Yeah .. Once we are content with our returns which are enough to help us acheive our financial goals .. we will be happy .

Manish

So I think that before investing we should think and learn more about our options and choose the one that matches our interest. Most importantly we should accept that there are really people who will have more yield , success and money than us. Our consolation is that, we have a chance to achieve what others have by seeing time as our ally and not one of our challenges.

Great , your reasoning for MF is perfect and for Home loans part you are correct to great extent .

My reasoning was based on the nature of changing environment actually . Bank A is the best at this moment , but what about the fact that tomm or after 4 yrs some Bank B (which was 3rd best at the time of evaluation) decreases its Interest rate and with other parameters becomes the best Bank , and then same thing happens for next 20 yrs ..

Just like Mutual funds , U cant be sure that the Bank you choose now will turn out to be the best at the end . However , i agree that at that current moment choosing the Bank A was the best thing to do .

At the end , Its more of a "How much of effort you want to put and how much result you want to get" ..

Even in Mutual funds case , What I suggested is a great simple method which will work 95% of the time , now it depends on the person if he is ready to get 95% by putting in 2% work or he wants to get 99% with 15% efforts , its a personal choice ..

We are discussing a case which is concerned to an average person , who has too little knowledge and time to do all this but still wants more than average results .. we are trying to discuss about how to achieve "better than average" results for 95% of mass .. For people who have time , knowledge and eagerness to find the best for him , He can do more work than average .

I have to agree with you for that case . I hope we are on the same ground now .. What do you say ?

Manish

I need to explain further. I agree with the conclusion of your post(that too only for category 1 financial products, e.g. MF). But I disagree with the reason.

Your valueresearchonline method is reasonably good and for the sake of argument, I can even agree that it is perfect. But then you go on to say: which may not be the "best" choice. By saying this, you suggest that there is a best choice. My argument is – unless you have a crystal ball to know future returns, there is no best choice. At best, you can know that if I were investing 5 years ago, this MF would have been the best choice. Hence too much research is futile and thumbrules, like your valueresearchonline method are perfectly fine.

But in category 2 of financial products like home loan, there is a best choice, to a certain extent. The starting interest rate, unchanging interest rate period, transparency in increasing interest rate in the future, processing fee, pre-payment penalty, missed instalment penalty, and many more features; have direct impact on your finances. Research can help a person understand these features and choose the "best" one for himself. Any amount of research is not futile here, as long as it concentrates on features that can be known now.

I know it was a single comment, Just for replying i called them 1 and 2 .

Regarding your comment , I think there is some interpretation . I totally agree with you on what you said .

If one can take that decision fast enough by filtering out some of the choices , thats great .. thats the ideal situation . I never said that if we have a single product and no competitor at all ..

In this real world what we can do is filter out most of the bad choices and then only from handful of good choices , choose a good product for us , thats am ideal situation .

But most of the people are not able to choose products by comparing them in a way you have done … and hence they keep on delaying their decisions most of them time in future which is the real problem .

The gist of what I wanted to say was more choice = More confusion and more data processing , even though we can get better choice , but that does not beat the average choice by very very huge margin .

I would agree that this may be least applicabl to home loans , but in Mutual funds , if you want to buy a equity fund , the best way i would suggest one with least work is go to valueresearchonline , search for the top 10 mutual funds based on 5 yrs , 3 yrs and since launch return . And then choose any one of them and start SIP , this is the simple method using which one can choose a very good fund , which may not be the "best" choice , but considering the time and mind spend, it would be a desirable choice .

I agree that I was little harsh on Home Loans , but most of the people seem to agree with it i guess . What do you say Maurya ?

and thanks for bringing up this point .. it helping clarity . and your example was a nice one ..

Manish

home loan amount: 25 lakhs
interest rate: 10%
processing fees: 1%
duration: 20 years
total payment: 5815240

If the person had spent 2 days learning about other products, negotiating with banks, etc he could have ended up with:
processing fees: 0.5%
interest rate: 9%
total amount: 5410820

Amount saved: over 4 lakhs.

I'll be surprised to meet a sensible person buying a home of 30 lakhs (5 lakhs downpayment, 25 lakhs loan) who will not care about these 4 lakhs (or even 1 lakh) if they can be saved after research of a few days to a week.

The above is a simplified example to illustrate the point.

On the other hand, all the research in the world cannot accurately predict a mutual fund's future performance. Hence your post is perfectly applicable to mutual funds, and only a few thumb rules should be used to select MFs. Like you say, too much research wastes time, develops indecision and doesn't get you anywhere.

For your comment 1 , i agree with you that too much choice prevents decision making .

For your comment 2 , Why do you say that Home loans end up with differnet cost , how significant the differnce is , if its less than 5% , its not significant which will happen always , not doubt about it .

You need to tell me in detail where i am confusing people , i really didnt understand that part .. thanks for taking the pain of telling that .. please givemore info

Manish

1. Future performance is the only thing that matters to a person e.g. mutual fund. Past performance can just give some indication of investment strategy of the fund. Hence thinking too much is harmful: too much choice prevents decisions and future performance cannot be predicted with much accuracy anyway, even if you have infinite knowledge.

2. Current features of a product: Home loan is the other category. Here, at current state and next few years, different loan product end up costing differently. Unlike mutual funds, thinking too much is not futile in case of loans. In fact, it is necessary because banks hope that you will not study the details of your loan product and end up getting charged more. Banks have complicated things by introducing different types of charges at various stages of loan. The only way to defeat their strategy is by learning more about home loans.

Even here some part is in the domain of future e.g. interest rate movements and the bank's reaction to them to change your rate of interest.

You are confusing these 2 categories and painting them with the same broad brush. This is very dangerous.