The document discusses challenges that investors face with current investment options and introduces Spoke Funds as a better alternative. It summarizes key limitations of mutual funds, hedge funds, and ETFs in meeting investors' needs around alignment of interests, transparency, accessibility, and liquidity. The document then introduces Spoke Funds, noting their key advantage is that the portfolio manager invests their own money alongside investors'. It provides an overview of The Mosaic Portfolio, a long-term, business-owner approach to investing run by The Free Investors. The Free Investors aims to be accessible, transparent, invest for the long-term, have no conflicts of interest, be low cost, and independent.
Real Partners in Your Investing Journey with Spoke Fund®: A Better Alternative for Your Investment Dollars
1. Real Partners in Your
Investing Journey
Spoke Fund®: A Better Alternative for Your Investment Dollars
2. DISCLAIMER
This presentation is for educational and informational purpose only. Nothing
contained here should be construed by anyone as an invitation or solicitation to
buy or sell any security. This presentation does not contain personalized
legal, tax, investment, or financial advice. Viewers should consult with a qualified
adviser to obtain advice suited to their personal circumstances.
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4. Investing
is one of the very few service businesses where
the service provider (portfolio manager) is not
directly accessible to the buyers (investors) of
the service ! Every other service provider, e.g.,
doctor, lawyer, accountant etc., do closely
interact with the buyer of the service.
Remember that lack of accessibility can lead
to lack of accountability.
INVESTOR CHALLENGES
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5. [
INVESTOR
[
To invest in equity/stocks, typical options
available to investors are – Mutual Funds,
ETFs and Hedge Funds etc. Each of these
CHALLENGES options have serious limitations.
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6. INVESTOR CHALLENGES
Most of these investment products available in the
market today do not meet all the key criteria.
1 2 3 4
Alignment of interest Transparency of what Accessibility of Liquidity of the
between the are the securities in portfolio manager to accounts allowing
portfolio manager the investors portfolio, his/her investors the investors to get
and the investors the timing of the their money back in
transactions, and short notice
exact
fees/commissions
charged
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8. MUTUAL FUNDS
A BROKEN AND ANTIQUATED MODEL
OPTION 1
• The vast majority of actively managed mutual funds underperform
the comparable index, charge fees that are too high (~ 1.5% -
2.3%), own too many stocks, and trade too much (average mutual
fund holds a stock for barely an year)
• The majority of fund managers do not own a single share in the
funds that they manage
• Mutual funds force taxes onto their investors, make their fund
managers inaccessible and have fee structure that makes it
difficult for investors to find out the exact total cost/fee that they
are paying
• Mutual funds, emerged during the pre-technology era that
required a significant size to be economically viable. Therefore, it
was not practical for portfolio managers to be directly accessible
to the huge number of investors in their mutual funds.
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9. HEDGE FUNDS
NOT FOR THE AVERAGE INVESTOR
OPTION 2
• Investors are saddled with high fees. A typical hedge fund
charges a performance fee of ~20% of profits on top of the
management fee of around 1%-2% of assets under
management per year.
• Many hedge funds have opaque investment strategies. So, you
may not know what you own, how frequently the fund manager
is trading, and how much risk you are taking in your investment
portfolio.
• Not accessible to average small investor. Only accredited
(wealthy) investors are allowed to invest in hedge funds.
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10. EXCHANGE TRADED FUNDS (ETF)
GOOD, BAD, AND UGLY – ALL MIXED TOGETHER
OPTION 3
• Passive ETFs suffer from the risk of over diversification. These ETFs
track an index. So, you own the lousy businesses in the index
along with the good businesses. In addition, some indices are
very narrowly structured and, therefore, can be risky.
• Active ETFs have the same problems as mutual funds:
inaccessible portfolio manager, lack of significant ownership by
portfolio manager.
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12. What is a
Spoke Fund®
“A spoke fund® is a group of separate investor accounts linked to a portfolio
containing most of the liquid net worth of that fund’s manager”
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13. Key Advantage Over Mutual Funds
MUTUAL FUND SPOKE FUND
Portfolio Manager is usually not an investor in Portfolio Manager invests most of his own
the fund investable assets in the fund
All investors’ money goes into a single pool of All investors’ accounts are separate and
investments mirrors the same core portfolio
Total expenses and fees difficult to find from
No hidden expenses or fees
bulky prospectus and SAI documents
Investor only pay taxes based on the holdings
Taxes are passed on to the investors
in their account(s)
Transactions and holding are not transparent Each investor can view his/her holdings
Pooled fund structure often means portfolio
No pressure to sell low and buy high as each
manager may need to buy when market is
investor account is separate
high and sell when market is low
Actions of large investors can hurt returns of Actions of investors have no impact on other
smaller investors investors
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14. OUR SPOKE® FUND: THE MOSAIC PORTFOLIO
www.thefreeinvestors.com
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15. THE MOSAIC PORTFOLIO
Our flagship Mosaic Portfolio seeks to achieve long-term capital appreciation
by investing in great companies at cheap prices.
We take a long-term,
business-owner
approach to investing.
We buy common stock
of well-managed
companies that boast
strong financial
positions, operate in
industries that we truly
understand, and that
are selling their stock at
low prices.
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16. THE MOSAIC PORTFOLIO
Our investing philosophy is to invest in good business with the plan to own
their stocks for years.
Gopal Gantayat,
portfolio manager of The
Mosaic Portfolio, has nearly
all of his investable assets in
the Mosaic Portfolio.
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18. OUR PORTFOLIO STRATEGY SPRINKLE CUPCAKES
• “Stable Cake Base”: Stable, high quality companies: This layer forms the stable
foundation of The Mosaic Portfolio and consists of relatively stable and high quality
businesses. Over the years, these companies have generated market-beating
cashflows and income for their shareholders. We are betting that for the next few
years that trend of superior performance will continue and, in the long term, their
stock prices will catch up to the businesses’ performance.
• “Delicious Icing”: Disruptors, innovators and thematics: The companies in this layer
make up the bulk of the Mosaic Portfolio. These include innovators, disruptors, and
companies riding an emerging theme. Typically, these companies are growing faster
than most of their competitors by disrupting current industry top players, innovating
and creating new markets, or better executing an emerging theme. We believe this
category of companies has the potential to substantially beat the market in the long
run.
• “Colorful Sprinkles”: Early stage companies, turnarounds and event-driven: Just like
the sprinkles on a cupcake, these companies are the smallest layer in the Mosaic
Portfolio. These include some early stage companies. The market verdict on these
companies may not be clear for at least a few years. Wall Street analysts are likely to
be wary of these companies because of their need to estimate/predict the stock
price for the next quarter and the next year. We, with our eye on beating the market
in years or decades to come, are happy to invest in these early stage, industry-
transforming companies and to wait for the investment thesis to play out in coming
years.
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19. OUR FIRM: THE FREE INVESTORS (TFI)
www.thefreeinvestors.com
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20. The Free Investors (TFI) is an independent registered investment
advisor located in Princeton, New Jersey. Our flagship Spoke
Fund® is named The Mosaic Portfolio, a long-term, total-return-
focused equity portfolio.
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21. OUR MANIFESTO
“We believe that your portfolio manager should be as
accessible and transparent as your close friend/partner and
invest your money for long-term, right alongside his/her own
money. Period. No hidden fees, commissions, penalties, and
year-end window-dressings. No intelligent-sounding, but
opaque, illiquid, and risky investments using your hard
earned money. No excessive trading, portfolio churning, and
high commission investments.”
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22. [TFI Difference [
We are like your neighborhood community small-business. So,
unlike the institutional structures and layers of hierarchy at
ACCESSIBLE other investment management businesses, our Portfolio
Manager is directly accessible to our clients, just like a small
business owner to talk about any questions they have about
their portfolios or investment philosophy etc.
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23. [TFI Difference [
We use a Spoke Fund® model which makes your
portfolio completely transparent. You can log in to your
TRANSPARENT account anytime and see what securities your portfolio
manager has chosen and what fee has been charged
to your account.
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24. [TFI Difference [
We invest for the long-term. With us you can be assured
LONG-TERM that we are not swayed by the investment fads of the
time, stock market momentum, or the loud mouths in the
INVESTMENT financial media.
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25. [TFI Difference [
Our portfolio manager has nearly all of his investable assets in our
NO fund. So, your money will be invested right alongside ours. We
charge a fee based on the amount of assets you have under
CONFLICTS management. This way our interests are aligned with yours. We
only make more money when you make more money by growing
OF INTEREST your assets. We have no reason to churn your portfolio to generate
commissions or to sell you expensive products that pay us more.
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26. [TFI Difference [
We are penny pinchers at heart. Our portfolios
minimize costs. The few trades we do make pay little
LOW COST to no commissions to the custodian. There are no
hidden fees.
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27. [TFI Difference [
We are an independent firm. We have no ties to Wall
Street or any other companies, for that matter. We have
INDEPENDENT no pressure to sell preferred products or prepackaged
solutions. We do not accept commissions, kickbacks,
gifts, or any other payments from any third party.
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29. MORE ABOUT US
• Every month we share our thoughts on investing philosophy, state of the market,
portfolio performance, and much more. Sign up for our free email newsletter at
www.thefreeinvestors.com/newsletter
• Visit out website (www.thefreeinvestors.com/portfolio ) or call/email us to learn more
about the investment process of our flagship Spoke Fund® - “The Mosaic Portfolio”.
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