A real life story of one of our investors: I am a salaried executive who once aspired to become an entrepreneur. In 2002, I had Rs 5 Million comprising of my 15 years accumulated savings and my share of proceeds from sale of my ancestral property. While weighing costs of (aspirating to) becoming an entrepreneur I looked at the ground realities.
I realised that I need to manage a household consisting of 4 dependents and that I cannot afford to forego my current life style. I also recognise that establishing and running a successful business venture requires full time devotion. I also calculated the cost of foregoing my existing job which was equivalent to 20% "Return on Equity" on my prospective investment amount. This meant that even the businesses generating 30% margin will not give profit of more than 10%.
The more I was thinking the further I was moving away from my dream of owning a successful business empire like Packages/Nishat Group or well run companies like Engro and Fauji's etc. I was becoming so obsessed with the idea that I started thinking of even making sacrifice of foregoing my current life style. Here, a friend came to me and brought sanity in my thoughts and made me realise that start-up businesses carry higher risks and that there are "factors beyond one's control". He said that risking your money and job simultaneously is not a great idea. Reluctantly, I was accepting the costs and uncertainties associated with start-up business venture and saw my dream of mimicking successful entrepreneurs shattering.
I took my friend's advice and started looking at alternate investment options. Another very close friend advised me to look at buying real estate which provides opportunity of delivering 100-200% in couple of years in good times. Then I found out that real estate investments sometimes becomes illiquid making it difficult to cash out in times of need.
Another alternative suggested to men was to trade in Stock Market. While doing research, I found that most of the day traders speculate on movement of stock prices based on tips and technical analysis. They use leverage positions which magnifies small stock price movements into higher profits or loss. Here, catching the price movements is the name of the game. Catching the right move consistently is virtually impossible. Seeing my friend's inconsistent nerves and constant high blood pressure over the past few years, I decided against it.
Then I saw an advertisement in the newspaper captioning "Truly Great Ideas come once in many moons!" And "Truly great Ideas backed by experience come once in a lifetime!"
I became inquisitive as the Ad really caught my attention. I could not resist checking out the details. It was a mutual fund! And specifically on Open-end Fund. When I asked for further details for detailed scrutiny, the concept attracted me. Actually, when the marketing person was presenting details, I was drawing my picture of Pakistan Stock Market Fund.
I was evaluating PSM with my own perspective, looking at the costs and uncertainties of stable business. It was a totally different angel from what the presenter wanted me to understand. Finally, when I left the room I was very clear. My theme came out as .... Investing in PSM is like "Becoming Partners with Successful Companies / successful Entrepreneurs" A theme very close to my heart.
My understanding of Equity Funds: As I understood, my Fund Manager is continuously studying global & regional situation, evaluating macroeconomic numbers, weighing up viability of various sectors, reading and analysing balance sheets of different companies.
Or in common man language the Fund Manager's job is to continuously evaluate and select the finest running businesses around and becoming their partners. It would have been impossible for me to read so many balance sheets, understand the dynamic market variables and take informed decisions. The concept of value investing clarified my understanding that the Fund manager who acts like a bridge between me (my investments) and successful business houses.
What else did I want!......... As a PSM investor I became partner with the auto industry for five years, I am a partner with the fertiliser sector for the past seven years. I have the privilege of receiving dividends from power companies, I also participated in the economic prosperity when my Fund Manager invested in OGDC privatisation. And, most of all, my Fund manager connected me (indirectly) with many prestigious business groups. All those years I concentrated on my job without sacrificing my lifestyle. I was never worried about the liquidity as PSM is an open end fund and I could literally cash out anytime I wanted.
I am happy that I took the right decision. My initial investment of Rs 5 Million in Pakistan Stock Market Fund is now worth Rs 33.65 million as at October'09 end, astounding isn't it !. With Rs 33 million in hand today I can once again think of becoming an entrepreneur but why should I do that? Who would want to start a new business when a specialist is there to connect you with the best companies around? Why would I want to have sleepless nights when I know that my money is the hands of reliable Fund Managers.
Returns calculated on the basis of all dividends reinvested
Hum ......... Seems like a story - too good to be true!
Dear Investor,Well, it's a real story and we have many such investors who invested in PSM in March 2002 and are still holding on to their investment. Their stories may be different but their returns are real - Astounding total returns and an Amazing outperformance of KSE-100 index. Such outperformance for such extended period is a rare phenomenon in the world of fund management.
Moral of the story: Many of us mix investing with speculating and forego benefits of equity investing. There is a fine line between investing and speculating! It is the intent that draws the line between investing and speculating. Investors always take utmost care while making investment/disinvestment decision based on fundamentals. PSM Fund Managers are assigned to add value by picking up value companies and creating a connect between investors and value offering companies. So what are you waiting for.
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