imagine if you were to invest a sum of Rs. 10,00,000 over a period of time. You immediately end up saving Rs. 25,000 just because of your knowledge. You don’t need special skills or an IQ of 100 to find out such things. A basic eye for detail and regular reading would ensure that you stay updated of the latest happenings in the world of investing.

Of course your distributor or broker might be advising you, but is it really that hard to read and find out for yourself, which Mutual Fund is good and which isn’t? I feel with a little bit of time and reading you can easily figure out a quality Mutual Fund.

The fact that you are reading this here on Moneycontrol.com is proof that you have the inclination and desire to learn more.

Don’t Churn If You Don’t Need To!

Several times Mutual Fund distributors purposely try promoting NFOs or other funds and tell investors to exit their present mutual fund investments to enter NFOs.

Usually after a period of one year is over and an investor no longer has to pay any tax on returns made, they are asked to exit a fund they have invested in and enter some other fund.

Now if you think a bit more about it, you will notice that one of the main reasons behind this is that the distributor makes money only if you churn. If you stay invested there is no revenue for him. Most of the times it makes more sense to stay invested for the long term and not keep moving from one fund to another year after year, unless the fund is giving you bad returns.

If more investors knew about this, imagine the amount of time and money they could have been saved.

The reasons retail investors get carried away is because they assume that a Mutual Fund distributor might know more than them. This is not necessarily true if you read a little and invest in knowledge. Remember that everybody does what is in his or her best interest.

Of course there will always be people who don’t have the inclination to gain knowledge and thus would be willing to be an extra 2.5% and also willing to follow whatever is being told to them. But I am sure you are not one of them and are hungry for knowledge.

For instance at the moment I am investing in a company which has a huge land bank worth at least 2-3 times more than the present stock price. Investing in this company is just like buying a one-rupee coin for fifty paise. Just the knowledge of this land bank can help create a lot of wealth over a period of time. I also like having a long-term horizon, as it is the best way to create wealth in a sustainable manner.

If you want to create wealth the first investment you need to make is in knowledge. I speak from experience.

Happy Wealth Creation!

- Yogesh Chabria

The author started investing in the Indian stock markets when he was sixteen. His latest book, Invest the Happionaire™ Way-Let’s Get Started; which deals with creating wealth through the Indian stock markets in a fun and simple way should be available at a bookstore near you soon. You can get in touch with him at yogesh.chabria@moneycontrol.com

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