Type Term Annual Percentage Rate Notes Home Equity 5 Years: Fill & Download for Free

Published on ValueWalk day after the 2015 BRK annual meeting.QUESTION:If you and your spouse had invested in the exact same stocks at the exact same prices as Warren Buffett did through Berkshire Hathaway, would you and your lovely spouse be worth $74 billion today, as shown in the chart above?ANSWER:It depends on whether you were using long-term borrowed money or "OPM" liabilities at extremely low (i.e. negative) rates to fund those exact same investments.Mr. Buffett has and continues to borrow or use "OPM" liabilities or "Other People's Money" owed year after year, at an extremely low cost to achieve a significant portion of Berkshire Hathaway's remarkable returns. Note, Berkshire is not a fund; Buffett's OPM was not money from other investors.And even better for Mr. Buffett, he has been PAID to use this OPM or borrow money. This further boosted his returns. He has had a zero to negative cost of borrowing. Being paid to borrow would be comparable to a student taking out a 5-year student loan for $100 and paying back only $95 at the end of the 5 years with zero interest. The student pockets $5.In summary, even though the stock you and Mr. Buffett bought may have gone up the same 5% for the year, he's achieving 2.0x-4.0x the 5% return you're getting because of OPM that he was being paid to borrow.Buffett wrote in 2004:“Indeed, had we not made this acquisition [of our first source of OPM, an insurance company called NICO, for $8.6 million in 1967], Berkshire would be lucky to be worth HALF of what it is today [at $400 billion market cap in 2015]."To start with an example of how OPM liabilities work, let's say you, Mr. and Mrs. RateShark, who are hunting for a decent rate of return on your own money, buy a house for $100, putting all $100 of it down without taking out a mortgage.Mr. Buffett buys a house exactly like yours right next to your house for the same price of $100. However, Mr. Buffett uses $50 of his own money and takes a $50 mortgage from the bank. Assume the mortgage has a 2% interest rate.Say in one year, the value of both your house and Mr. Buffett's house go up by $10 or 10%. So each house is worth $110 at the end of the year.So if both the RateShark family and Mr. Buffett were to sell right at that point, you both would be seeing $110 coming in from the sale of your homes. For the RateSharks, you will have achieved a return of $10 for a 10% return on your initial $100.However, for Mr. Buffett, he gets cash inflows of $110, too, but what is then deducted is:-$50 mortgage principal paid back to the bank-$1 or 2% interest on the $50 mortgageSo $110 - $50 - $1 = $59 goes into his pocket.$59 is a $9/$50 or 18% return for Mr. Buffett on the $50 Mr. Buffett put in. 18% is almost double the 10% return you, Mr. and Mrs. RateShark, got on your initial investment of $100.This is a common misunderstanding of how Warren Buffett and Berkshire Hathaway achieved such immense wealth - that is, at least half the returns were generated using 1.6x-2.0x asset leverage, meaning for every dollar of Berkshire's own money put into an investment, Berkshire also borrowed another $0.60-$1.00 to invest alongside its own money, juicing the actual return on its own money down.What would now be even better for Mr. Buffett is if he had been able to get a longer maturity mortgage or other form of borrowing or OPM that he didn't have to pay back right away at the end of the year. Or if he could borrow $1.00 at a NEGATIVE interest rate - needing to pay back only $0.95 of it. That is, getting PAID 5 cents to borrow $1.00.What this means, using the same example above:Again, Mr. Buffett gets cash inflows of $110, but what is NOW deducted is:-$50 mortgage principal paid back to the bank+$2.50 or +5% profit added from the $50 mortgage(Essentially, this is the same as paying back the bank only $47.50 of the original $50 mortgage borrowed.)So $110 - $50 + $2.50 = $62.50 goes into his pocket.$62.50 is a $12.50/$50 or 25% return for Mr. Buffett on the $50 Mr. Buffett put in. 25% is 2.5x the 10% return you, Mr. and Mrs. RateShark, got on your initial investment of $100. 25% is also 7 percentage points higher than the original 18% Mr. Buffett was getting when he was paying a 2% interest rate on his $50 mortgage.And remember, the value of the purchased asset, the house, only went up 10% from $100 to $110.You may be asking where in the world can someone be paid to borrow money? Well, there are several places. Insurance is one industry as mentioned earlier, but only if you can underwrite profitably. If you collect premiums from policyholders, this is a source of OPM. Then, if you pay out claims in an amount less than what you collected as premiums, you just got paid to borrow or use this OPM. Insurance has been Buffett's primary source of OPM for most of Berkshire Hathaway's history. What's ironic is that, in the past 50 years or so, insurers on average have not underwritten profitably. If it's not clear how collecting premiums from policyholders is the same as borrowing money from them or why insurers have trouble writing profitably, I will elaborating more in our company's newsletters.OPM or leverage or borrowed money is a double-edged sword as it can amplify your positive AND negative returns, and can be especially punitive if it comes at a high cost. What Buffett did was he sourced long-term "friendly" OPM at an extremely cheap cost and respected the leverage by using just enough to boost the returns on very safe stock investments.Buffett was never given funds to manage on behalf of investors at Berkshire Hathaway. Berkshire Hathaway is not a fund. Most of the money Berkshire has used to invest was its own capital and insurance premiums paid by policyholders, who couldn't care less or knew anything about what investments their premiums were funding. They certainly did not get any of the returns from those investments - all they were owed were payments to fund their insurance claims. If you ever paid GEICO for auto insurance, you helped fund some of Berkshire Hathaway's investments.For the last few years, after leaving my career as a hedge fund analyst, I have been pursuing the goal of trying to replicate the strategy through my company S&C Messina. Warren Buffett’s partner at Berkshire Hathaway, Charlie Munger, said in 2000, “More people should copy us. It's not difficult, but it looks difficult because it's unconventional - it isn't the way things are normally done.”The strategy of Berkshire Hathaway, to boil it down to its two most critical components, is as follows:A) Getting OPM - "Other People's Money You Owe", borrowed money or simply an I.O.U. - at a cheaper cost, year after year, on better terms than anyone else, by sourcing and getting OPM in a way most don't and;B) Using OPM in a way most do not, by investing it (along with your own money) in stuff that most find too boring and ignore, especially over the short-term.The execution of these two components is shown in the following series of steps:1) On day 1 of this year, you put $100 of your own money or capital (your own equity or net worth) into a bucket.2) Getting OPM - if you can get OPM, which can be called "leverage" or "debt" or "float", at a cheap (perhaps even negative) cost or interest rate and on very friendly terms over a long time period, that's the first critical step. So, on day 1 of this year you get OPM of $100 and put that into the same bucket. Now, in addition to your own money of $100, you also have $100 of OPM, leaving you with $200 of cash in the bucket on day 1.3) Using OPM - if you use OPM, in addition to your own money, to invest in assets in a way that most cannot or do not find attractive or possible (low-beta, boring), that's the next critical step. On day 1, with $100 of your own money and $100 OPM in the bucket, you move the total of $200 cash to invest in boring Asset X for the year.4) It's now the last day of the year and $200 of Asset X has grown and returned 5% or $10. Asset X is now worth $210 total.5) But we're not done yet. Say you now have to give back the OPM of $100. Say the terms were such that you had to pay $100 OPM back on the last day with no interest or cost.Sell $100 of Asset X and return $100 of cash into the bucket:Pay back $100 OPM, leaving $110 of your own money in the bucket, as shown below in (i) and (ii):(i) OPM is now gone...(ii) Leaving you with $110 of your own money...So you actually got $10 on top of your $100 of your own money for a return on your own money of 10%. How? By investing in Asset X at 2 to 1 "asset leverage". $200 Asset X divided by $100 Your Own Money = 2 to 1 "asset leverage" or extra juice. Even though Asset X went up for a return on asset (ROA) of only 5%, your return on equity (ROE) or return on your own money was 10%.6) But it gets even better. You find out that from the OPM of $100, you actually only had to pay back at the end of the year $95 of it. In other words, if you were an insurance company like NICO and you took in $100 of insurance premiums from policyholders on day 1, by the end of the year you only ended up paying $95 in claims to certain policyholders to cover the cost of their accidents. Enough people didn't have an accident. So, with an Underwriting Profit of $5, you just got paid $5 to borrow OPM of $100. Your cost of capital or "interest rate" was actually negative at -5%. This is like getting a $100 mortgage (another form of OPM) and paying back $95 to the bank at the end of the year with no interest! So, you made an Underwriting Profit, or let's call it OPM Profit, of $5 for an OPM Profit Margin of 5% on $100 OPM received.So, going back to an earlier diagram and adjusting for this OPM Profit, you only had to pay back $95 OPM. This gives you OPM Profit Margin of 5% ($5 OPM Profit/$100 OPM = 5%).Including this OPM Profit of $5 (outlined in the gray dotted box) adds a 5% return on your own money of $100 that you started with on day 1. In other words, this gives you an OPM return on equity, or OPM return on your own money, of 5% ($5 OPM Profit/$100 Your Own Money).7) So when we put it all together:Investing ROE of 10% + Underwriting (OPM) ROE of 5% =15% Total Return On Equity (ROE) or15% Total return on your original $100 downAs an analogy, this would be like saying Berkshire Hathaway's net worth or book equity value goes up by 15% annually, even though the actual investments went up by only 5% during the year. 10% from 2x levered asset returns plus another 5% from OPM Profit (Underwriting Profit) gets you 15%. The invested asset never went up 15% - not even close. Only 5% return on asset (ROA) in this example.8) Repeat and continue to compound your own money or equity at 15% or better per year, year after year, for many years. Note, your investment in Asset X went up by only 5%.Berkshire's actual ROE is in the neighborhood of 25%/year. For 47 years at 25%/year Buffett has been able to compound Berkshire's investment in NICO for $8.6 million in 1967 to BRK's current publicly traded equity value of $400 billion. But as shown in the example above, this monumental achievement was never purely from his investments alone. Not even close.So why do people focus so much on Buffett's investments (without acknowledging his OPM), especially if most of these investors don't even have or use OPM?And if people do get OPM, where can they get long-term OPM or leverage or borrowing where you can potentially get PAID to borrow? If you borrowed from a bank at 2% per year, that is still worse. Borrowing at the same U.S. gov't risk-free rate, that's still worse. At 0% per year, this is still worse. Furthermore, where can you get OPM, the cost and volume and call-ability of which is not correlated with whether or not the value of Asset X goes up or down? Hedge funds get leverage, sure. But when their asset (collateral) values go down, they get margin calls and have to sell. They get investor redemptions. Mom and pop investors borrow on margin at 7% or even 10% or higher. And even if it was 0% margin interest, they will still get called and be forced to sell if their investments go down enough.It may not be intuitive at first, but when you pay auto or home insurance, your paid premium is essentially a loan to the insurance company. Your premiums are a form of OPM or borrowed money being used by the insurance company. Why? Because if you have an accident and file a claim, the company owes you money, as long as it happened during the term of the insurance policy. (I was asked to further elaborate on how an insurer receiving insurance premiums from policyholders is the same thing as that insurer getting a loan, OPM or borrowing money from policyholders. I'll be going into that in more detail in our company's newsletter.)It may not feel like you're loaning money to the insurance company, but if you take 100 people who each pay $10 in monthly premiums for covering iPhone damages or loss during one month, that $10*$100=$1,000 is a loan from the policyholders as a whole that is held on the books of the insurer as $1,000 borrowed money, OPM or liability, until the end of all the policies' terms. The $1,000 is potentially owed to all policyholders as a group. If 2 out of the 100 people get their iPhones replaced, assuming each iPhone is $500, the entire 2*$500=$1,000 of received premiums held on the books as debt, OPM or borrowed money is now paid back to the policyholders, specifically 2 of the 100 policyholders. And the insurer is left with $0 liability at the end of the period, but the insurer hasn't lost any money. But it's actually better than this in reality for the insurer - the 2 people that are getting their insurance claims paid out - they don't usually get that money right away, as there's a time lag from when the claim is filed until the claimants actually get their owed money. So theoretically, if two people filed a claim on the last day of the month, it may still actually take another few days or a few weeks, before they actually get cash from the insurer. So the insurer's OPM or borrowed money had a "maturity" of longer than the policyholders' iPhone insurance policy term of one month!With Buffett's insurance OPM, as long as he paid back policyholders, the policyholders who are providing the OPM didn't really care or even know what he did with the OPM. In fact, when the markets tank, and most OPM sources like banks and lenders also freak out and start giving out less and charging higher rates, Buffett could add to his positions without selling, by funding it cheaply with the continuous OPM coming in through insurance premiums that were underwritten profitably."Weeeee! I never have to sell!!!" like the GEICO pig he squeals.Think about mutual funds or long-only asset managers - how many of them use OPM?With regards to why the insurance industry, which does have access to OPM, doesn't adopt his strategy more often, that requires an entirely separate post, and please let me know if you are interested in that question. But in short, suffice it to say, the same type of behavior that goes on in the investment world with regards to short-term focus on chasing invested asset risk - the same thing happens in insurance with regards to short-term focus on underwritten liability risk. Some details are further below when Buffett refers to a "managerial mindset that most insurers find impossible to replicate" and an "institutional imperative" amongst the insurance industry that "rejects extended decreases in [premium] volume". For most companies in the insurance industry, their OPM has been expensive and costly, as they have underwritten at a historical loss, losing $4 dollars for every $100 dollars of premium or OPM received in the last 25 years, and their investment strategy consists of investing almost 100% in bonds and fixed income.So to summarize:Buffett was able to compound his investments over the long-term with higher returns than others, specifically because his OPM allowed him to do so - even his OPM itself was compounding, turning the OPM liability profitably into equity.Think about that - he actually had TWO snowballs rolling down the hill - an asset snowball (stocks and bonds/investment) and a liability snowball (OPM/liability funding), rolling together, each putting more snow onto the other, merging slowly into one $400 billion equity behemoth. And it's still rolling.From Pages 6 to 11 of Berkshire Hathaway's 2004 Shareholder Letter:"When we purchased the company – a specialist in commercial auto and general liability insurance – it did not appear to have any attributes that would overcome the industry’s chronic troubles. It was not well-known, had no informational advantage (the company has never had an actuary), was not a low-cost operator, and sold through general agents, a method many people thought outdated. Nevertheless, for almost all of the past 38 years, NICO has been a star performer. Indeed, had we not made this acquisition, Berkshire would be lucky to be worth half of what it is today.What we’ve had going for us is a managerial mindset that most insurers find impossible to replicate. Take a look at the facing page. Can you imagine any public company embracing a business model that would lead to the decline in revenue that we experienced from 1986 through 1999? That colossal slide, it should be emphasized, did not occur because business was unobtainable. Many billions of premium dollars were readily available to NICO had we only been willing to cut prices. But we instead consistently priced to make a profit, not to match our most optimistic competitor. We never left customers – but they left us."Most American businesses harbor an “institutional imperative” that rejects extended decreases in volume. What CEO wants to report to his shareholders that not only did business contract last year but that it will continue to drop? In insurance, the urge to keep writing business is also intensified because the consequences of foolishly-priced policies may not become apparent for some time. If an insurer is optimistic in its reserving, reported earnings will be overstated, and years may pass before true loss costs are revealed (a form of self-deception that nearly destroyed GEICO in the early 1970s).To combat employees’ natural tendency to save their own skins, we have always promised NICO’s workforce that no one will be fired because of declining volume, however severe the contraction. (This is not Donald Trump’s sort of place.) NICO is not labor-intensive, and, as the table suggests, can live with excess overhead. It can’t live, however, with underpriced business and the breakdown in underwriting discipline [i.e. disciplined, profitable underwriting means OPM profit that results in a NEGATIVE cost of borrowing / float / OPM] that accompanies it. An insurance organization that doesn’t care deeply about underwriting at a profit this year is unlikely to care next year either."_____________________________For those wishing to read a more technical, more academic analysis, the following may be useful: Noh-Joon Choo's answer to How does Warren Buffett generate alpha?

I wrestled with this question a great deal before I bought my first rental. When I first thought about buying rentals, I had a very simplistic ROI calculation, and everything seemed to yield 25-30%. (Fortunately, I realized numbers like that meant I was doing something wrong, as opposed to actually looking for those types of returns.)In any case, my approach is this:1. Identify your equity in the property. At the outset, that's down payment plus closing costs, plus improvements (if any). As time goes on, your equity will change as you accumulate principal. Your equity will also change with fluctuation in the market value of the home (... which, hopefully, is all appreciation.)2. Identify monthly or annual rent. If you're doing projections, rather than evaluating actual events, then it's worth building in a percentage multiplier so you can model vacancy. This is the revenue the unit generates.3. Identify expenses. This includes mortgage principal, interest, taxes, insurance, condo fees (if applicable), management fees (if applicable), maintenance, and things of that nature. (If you're going to hold your rental property in a corporate entity, include annual corporate filing fees in your expenses.)4. Revenue minus expenses is cash flow. That's certainly part of the profit. But...5. Identify the principal portion of the mortgage payment. This is a bit of a pain, since it changes every month. Fortunately, Excel has a built-in function for that. Then...6. Your TRUE profit is the cash flow PLUS the principal portion of the mortgage.7. For a given time period (e.g., monthly, annually, etc.), you can compute the ROI as a the profit you identified in step 6, divided by the equity in step 1.8. (Bonus round). Everything I said so far has been gross profit. If you want to figure out net (i.e., after-tax) profit, you can do two more steps:a. First, mortgage interest is deductible. (Hallelujah!) So, figure out your cash flow of step 5, MINUS mortgage interest, and get a tax-adjusted profit. It can be negative, even if your cashflow and ROI is positive. (This happens especially in the early phase of the mortgage, where the interest portion of your payment is the highest.) If you have a loss, that can be used to offset the tax you'd pay on profit elsewhere. Or in other words, that loss has a certain present monetary value. Figure it out using your effective tax rate.b. Depreciation is another huge deduction. Divide the value of the home (at the time you purchased it, not accounting for any appreciation) by something like 28.5, and you get to deduct that annually. To figure out the present monetary value of that deduction, use your effective tax rate.Notes:First, all that stuff about taxes is important, and I was intentionally vague. If you don't understand what I'm saying, it's worthwhile to talk to an accountant. Especially about depreciation... learn how depreciation affects your taxes when you sell the house. And speaking of selling, you should also learn about 1031 exchanges at some point. But that's what I'd call an "advanced" tax move, that you need not understand right off the bat.Second, I have this (poorly) implemented in a spreadsheet that I'm happy to share with anyone. Just message me or leave a comment. The spreadsheet isn't as slick as I'd like: in particular, it doesn't re-compute equity with every mortgage payment... it just assumes the equity is just downpayment + improvements. So every few years, you sort of have to adjust it by hand. There are some other little quirks that aren't exactly how I'd want. (For example, I'd LOVE to build in a "percent appreciation" field for forecasting, but I haven't done it yet. In any case, the spreadsheet is pretty good estimation of real ROI, especially in the first few years of owning the property.

I promise you can find this answer useful if you are invested in Indian mutual funds, even if yiou are an experianced investor. You will be surprised how much mis-information is floating around in the market around this simple concept.What are mutual funds:When you invest in mutual funds, you join a pool of investors that give money to a fund house to invest on their behalf. While every investor can do this on their own, the expertise of investing in stock markets or bonds is missing. Thus, the solution of mutual funds came into existence.Are mutual funds safe:Mutual funds are present across the world in every country. These are absolutely safe & backed by government regulators (SEBI in India) to the extent that nobody can run away with your money. This is quite remarkable in a country where people hardly find anything safe outside of SBI deposits & LIC plans. The fund is designed in a manner that your money or investments are not held in the owners account. It is with the custodian which is different from the fund house. All said, your money is safe, except for the market risk that everyone has to bear.How do you invest in mutual funds?Now for the real part of the answer. If you are a beginner or may have some years of experience in fund investing, what should be your strategy ? Do you even have a strategy in place ? The following steps will address all of this:1) Identify your investor personality:This is the most critical step. I see numerous questions here that ask the “best mutual funds”. What is the “best” is different for each individual. For a retired person with lifetime savings, the best could be debt funds with stable but low returns whereas a youth wit first job may find small caps more impressive with high volatility but better returns. So, it all depends on what is your INVESTOR PERSONALITY. Only you can identify that. Be true to yourself here. There is nothing like “highest returns” with lowest risk. Mutual funds are not for guarantee seeking investor.Investor personality can vary from defensive, conservative (if you like fixed guaranteed returns) to moderate but ambitious (if you are in-between) & aggressive(if you like equities & riskier investments but possibility of high returns). Various tools are available online to assess this. But you can broadly understand where you are on this spectrum. So, your BEST funds will depend on this parameter.2) Have an Investment strategy: So, there are broadly 6 different categories of funds in equity. Picking up different funds is not diversification if all of those belong to the same category. Large Cap, Flexi/Multi Cap, Mid Cap, Small Cap, Sectoral funds & ELSS. There is also ETFs if you want to play Index strategy & want to have very low charges on your fund. Stay away from Sectoral funds if you are just starting up. Want to know more details about what each category is about, pls read a detailed answer here.Anurag Singh's answer to What is your view on the new norms by the SEBI on categorization of mutual fund schemes? How would this effect the different categories of equity mutual funds, especially the mid-cap space?2) Plan your portfolio strategy:having understood the kind of funds that exist & your investor personality, the next step is to figure out your investment basket. Let’s support your investor personality is Moderate & Ambitious. This will hold good for most average investors who are just starting. Even if you are an investor for last 3 - 5 years, trust me, you’re also just a beginner.So here is the found allocation you should follow-Debt funds - 40%Equity funds - 60% (Large cap 30% & Multi cap - 30%)A typical rule you can follow is this : A percentage equal to your age should be in debt funds. So, if you are 30 yrs., 30% should be in debt funds & 70% in equities. Hope you got the point.3) Select the funds to invest:This is where I urge you to do some research. I will not suggest fund names here for two reasons. You need to educate yourself of the process of selecting right funds. More importantly, you should feel convinced about your research to stay invested for long term. If I suggest something, you may drift tomorrow as some other advisor comes along & suggests something flashier. So, you need to do this small part of your research as most of your strategy has been suggested already as above. I’ll give a clue. Go to a good fund rating website like Value research online & look for the top funds in the category you are looking for. Also try to stick to the top fund houses. I don’t want to recommend names on an open platform but there is always merit in sticking to large funds. Smaller funds ay give great returns for a year or two but as theyy grow bigger, the returns can be erratic.Both risk & return increase when you move from large cap (low risk & lower potential returns) to small cap(highest risk & highest potential returns). A long-term view(5 to 8 yrs. plus) is recommended for riskier funds like small caps, longer the better. So, see where you fall in the risk profile & pick YOUR BEST fund accordingly.4) Restrict the number of funds, avoid over-diversification:The maximum funds you should have is 6 at the most. That is 2 for each category. There is no value in adding more funds in the same category. For example, all large cap funds invest in top 100 companies in India. You don’t achieve any diversification by buying 3 large cap funds. One is enough. If you have investments higher than Rs. 20 lacs or a SIP of Rs 20 K per mth within large cap, maybe you can go for 2 funds. That’s all you need.The level of risk you can undertake to get higher returns will decide which category you should pick or avoid.Mode of investment - SIP & lumpsum:By now, all of you understand the Systematic Investment Plan, i.e. a kind of monthly EMI that you pay for your investments. You can choose the SIP method if you want to contribute a fixed sum out of your income each month. Don’t forget this EMI ever. This is your future.If you have lump sum money, then timing is very important. You might get it right by chance but if you get it wrong, the pain is immense. So, our recommendation for retail investor is to invest only thru the SIP mode.5) Buy DIRECT PLANS only :Always buy DIRECT PLANS of mutual funds. Every mutual fund has 2 plan options. Regular plans (Pays commissions to brokers every year) & direct plans (No broker commissions) . These are exactly the same fund but with different expense or cost structure. One has commissions built in & other has none. So while the annual expenses for a regular plan may be 2.5%, those for a direct plan for the same fund could be just 1%. That is 1.5% higher returns on your corpus every year.There are various platforms now to buy direct plans on a single login rather than approaching various mutual funds separately.Want to understand the difference between direct & regular plans & why that is important? Pls read this answer;Anurag Singh's answer to What is the difference between Regular (Growth) plan and direct plan in Mutual Funds? Which should be preferred while buying and why?Paytm, ET money, Paisa Bazaar, etc. are some of these platforms. Also remember - Investing thru banks is not “direct plan investment”. Even if you buy HDFC mutual fund thru HDFC bank, it is NOT a direct plan investment. Pls always note at the top of the application form.It should clearly mention “DIRECT” in the section for the ARN number/code. The form shown in the picture above is not a direct plan. In case of online form, this will be an option to click as you start the form.Finally, if you are visiting a bank branch or a broker is filling a form at your home, it can never be a direct plan. Nothing in the world is free. Stop expecting that from financial planners. Most notable online option of FundsIndia is also not direct. Ironically, investing thru icici-Direct , HDFC - Direct or Axis Direct is also NOT a direct plan investing. The bank or the broker is taking commissions there. Don’t allow that to happen to your money.6) Your broker or bank relationship manager is the product seller.Just because someone uses the term “advisor or manager” doesn’t make them one. Please don’t take him to be a financial adviser. There is no substitute to keeping your eyes open and not trusting anyone with your investments. The sellers don’t care once you invest and move on to others. Be watchful and review portfolio every 6 months to 1 year. It's your money and nobody cares about it more than you!6) Remember the most critical virtue for investing in stocks:Mutual funds are indirect investment in equity/stocks. Therefore, you should possess the three most critical virtues of stock investing at all times.Patience, patience & patience.Remember, there are no free lunches. You have to do some research & educate yourself. However, what I’ve made sure here is that you would have the right strategy in place.Feel free to mail or write to me on twitterHonest - Unbiased - Simplified, as always.