According to a survey of around 2,600 people in India by Nielsen, only nine per cent were found to have invested in mutual funds. I explored this topic in detail in my article Why Mutual Funds in India are not popular. I then thought let’s find out what other people who are in this field think about it. And I contacted some of whom I have interacted over on twitter or over mails and most of them agreed. We are thankful to them for taking out time from their busy schedule and penning their thoughts for. So read to find out why Monika Halan(editor of MintMoney of Livemint), Manoj Nagpal (Financial Services Professional), InvestMutual (Offer financial advisory services), FundsIndia (platform for investing in Mutual Funds in India) , M. Pattabiraman aka pattu (a professor at IIT-Madras who runs freefincal.com), Paresh from Saving-Ideas.com, BikramJit Singh (a Government doctor and from tradethetechnicals.com)
Table of Contents
Monika Halan
Monika Halan (@monikahalan) Edits Mint Money, the money&markets pages of Mint. Work on financial literacy and retail facing regulationMutual funds are very popular with the people who understand them. If you don’t educate the people on the benefit of a vaccination, who will line up to get a jab? It is not the job of the government to do this. Those running the business need to do the work to get people to correctly understand what mutual funds are and what works for each person. Having said that, the dice in India is loaded against the mutual fund industry since there are competing products offered by entities who function under very different regulatory regimes. Add to this the fact that investment rules mandate a purchase of government bonds by these competing products and the sort of tax breaks and looser regulatory environment seen in the life insurance and banking sectors is explained. But if funds are able to gather over Rs 22 trillion of equity funds, it proves that they can do business in very tough circumstances. Once the regulatory arbitrage is over, as it will be, we can expect funds to actually reach the people who need the product.
Manoj Nagpal
Manoj Nagpal (@NagpalManoj) is Financial Services Professional. He is chief executive officer, Outlook Asia Capital, a consulting and wealth management firm.
Last year has been a year of introspection in the Indian MF industry. There are two reasons for this introspection. One the MF industry has always been seen as an industry of great potential given the long term performance track record, strong regulation, transparency and an ever burgeoning Indian middle class with a high savings rate. Secondly and most importantly, after a long time the MF industry saw a friendly regulator in SEBI who was willing to go the extra mile in removing the obstacles in the growth of the industry. The regulator prodded the industry into this self introspection almost forcing the industry to put their thinking caps on and come with the key challenges that the industry faces and the changes that the industry needs so as to become a preferred long term investment vehicle rather than its current form of being a short term investment vehicle that provides investment solutions primarily to institutions and HNIs based on tax arbitrage. It was high time that the MF industry finally realizes it potential, the regulator said.
This was an opportunity that the MF industry could not let go by and got to work on it seriously. The MF industry head honchos got into a room and brainstormed for hours on why Mutual Funds are not popular in India and came up with the below 5 point list:
(i) Government: Absence of level playing field/parity in terms of tax benefits, Direct Tax Code – Equitable Tax Treatment to Mutual Funds, Restrictive Investment Guidelines of major institutional investors, financial inclusion
(ii) Regulator: Reviewing structural issues like entry norms, obligations, protection of investors’ interest, etc.
(iii) Industry: Lack of appropriate products for attracting long term savings
(iv) Investor: Lack of awareness of the need to save for long term and tendency to procrastinate, insufficient incentives to save privately for the long term, limited stamina for long term savings, lack of education making them prone to mis-selling
(v) Distribution: Developing alternative distribution channels, distributors’ regulation, etc. SEBI has taken up this seriously and in a series of steps implemented regulations and proposals to solve the issues highlighted in this list by the mutual fund industry.
Now comes the key question – Will this change the investor investing preferences and make mutual fund the preferred vehicle. Is this the list that will be the panacea for the mutual fund industry.
The first time I had read this list what struck me was the effacing inconspicuous focus on the industry and the patronizing nature. To start with the assumption that the investor does not know what is good for him in the long term, clearly itself points to the fact that either this will be a long term process of changing investor habits and consequently the impact of the changes will be marginal or at best incremental in the short term. And the industry will need to invest in each of these steps with a five to ten year focus to see these steps translate into changes in investment habits of individuals.
There is another ludicrous thinking process that the basic assumption, of the investor not knowing what is good for him, being wrong. This camp thinks that the investor knows both his short and long term goals but he doesn’t find the mutual fund industry giving him solutions that have that certainty that will help him achieve his goals. I unfortunately fall into this second camp.
FundsIndia
FundsIndia.com is India’s first online platform created in 2008 specifically for mutual fund investing.
The answer to the question of why mutual funds are not popular in India is often framed in the context of cultural attitudes – that Indians are risk averse, they don’t like non-guaranteed products, their love for gold, etc. I think the answer is simpler than that and less insurmountable. The reason I think this is because I believe that risk tolerance is a secular, non-culture-sensitive, fundamental personality trait. That is, if you take different sets of random samplings of people, you’ll find that the capacity and willingness to take risk (with investments) adhere to a normal (bell-curve) distribution. A few people willing to take extreme amounts of risk (gambling, for example), a few people willing to take no risk at all (savings account, deposits), and the majority in the middle willing to accept risk if there is a reasonable assurance of commensurate returns.
So, if I believe that to be the case, then how can I explain the lack of popularity of a risk-adjusted return vehicle like mutual funds in India? The answer to me is simple – it is simply a lack of awareness of mutual funds as a class of investment.
Over the past six years, I’ve spoken to hundreds, if not thousands, of investors across demographics (region, age, income, etc.). Every time I interact with a new set of people – be it at social gatherings or at corporate meetings or IT seminars – it is becoming increasingly clear to me. A vast segment of people who are prime candidates for investing in mutual funds are simply not aware of its existence and/or its role in their money management.
In high-school physics, when we learn Newtonian laws of motion, we are told to assume an imaginary world where friction does not exist. If, similarly, we can assume an imaginary India where everybody knows about mutual funds (or let’s just say mutual funds are as known to people as bank FDs), then the risk bell- curve will take over, and the bulging middle of people who want risk-adjusted returns will choose different classes of mutual funds naturally.
In the current situation, there is also a small segment of people who have been, at various times in the past, mis-sold NFOs and other inappropriate products by unscrupulous agents. This set of people, unfortunately, is misinformed about mutual funds, and are probably lost forever as customers of mutual funds. But thankfully, given that the overall investor base is currently a small percentage of the addressable audience (if you take the current FD investors in the country as the addressable audience for mutual funds, we are talking about 7 crore people, while retail investors in mutual funds are less than a crore), this ‘lost’ segment is not impactful to overall growth prospects for the industry.
So, we’re in a bad news/good news scenario – the bad news is that the industry is trying to sell a product that its target audience does not even know exists, and creating awareness is a hard problem to solve (especially with tightening margins). The good news, of course, is that there is a lot of room for growth, and this growth will happen almost automatically if people come to know about the benefits of this product. Yes, there is a problem, but at least it is not as insurmountable as reforming the cultural biases of an ancient people.
InvestMutual
invest-mutual.blogspot.in (@investmutual) Offer financial advisory services. Financial Planning / Investor awareness workshops and training modules for corporates. They are based Chennai
- Lack of awareness on how they really work
- No education but awareness. And MF AMCs don’t make effort to really inform
- I see efforts only to sell when the going is good
- Though I see MFs actually becoming popular among informed investors
- In my workshops on financial literacy the attendees eyes open up when I explain what funds r really meant for
- So I would not say that they are not popular. I would put it as ” awareness” is less on how they work
- If they are unpopular at all I feel that is due sub optimal return coxes by mis selling and earlier NFO s
M. Pattabiraman aka pattu of freefincal.com
M. Pattabiraman is a physicist working at IIT, Madras and runs blog freefincal.com. He has a strong interest in personal finance calculations and provides excel based calculators he has created for financial planning
Mutual Funds in India are not popular because:
- Investors do not understand the difference between risk and volatility.
- Distributors are not competent enough to educate them and AMCs don’t car about investor education.
Paresh from Saving-Ideas.com
Paresh runs a blog saving-ideas.com and he regulaly comments on our article. His comment on our article was
Mutual funds can not be popular in a country where people are mad about real estate and Gold.As well people are comfortable with products like FDs at 9-10%….more than 70% AUM in debt and liquid funds and its mostly in form of FMPs …situation is really full of worry especially after recent taxation changes in debt funds.
Bikramjit Singh from tradethetechnicals.com
Bikramjit Singh runs blog tradethetechnicals.com. He is a M.B.B.S. graduate working as Medical Officer with Government of Punjab. His comment on our article
There is too much of Financial Illiteracy in India due to low education level and socio economic setup.If we talk about Mutual Fund to anybody,they listen carefully and are enthusiast by the returns but the moment you talk about Stock Market,they are not just interested.They know only of risk in the markets and not the return potential.
Being more conservative and less risk averse are the reasons for low popularity of the mutual funds.
Bemoneyaware
While we agree with what has been said. As an investor investing in Mutual Funds we have to answer so many questions, while choosing , while being invested if you see performance/ratings of fund fluctuating. Remember the advertisement of person getting frustrated on buying coffee?
- Too many choices With over 850 schemes , finding scheme to invest is an onerous task. mutual fund investors are spoilt for choice there are large cap, small cap, equity, debt, gold, ETF, sector based funds such as pharma, bank, retail or energy to commodities to foreign indexes.
- Should I invest in lump sum or invest regularly through Systematic Investment Plan or Systematic Transfer Plan .
- Should I invest through a broker, a broking platform or directly.
- Should I trust the ratings of the Mutual Funds. Often a 5 star fund became a 4 star (experts said don’t worry hold on it’s a temporary blip) then a 3 star. Same with performance
- Volatility :The term roller coaster ride has very often been used for schemes of equity mutual funds, but this has of late become a reality for debt funds as well.
- Over period of time trying different strategies I wanted a fund which is of good pedigree, has given handsome returns, is consistent, Just like Draupadi who asked Shiva for a husband who was noble and strong and skilled with the bow and handsome and wise. One ends up having many funds in the portfolio.
- Government/SEBI changing regulations entry load,exit load, change on tax strategy on debt fund.
Somehow My parents KISS(Keep it simple stupid) strategy in Fixed Deposit seemed so easy ,kam se kam returns to assured tha and easy to decide. Or as my friend,Kartik, comparing investing in mutual fund to choosing between Salman Khan’s Kick and Akshay Kumar’s Its Entertainment “Salman ki movie hai I know what I will get. Unlike Akshay Kumar whose movie can range from Welcome to Special 26 you don’t know what to expect”
Related Articles:
- Why Mutual Funds in India are not popular
- Growth and Dividend Option in Mutual Funds
- Investing in Equities: Stocks vs Mutual Funds
- Investing in Mutual Funds for Beginner
- Registrar and Transfer Agent : CAMS, Karvy
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So what do you think is the reason why Mutual Funds is not something that Indians considers investing in? Do you invest in Mutual Funds? Which is your preferred mode of investment and why?
People who lost money, nerver come back to mutual funds.
People who think shares are risky can never see at mutual funds
People who does not understand inflation eating their returns, can not even look into MF’s
….
However, why they loose money? when handful of others are making.
They are novice in understanding markets, they don’t know the meaning of Core and Satellite strategies, they never try to read the scheme documents and investing areas.
They never understand overlapping of shares in their portfolio of 10’s of Funds.
They don’t know why they are opting a Mid-Small Cap fund or a Sector Fund – It gave wonderful returns to their cousins or their friends.
Only way to make money in MF’s is follow simple rules…. very very simple rules.
1. Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
2. Check the Fund Managers track record and the selection of funds he makes.
3. Check for the churning of funds by Fund Manager – How often he do it
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
5. Never let euphoria overtake you by investing or pumping money when markets are at all time high or upward
6. try doing the opposite, buy in a staggared manner when ever NIFTY/SENSEX corrects by 2-3 %
7. Never buy Funds for sake of namesake diversification – Check the underlying Stocks and buy only if there is less than 10% overlap.
8. Follow Core Satellite approach
9. Write this in BOLD Letters by your bed side, never buy Mutual Funds for Quick returns – It takes years for the companies to perform and show profits, and for your money which is invested in those companies, it takes time to grow. Give ample time for your investments to show growth.
10. Follow SIP’s to negate market predictions and volatility
11. Last and the most important – Review your investments atleast every year (NOT TO CHANGE THEM, but to decide where they are heading) to see and decide on your money.
Disclosure – Fund Managers are humans and they can make mistakes…. so you have to live with a little risk when you expect infaltion beating returns.
I hope someone will benefit from this.
-Sunil.
Sunil wow you have put really great comments. I am bowled over. I read it so many times.
(Just a doubt are you from a Mutual Fund company :-)?)
Some of your statements are so true..
Write this in BOLD Letters by your bed side, never buy Mutual Funds for Quick returns
Never let euphoria overtake you by investing or pumping money when markets are at all time high or upward
You have suggested some great tips.
1.Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
2. Check the Fund Managers track record and the selection of funds he makes.
3. Check for the churning of funds by Fund Manager – How often he do it
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
But the catch is how to do all this?
Reason for investing in Mutual Funds was to avoid all the hard work. Why can’t mutual fund strategy be
“Buy it, Keep it”..
Kirti, Thanks for the appreciation. I have to admit that i am no one from a Mutual Fund company nor am i a background of finance.
It’s sheer interest that made me learn about Mutual Funds.
I have learned all the pros and cons of MF industry through sites like Jagoinvestor, bemoneyaware, subramoney and the holy grail, Morningstar.in.
I somehow disagree with the statement “Reason for investing in Mutual Funds was to avoid all the hard work” – NO it is not about getting a free lunch, it’s about avoiding the hardwork of,
Reading balancesheet’s of companies,
Reading Annual stmnts and understanding them,
Meeting the management and finding vision – This no retail investor (in stocks) can do
Finding multibaggers
The list is never ending…..
Since a normal person cannot do all these, he rely on the expertise of the Fund Manager and hence will invest his money in those companies.
Now, coming to your question of how do we do it?
1.Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
A normal person can easily get this data from morningstar.in or value research websites, they can compare the returns anually with the peers and can decide.
This can be easy because, he will obviously not decide on investing in all the Funds available. So, he can first find top funds (which are consistently mainataining their position) from say large cap (Eg:Franklin India Blue Chip) and then dig inside it.
2. Check the Fund Managers track record and the selection of funds he makes.
Which companies the fund manager is investing, this is a little tricky and can be bypassed by novice investor. But for someone who are aware of stock markets they can find some interesting picks in the portfolio.
eg : Yes bank, which is one of the top growing Pvt sector banks, if a investor sees this newly included in the portfolio he can be assured of the manager investing or going in right direction.
Same way if he sees Kingfisher being added to the portfolio, he can think of it.
Mutual Funds should always match your style of investing and match your risk taking capabilities.
3. Check for the churning of funds by Fund Manager – How often he do it
Again can be easily obtained from websites, this information can be compared with peers and a conclusion can be drawn whether the fund manager is investing/speculating.
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
I would say without a person understanding the meaning of them, they should not venture into Mutual Fund. How can you go into a sea without knowing swimming. It is not the 4 feet deep pool in your backyard.
And finally, since it is your money, you have to understand where you are investing and why.
So READ, READ and READ about Mutual Funds…..
It might seem very complicated at the beginning, but once you venture, you will love it.
““Buy it, Keep it”..” – Exactly Mutual Funds are and will be such simple like Buy it, Keep it when you understand all the points….
This will take time but at the end you will rewarded, and rewarded well.
People who lost money, nerver come back to mutual funds.
People who think shares are risky can never see at mutual funds
People who does not understand inflation eating their returns, can not even look into MF’s
….
However, why they loose money? when handful of others are making.
They are novice in understanding markets, they don’t know the meaning of Core and Satellite strategies, they never try to read the scheme documents and investing areas.
They never understand overlapping of shares in their portfolio of 10’s of Funds.
They don’t know why they are opting a Mid-Small Cap fund or a Sector Fund – It gave wonderful returns to their cousins or their friends.
Only way to make money in MF’s is follow simple rules…. very very simple rules.
1. Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
2. Check the Fund Managers track record and the selection of funds he makes.
3. Check for the churning of funds by Fund Manager – How often he do it
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
5. Never let euphoria overtake you by investing or pumping money when markets are at all time high or upward
6. try doing the opposite, buy in a staggared manner when ever NIFTY/SENSEX corrects by 2-3 %
7. Never buy Funds for sake of namesake diversification – Check the underlying Stocks and buy only if there is less than 10% overlap.
8. Follow Core Satellite approach
9. Write this in BOLD Letters by your bed side, never buy Mutual Funds for Quick returns – It takes years for the companies to perform and show profits, and for your money which is invested in those companies, it takes time to grow. Give ample time for your investments to show growth.
10. Follow SIP’s to negate market predictions and volatility
11. Last and the most important – Review your investments atleast every year (NOT TO CHANGE THEM, but to decide where they are heading) to see and decide on your money.
Disclosure – Fund Managers are humans and they can make mistakes…. so you have to live with a little risk when you expect infaltion beating returns.
I hope someone will benefit from this.
-Sunil.
Sunil wow you have put really great comments. I am bowled over. I read it so many times.
(Just a doubt are you from a Mutual Fund company :-)?)
Some of your statements are so true..
Write this in BOLD Letters by your bed side, never buy Mutual Funds for Quick returns
Never let euphoria overtake you by investing or pumping money when markets are at all time high or upward
You have suggested some great tips.
1.Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
2. Check the Fund Managers track record and the selection of funds he makes.
3. Check for the churning of funds by Fund Manager – How often he do it
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
But the catch is how to do all this?
Reason for investing in Mutual Funds was to avoid all the hard work. Why can’t mutual fund strategy be
“Buy it, Keep it”..
Kirti, Thanks for the appreciation. I have to admit that i am no one from a Mutual Fund company nor am i a background of finance.
It’s sheer interest that made me learn about Mutual Funds.
I have learned all the pros and cons of MF industry through sites like Jagoinvestor, bemoneyaware, subramoney and the holy grail, Morningstar.in.
I somehow disagree with the statement “Reason for investing in Mutual Funds was to avoid all the hard work” – NO it is not about getting a free lunch, it’s about avoiding the hardwork of,
Reading balancesheet’s of companies,
Reading Annual stmnts and understanding them,
Meeting the management and finding vision – This no retail investor (in stocks) can do
Finding multibaggers
The list is never ending…..
Since a normal person cannot do all these, he rely on the expertise of the Fund Manager and hence will invest his money in those companies.
Now, coming to your question of how do we do it?
1.Check out the AMC’s track record in various Market cycles atleast 1 high and 1 low to be included
A normal person can easily get this data from morningstar.in or value research websites, they can compare the returns anually with the peers and can decide.
This can be easy because, he will obviously not decide on investing in all the Funds available. So, he can first find top funds (which are consistently mainataining their position) from say large cap (Eg:Franklin India Blue Chip) and then dig inside it.
2. Check the Fund Managers track record and the selection of funds he makes.
Which companies the fund manager is investing, this is a little tricky and can be bypassed by novice investor. But for someone who are aware of stock markets they can find some interesting picks in the portfolio.
eg : Yes bank, which is one of the top growing Pvt sector banks, if a investor sees this newly included in the portfolio he can be assured of the manager investing or going in right direction.
Same way if he sees Kingfisher being added to the portfolio, he can think of it.
Mutual Funds should always match your style of investing and match your risk taking capabilities.
3. Check for the churning of funds by Fund Manager – How often he do it
Again can be easily obtained from websites, this information can be compared with peers and a conclusion can be drawn whether the fund manager is investing/speculating.
4. Understand the meaning of Large Cap, Mid cap, sector funds etc… and why they should be used and by whom?
I would say without a person understanding the meaning of them, they should not venture into Mutual Fund. How can you go into a sea without knowing swimming. It is not the 4 feet deep pool in your backyard.
And finally, since it is your money, you have to understand where you are investing and why.
So READ, READ and READ about Mutual Funds…..
It might seem very complicated at the beginning, but once you venture, you will love it.
““Buy it, Keep it”..” – Exactly Mutual Funds are and will be such simple like Buy it, Keep it when you understand all the points….
This will take time but at the end you will rewarded, and rewarded well.
Why Indians don’t invest in Mutual Funds? – Because there are less people selling mutual funds now.
Why less people are selling mutual funds now? – This is a problem which no one wants to address.
When writing about mutual funds in the media & conducting investor awareness programmes becomes more profitable than selling mutual funds, than how many will sell mutual funds???
Good point Nilesh..why are less people selling mutual funds?
Why Indians don’t invest in Mutual Funds? – Because there are less people selling mutual funds now.
Why less people are selling mutual funds now? – This is a problem which no one wants to address.
When writing about mutual funds in the media & conducting investor awareness programmes becomes more profitable than selling mutual funds, than how many will sell mutual funds???
Good point Nilesh..why are less people selling mutual funds?
Good article,
But the problem is with all of us who know Abcde of MF and do not want to explain to others, even to our neighbours or relatives.
No one will try discuss about positives of MF with these two gentlemen(who commented on this article) to make them Happy Investors.
Mudit we hardly discuss our investments with our neighbours and friends. Money is such a taboo topic..
Good article,
But the problem is with all of us who know Abcde of MF and do not want to explain to others, even to our neighbours or relatives.
No one will try discuss about positives of MF with these two gentlemen(who commented on this article) to make them Happy Investors.
Mudit we hardly discuss our investments with our neighbours and friends. Money is such a taboo topic..
I think the primary reasons why Indians don’t invest in mutual funds are :
1) The Principal amount i.e. the investment that we make is NOT guaranteed even in case of debt funds which are the safest .
2), There is NO insurance of the mutual fund investment unlike FDs in which the investments are insured upto 1 lakh rupees.
3) There is NO guarantee that the past performance of a mutual fund scheme will sustain in future. So, if someone is investing in MF for child’s education ,for say 10 years , then there is no guarantee of what amount will he receive at the end of ten years. So your expense (child’s education cost ) is fixed , it is going to occur but you are not sure whether you will be able to meet that expense.
4) There is NO loan available against MF investment. ( in FDs you get 90% of amount as loan).Even the AMCs that predict the MF scheme to perform better are not willing to give loan against the investment.
5) I think the Fund Managers should compulsorily disclose how much investment they make in Mutual Funds on a monthly basis. What schemes they go for, how much SIP they have …..
I would therefore suggest the small investors to invest in FDs and Recuuring Deposits that provide assured returns and both are available for longer tenures ( max. Ten years).
Well said Gaurav.
But isn’t the risk worth the guarantee/insurance/loan?
How does Fund Managers disclosing their investment they make in Mutual Funds on a monthly basis help you and me?
Hello Kirti,
I think if the fund managers disclose the investment they make in Mutual Funds then it will make them more accountable and responsible for the investment decisions they make on behalf of the investors.
I came across one AMC that practices this strategy. The link is as follows :
http://www.amc.ppfas.com/schemes/disclosure-of-insider-holdings/index.php#collapseCode
Further to your next question, I agree that since MFs have a higher risk , they might provide higher returns..but I think that for small investors the return of capital should be more important than the return on capital…so I suggest that the small investors (esp. In 10 % tax brackets should invest more in FD, RD and PPF).
I kind of agree and disagree.
Okay so manager buying his mutual fund shows he has confidence. But on the other hand he has been hired to do a job of mutual fund investments.
It’s like asking manager of a company buying shares of his company because he works there.
But isn’t it putting too many eggs in the same basket? He gets pay from the job and he invests in the same job.
MFs have a higher Risk..than Fixed Deposits but then they say the returns will be worth the risk.
MFs have a lower Risk than…stocks..so you may not get extreme returns.
One has to learn how much risk can one take?
And for what amount? -10% 20%?
There are so many accidents on roads but people don’t stop driving. People learn to manage risks – buy helmets, drive slow.
No one likes to lose money and we are not talking about gambling but calculated risk?
I think the primary reasons why Indians don’t invest in mutual funds are :
1) The Principal amount i.e. the investment that we make is NOT guaranteed even in case of debt funds which are the safest .
2), There is NO insurance of the mutual fund investment unlike FDs in which the investments are insured upto 1 lakh rupees.
3) There is NO guarantee that the past performance of a mutual fund scheme will sustain in future. So, if someone is investing in MF for child’s education ,for say 10 years , then there is no guarantee of what amount will he receive at the end of ten years. So your expense (child’s education cost ) is fixed , it is going to occur but you are not sure whether you will be able to meet that expense.
4) There is NO loan available against MF investment. ( in FDs you get 90% of amount as loan).Even the AMCs that predict the MF scheme to perform better are not willing to give loan against the investment.
5) I think the Fund Managers should compulsorily disclose how much investment they make in Mutual Funds on a monthly basis. What schemes they go for, how much SIP they have …..
I would therefore suggest the small investors to invest in FDs and Recuuring Deposits that provide assured returns and both are available for longer tenures ( max. Ten years).
Well said Gaurav.
But isn’t the risk worth the guarantee/insurance/loan?
How does Fund Managers disclosing their investment they make in Mutual Funds on a monthly basis help you and me?
Hello Kirti,
I think if the fund managers disclose the investment they make in Mutual Funds then it will make them more accountable and responsible for the investment decisions they make on behalf of the investors.
I came across one AMC that practices this strategy. The link is as follows :
http://www.amc.ppfas.com/schemes/disclosure-of-insider-holdings/index.php#collapseCode
Further to your next question, I agree that since MFs have a higher risk , they might provide higher returns..but I think that for small investors the return of capital should be more important than the return on capital…so I suggest that the small investors (esp. In 10 % tax brackets should invest more in FD, RD and PPF).
I kind of agree and disagree.
Okay so manager buying his mutual fund shows he has confidence. But on the other hand he has been hired to do a job of mutual fund investments.
It’s like asking manager of a company buying shares of his company because he works there.
But isn’t it putting too many eggs in the same basket? He gets pay from the job and he invests in the same job.
MFs have a higher Risk..than Fixed Deposits but then they say the returns will be worth the risk.
MFs have a lower Risk than…stocks..so you may not get extreme returns.
One has to learn how much risk can one take?
And for what amount? -10% 20%?
There are so many accidents on roads but people don’t stop driving. People learn to manage risks – buy helmets, drive slow.
No one likes to lose money and we are not talking about gambling but calculated risk?
I’m a big loser when it comes to MFs. They gave me returns much less than what any bank would have given on savings.
Mathekial was it because of the time-frame in which you invested? Did you try to dig up and find why your investment in Mutual Fund did not earn more returns for you
I’m a big loser when it comes to MFs. They gave me returns much less than what any bank would have given on savings.
Mathekial was it because of the time-frame in which you invested? Did you try to dig up and find why your investment in Mutual Fund did not earn more returns for you