Why Indians need active portfolio management to create real wealth
Recent analysis of over 400,000 mutual fund portfolios through advanced wealth monitoring platforms has revealed a stark picture: approximately 65% of portfolios fail to match, let alone exceed, their respective benchmarks. This underperformance isn't merely a temporary setback; it's a wealth erosion epidemic that compounds over time, particularly affecting High Net-Worth Individuals (HNIs) who have the most to lose.
The root causes of this widespread underperformance are both systematic and behavioral. With over 1,800 mutual funds and 5,000 stocks available in the Indian market, the complexity of choice is overwhelming. Traditional approaches to portfolio management are proving inadequate in an era where market conditions evolve at unprecedented speeds.
One common pitfall is the excessive reliance on historical performance metrics. It's a natural human tendency to extrapolate past performance into the future, but in the dynamic world of investments, this approach is fundamentally flawed. Historical performance, while comforting to look at, has shown virtually no correlation with future returns. Yet, this remains one of the most common selection criteria among individual investors and even professional wealth managers.
The problem is further compounded by inherent conflicts of interest within the traditional wealth management industry. Relationship managers, operating within distribution-led platforms, often face pressure to recommend products that maximize commissions rather than client returns. This
