(This column was first published on Value Research Online.)
Ladies and gentlemen, welcome to the closing ceremony of the Investments World Cup. It has been a hard-fought tournament, with a wide array of different investment avenues gunning for the coveted trophy. The winner would be announced to be the Best Investment for Long-term Investors, which is something that every avenue had staked claim to. But in the end, the final was contested between two teams – Team Direct Equities and Team Equity Funds.
Prior to the final, we witnessed some thrilling matches in the knockout stage. But unfortunately, one team has to lose for the other to win and teams like Team National Pension System, Team Public Provident Fund, Team Unit Linked Insurance Products and others just didn’t have what it takes to be the Top 2. They fought hard, but Team Direct Equities and Team Equity Funds eventually came through.
Right then, the stage was set for the keenly-awaited finale. The stadium was packed to the rafters, with both teams having an almost equal number of supporters. Neither of the two teams could say they had any sort of an advantage over the other. Both teams definitely deserved to be in the final and they were equally pumped up to win. They played clean, but played hard. They left no stone unturned to upstage their rival on this grand stage. But when all was said and done, when the dust settled, it was Team Equity Funds that turned out to be eventual winners.
And the reason for their win was fairly obvious in the end. Team Equity Funds was more diversified, flexible and liquid.
While Team Direct Equities had a couple of strong players, Team Equity Funds had different types of players who were able to contribute to the team’s performance in their own special way. The latter had more options and even more flexibility to change players as and when the situation demanded. The former, on the other hand, often got stuck with what they had because they found no takers for their poor performers. Another significant advantage that Team Equity Funds had was their ability to cover up the poor performance of one or two of their players. In this regard, Team Direct Equities was heavily dependent on some players and a bad day for them brought down the entire team’s performance.
And so, there you have it, Team Equity Funds – winners of the Investment World Cup and the Best Investment for Long-term Investors title. They’re probably not undisputed champions, but as even history suggests, the team that is nimble enough to make changes and adapt to different situations is more likely to make the winning score.