How is Goalwise better than FundsIndia or ICICI Direct - Part 1


I have been asked this question a few times now, so I thought I might as well write a blog post about it. It is going to be a long post and is in two parts - because Goalwise is that much better! :D

I myself started investing online in Mutual Funds with FundsIndia in 2010. At that time, it was one of the first online platforms for Mutual Fund transactions. Since I worked for an investment management firm, I did my own research for which funds to invest in and used FundsIndia for the execution and tracking.

Not much has changed with FundsIndia since then. They have added some bells and whistles but they and several others like ICICI Direct etc. are still mostly Do-It-Yourself (DIY) platforms.

The problems I faced with Do-It-Yourself (DIY)

Even after having a decent knowledge of Mutual Funds and investing in general (I am now a SEBI Registered Investment Advisor), there were several problems I faced with FundsIndia, since it is a Do-It-Yourself platform:

1. Lack of Time (for the boring but important stuff)

There was just not enough time to manage my portfolio well. To be honest, there was enough time to keep checking how much I had made or lost, or whenever something major happened in the stock-market. But believe me, that is not the same thing as having the time to manage one's portfolio.

Having the time to manage the portfolio means having the time to re-evaluate fund selection periodically and making changes accordingly.

It means having the time to re-balance one's asset allocation (how much to invest in equity and how much in debt) and making sure it matches one's risk tolerance.

It also means having the time to co-ordinate the buys and sells to minimise the taxes to be paid on investment profits. And similar 'boring' but very important stuff.

A stale portfolio of yesteryear's best funds can easily cost you 2-3% in returns every year, if not more. Without proper rebalancing between equity and debt, you might risk more than you have the stomach for, and end up getting out at the worst time during market downturns.

Now you might think why spend so much time and effort for just 2-3% more returns annually, or for lowering your risk - well that's exactly the point I am trying to make. I did not end up making these efforts and if you too have a day job, nor will you.

Wouldn't it be great if all this was taken care of for me by my investment platform automatically? Absolutely - but will a Do-It-Yourself platform Do-It-For-You? As you might have guessed, the answer is No.

Will Goalwise do it for you - Yes!

2. Lack of Expertise (the ability to test a selection strategy)

Back then, since I worked for an investment management firm, I thought I was an expert. It was not too difficult to look up 5-star rated funds on Moneycontrol, Value Research Online, or similar websites. And if I had enough time, I would also dig into more esoteric statistics of fund performance like alpha, volatility, Sharpe - also readily available on the above mentioned websites.

I used the tools and statistics these websites wanted me to use by making them readily available. Do they work? Who knows. Did I follow them faithfully year after year? Not really - Why? See point #1 above.

Truly being an expert means being able to test a selection strategy and not just sorting or filtering a list provided by a website.

For example - did you know some of the funds with stellar long term performances are not even rated by VRO or Moneycontrol? If you don't believe me, check out the Birla Sunlife MNC Fund on VRO.

Also, there are so many 4 or 5-star rated funds. How do you choose between them? You might pick the ones with the highest returns in the past 2-3 years among the 5-star funds, but may be it is the rest of the 5-star funds that will do better. If you don't know and if you can't run these numbers and answer this for yourself objectively, then you are not an expert. Period.

To summarize, just because you can sort a list on VRO does not make you an expert.

To be fair, even DIY platforms provide a list of their best funds for your consideration. So, problem solved? Not really. Why? Two reasons:

a) You still don't know if their selection strategy works - because they don't tell you how their strategy would have performed over time if you followed it. They don't tell you that probably they have not done the hard work required to find this out themselves or, worse still, the results are nothing great to talk about.

b) More importantly - they don't implement it for you. It means that even if you initially invested based on that ready-made list, once the list changes, you are on your own. If you want to stick to their selections, as soon as the list changes, you will have to sell all of your old Mutual Funds and then buy the new ones. Otherwise you are no longer invested in the 'best' funds. And the list changes frequently. If it sounds like a lot of work that's because it is. But hey, that is what Do-It-Yourself means.

So, will FundsIndia keep you invested in their best funds always, automatically? - No.

Will Goalwise do it for you - Yes!

You can read more about this and our Sensex-crushing strategy here.

3. Behavioral Biases

This is something that even the best investors in the world have a hard time overcoming. And although it may sound harsh, the average retail investor trying to do-it-herself usually does not even stand a chance. Biases like loss aversion (holding on to losing investments in the hope that they will come up) and price anchoring (basing decisions on the initial purchase price and not future expectations) are very in-grained in us and cost us dearly when it comes to investing.

This is the reason why all good fund managers have their check-lists and follow them strictly (or at least try to). It is a way to prevent their emotions and biases from affecting their decisions, especially in times of high uncertainty.

It is not just about time and expertise. Do-It-Yourself investors seldom have the discipline and temperament to stick to a plan, especially when things start going south. Incidentally, that is the time when they need to follow the plan the most.

Having externally managed processes prevents our emotions from ruling our investment decisions. If an investment is in loss and needs to be gotten out of, it will be much harder if you have to do it yourself even if deep down you know that is the best thing to do. You will invent some excuse and hold on to it, promising yourself that you will get out as soon as you are even. Guess what, that day may not come or come so late that it wont be worth the wait.

Again, will a Do-It-Yourself platform save you from your biases - No!

Will Goalwise do it for you - Yes!

Goalwise has been designed to overcome the above-mentioned shortcomings of Do-It-Yourself platforms like FundsIndia or ICICI-Direct. It is a true 'Set and Forget' system which lets you focus on the big stuff and takes care of the details for you. Platforms like Goalwise are the future of investing.

Wait there is more - Seriously!

As the title of the post says, this is just one part of how Goalwise, being a We'll-Do-It-For-You platform, is way better than any Do-It-Yourself platform for investors.

In Part 2, I will show you how Goalwise provides a true Goal-based investing platform compared to the mere 'Goal Labels' provided by FundsIndia.

The future is here. Have you signed up yet? :)