Thank you 🙏
You goddamn Indexheads are goddamn awesome!
Hope you guys have locked yourselves in your houses like it’s an apocalypse proof bunker and there’s a nuclear winter outside.
Wash your hands, face, hell, go crazy and wash your bodies until you all look like Michael Jackson on a sunny morning. Don’t muck around. This is serious! Please stay safe indoors along with your near and dear ones.
I wasn’t sure about writing this post because it might seem a little insensitive given the times we are in. But hey, If I die tomorrow, it won’t matter so, here goes.
People, I’m just so goddamn psyched because we just crossed 1000 subscribers on the newsletter😍😍 I want to thank every single one of you for reading, subscribing, and sharing this newsletter. It might not seem like a huge milestone but, given that we write only about index funds in India, it is :) So, thank you!
If you had told me that this newsletter would have had 100 subscribers, let alone 1000 when we first published the first one, I would have laughed in your face. And this is even more surprising given the narrow focus of the newsletter. To be honest, I didn’t expect more than five people to read this when we started this. In fact, what I initially wanted to do with the newsletter when I had the idea and how it eventually turned out are poles apart.
If you’ll indulge me, I’d like to recollect the idea behind the newsletter and how it came to be. Low-cost index funds have been around for a while, and the first index fund was launched in 1976 by Vanguard. But 2008 was a watershed moment for low-cost index funds, and they finally hit mainstream due to a confluence of factors which I had written a little about here. They have become popular in the US and across most of the developed world, and rightfully so. They have democratized low-cost broad-market exposure to stocks and bonds for the average aam investor. All thanks to Jack Bogle.
Anyway, I had my enlightenment now moment a few years when I discovered index funds and immediately joined the cult of indexing. I realized I was paying out of my nose and ears in return for absolutely nothing. The fund management industry, with very few exceptions, was ripping off investors like me. It was all 80% beta and 20% bullshit!
Serendipitously, as I was starting to write this post, Prashant just shared this excerpt from the book Unconventional Success. It just pretty much sums up the rent-seeking nature of the fund management industry.
Don’t get me wrong; people seem to think that I hate all active managers, I don’t. I have an active fund in my portfolio, and the sole reason I picked that fund is that the manager is honest and walks the talk minus the attendant bullshit. I’ll stick with this fund as long that remains the case.
I sold the useless active funds I had in my portfolio except for the one and moved all of my money into low-cost broad-market index funds. And as I started learning more, I was surprised by how oblivious investors were to costs. I mean, relatively speaking, India is still an immature market. But still, the disregard people have for costs is just scary. A good chunk of the mutual fund investors, even to this day, think that regular mutual funds are free without realizing they are paying commissions. Again, not that paying commissions is bad, but paying commissions without getting any value in return is!
So, I thought, I’d start a newsletter to curate some useful resources to spread the gospel of low-cost indexing and tweeted this:
And Anish and a couple of other people who shall remain nameless due to various reasons agreed to help. I still honestly don’t know why, but I am incredibly grateful for all the people who’ve helped, and the rest is just history.
Indexing in India
As a slight aside, I want to talk about index funds in India, Given all the noise on a small corner of Twitter, you’d be excused for thinking that they are increasingly becoming popular in India, but they aren’t! They aren’t even a tiny drop in the overall AUM of the industry. The entire growth is pretty much because index ETFs are the chosen vehicle for the Employees' Provident Fund Organisation (EPFO) to invest. In fact, over 90-95% of Rs 1,87,104 crores of the ETF AUM is just EPFO. Index mutual funds are a better proxy of the popularity of index funds in India. The total AUM of index funds is just Rs 8,210 crores, and for context, the total AUM of large-cap funds is Rs 1,54,834 crores. So yeah, very very early days, but it was the same in the US, a trickle and then a deluge.
I think the next recession after the current crisis will be the landmark moment for the adoption of low-cost index funds in India. It’s only during crises that people look closely at what they are getting in return for what they are paying.
To the matter at hand
We published our first edition of the newsletter on August 15th, and we’ve published ten issues since then. Amazingly, the average open rates and clicks are phenomenal. What’s even crazier to me is the fact that people look forward to receiving the next edition and ask us on Twitter if there’s a delay in publishing an issue. This never ceases to amaze me, in a happy way 😃
Here are some of the most popular issues we’ve published:
Lessons from a true investing superhero. This one is special to me, not because I wrote it. But this post is about what I learnt from Jack Bogle, my personal hero. I also write about the amazing story of how the first index fund came to be. This was also a tribute to Jack from the Indexheads team for all that he’s done for us.
A "balanced" life with Index Portfolio. Anish writes about why a balanced fund is awesome and how you can build your own with low-cost index funds and debt funds.
The delusion of alpha by Avinash Luthria. This was our first guest post, and in this, Avinash, a fee-only advisor writes about why chasing alpha isn’t worth it. He talks about how to build a portfolio with low-cost index funds. Thank you, Avinash, if you are reading this for writing on Indexheads.
Oh Yes...to a happy ending by Mr Boiling Frog. This is a slightly offbeat post. A friend of mine who wishes to remain anonymous talks about how his behavioural biases during the Yes Bank crisis got him into trouble and what he learnt.
Is my beta smarter than yours? By Anish. Smart Beta funds have emerged as one of the biggest trends in investing in the US and across the developed world. They aren’t yet popular in India, but we are seeing a trickle of such products. But there are a lot of nonsensical views about these funds. Anish sets the record straight on what exactly is smart beta in this issue.
Thank you once again for reading the newsletter, encouraging us at every turn, being absolutely brilliant Indexheads, and sharing the newsletter. The idea with the newsletter was to build the Bogleheads of India and shout about the virtues of low-cost index funds as loudly as possible
You guys have also been asking us to write about topics like index funds vs ETFs, asset allocation, how to pick an index fund among others. We will write about all these topics and more. We also have some amazing guest authors contributing to the newsletter, so keep reading. If you want to write or know someone awesome who’d like to write on the newsletter, please send me a DM on Twitter.
Also, we’ve been considering doing a podcast with the best and the brightest on all things investing. Please let us know your views and ideas on Twitter or in the comments below, it would really help us out.
Please do spread the word about Indexheads, if you think we deserve it.
Have been a fan ever since the first newsletter. Thanks and keep it up guys !!
I must say, great read. Bold n blunt. How can i contact you to discuss more?