Widely read:
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Summary: Why do AMCs and brokerages command similar valuations? Our readers had strong views. This piece pulls together perspectives on ethics, speculation, misaligned incentives and long-term wealth building.
When Dhirendra Kumar, in his latest Editor’s Note, wrote about the strange symmetry in valuations between mutual fund companies and brokerages—despite one profiting when investors grow wealth and the other profiting when investors keep trading—many readers wrote in saying they weren’t surprised at all. Some found the contrast obvious. Others found it unsettling. A few found it philosophical.
Taken together, your responses painted a far richer picture of how investors think about incentives, ethics and behaviour than any column could.
“Everything becomes brutal when money is involved”
Regular respondent Sudha Devi Janga explored the idea through ethics: “This line becomes even more blurry in financial services, as everything is intangible. Brokerages simply say they’re not responsible if you win or lose, but AMCs carry responsibility because your whole future depends on them.”
H M Prabhu pushed the dilemma further: “If it’s a moral question, then I shouldn’t invest in cigarette companies, liquor companies or hospitals that fleece patients. Or my pet peeve—health insurance companies!”
Pankaj Bajaj drew a similar parallel: “It is like sin stocks. They make money essentially by harming their customers, yet customers value them as highly as healthcare companies.”
From a behaviour perspective, Anil Maheshwari added a reminder about the human element: “The urge to speculate is too strong. Especially for those who made profits in F&O initially—they keep trying again.”
And Muralidhara Reddy brought it back to the inner battle investors fight every day: “Financial freedom begins only when one understands the two biggest enemies—fear and greed.”
“One makes money when people gain; the other when people just participate”
Several readers saw the contrast in their own journeys. Vivek Phatak put it plainly: “One makes money when more and more people are involved, irrespective of their gains or losses. The other makes more money with more gains by the people.”
And he concluded simply: “Trading is not for me.”
Rajkumar Khiyani, who began investing after hearing Dhirendra Kumar decades ago, shared his numbers: “My equity MF returns are around 20 per cent CAGR. My direct equity is around 14 per cent. The difference is obvious.”
Shailesh Patel used the column to rethink how to interact with these businesses: “Instead of becoming a trader in Groww, I would prefer being their shareholder.”
And Oommen Mathew appreciated the clarity of the comparison: “You have provided insight into two different business models. The choice is with the reader to act diligently.”
“Positive-sum games will outlast zero-sum games”
Reader Santanu Roy connected the topic to a larger worldview: “Valuations reflect contemporary values. But in the long run, positive-sum games will overshadow zero-sum games, even if their valuations stay similar.”
He reminded us that patience and evolutionary advantage often go hand-in-hand.
Across all these responses, one truth stood out: The market may value AMCs and brokerages similarly, but investors must distinguish alignment from activity. The market rewards revenue. Investors must reward incentives.
Credits
Sudha Devi Janga, Rajkumar Khiyani, Oommen Mathew, H M Prabhu, Santanu Roy, Vivek Phatak, Shailesh Patel, Anil Maheshwari, Pankaj Bajaj, Muralidhara Reddy.
This article was originally published on November 24, 2025.
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