LETTERS TO THE EDITOR

When Everyone Wants the Same Destination

Editor,
Horizon has become one of the most popular tour operators in our locality. In less than five years, it has built a thriving business by understanding something important about modern travel: people increasingly want not only to enjoy a holiday, but also to share it. The company offers three- to eight-day group tours to popular Southeast Asian destinations, with attractive discounts and a professional videographer to capture the journey. Holiday reels circulate on social media, turning satisfied travellers into enthusiastic promoters. One group’s sunset becomes another group’s holiday plan. The strategy worked beautifully until too many customers began demanding the same destination at the same time.
A sleepy seaside village might suddenly become famous after a reel attracts millions of views. Soon, tourists descend upon it, searching for the same beach and queuing at sunset for the perfect shot. But the village still has the same narrow roads, limited rooms and modest facilities. Prices rise, infrastructure strains and the tranquillity that made the place special disappears. Horizon faces an uncomfortable choice. It can suggest alternative destinations, but customers who arrive with a particular reel in mind may simply book with a competitor. Refusing business is difficult; accepting everyone risks ruining the experience.
Now imagine Horizon as a mutual fund company and its travellers as investors. A tour operator bundles transport, accommodation and sightseeing into holiday packages. Similarly, a mutual fund company pools investors’ money and offers schemes designed around different investment objectives. Its competitors may offer broadly similar products, just as rival travel companies sell variations of the same itinerary. Think of large-cap companies as major cities. They generally have developed infrastructure and greater capacity to absorb visitors. Small-cap companies resemble picturesque villages: full of promise, but with limited capacity to accommodate a sudden crowd.
When investors rush into small-cap funds after seeing spectacular returns, fund managers must deploy substantial fresh money into a relatively limited market. Unlike large-cap shares, many small-cap stocks trade in smaller volumes. Heavy buying can push prices up, sometimes beyond reasonable valuations. Managers may struggle to find enough attractive opportunities without compromising the discipline that earned investors’ trust. The dilemma resembles Horizon’s. A fund house can moderate or restrict new investments, but competitors may continue accepting money. Commercial pressures do not disappear merely because prudence demands restraint.
This is particularly relevant to first-time investors. An inexperienced traveller may choose a destination because a reel went viral. Similarly, an inexperienced investor may select a scheme because a friend made money, an influencer praised it or its recent returns looked irresistible. Both arrive at the professional’s office with the decision already made. They want execution, not advice. Experienced travellers often do the opposite. They first consider their interests, budget, available time and the experience they hope to gain. Only then do they choose a destination, sometimes with help from a knowledgeable travel adviser. Seasoned investors begin with their financial goals, time horizons, risk tolerance and family responsibilities. They select investments to serve those needs, rather than shaping their needs around fashionable products.
Is there an easy solution to the rush towards whatever is trending? Probably not. Social media can turn an obscure village or investment category into an overnight sensation, but it cannot expand a village’s infrastructure or a market’s liquidity overnight. There is nothing wrong with visiting a popular destination or investing in small-cap funds. The mistake is believing that popularity itself guarantees a rewarding experience. Trends are useful conversation starters around the dinner table. They should never become life’s destinations. After all, we travel to enjoy our own journeys, not recreate somebody else’s photographs. And we invest to meet our own goals, not replicate somebody else’s returns.
Yours etc.,
Dipankar Jakharia,
Via email