MUTUAL FUNDS

The concept of mutual funds is very simple but is it suitable and the best option for making investments ? The purpose is to grow your savings at a reasonable rate which is above inflation and helps to grow the savings from hard earned income thus serving your best interests. Risk is also to be minimized and the mutual funds  are not useful and beneficial for this purpose.At best it is case of something is better than nothing .

There is an excellent opportunity for large number of educated intelligent investors to get out of the mutual funds and begin their journey to wealth building by making direct investments in equity. Many of these mutual fund investors are capable of making direct investments in equity with a little efforts, education and help.  I would recommend even learning at own cost by making a  beginning taking calculated risk, if you insist on learning after making your own mistakes. Take the plunge with small amount after covering your base . Better will be to take help from independent professionals but avoid brokers, sales people, banks and their advisers who have vested interests.

Here are my reasons: 

1. Firstly mutual funds in India have a legacy of UTI which was a government sponsored fraud and cheated the investors by selling unit 64 units at high prices , suffering losses for investors who also lost faith in equity as an asset class. Chairman Pherwani’s death or government creating a body and paying a small amount to investors and making high profits for itself in the long term  and losses for the investors has not helped. Cross holding and interventions by banks, LIC, financial institutions and PSUs leaves a lot to be desired by way of transparency. Most of the interventions are for political reasons too. Can RBI or SEBI help? I wonder, it will take a while even if it happens.

2. Given the large number of mutual funds and inadequate rating system for measuring quality and performance; marketing agents, promoters of these mutual funds and brokers make the most of it at the cost of investors.

3. Little is known about the fund managers or their competence, credibility, integrity or skill in making investments. Very average performance of mutual funds in general speaks for itself. Most earn for you just a little better than index with no real risk for the promoters.

4.  Most of these mutual funds are run by large business houses,banks  and brokerage firms who trade in shares of their own enterprises and hardly bother for the small investors as such, concern if at all is secondary and basically focused towards retaining customers.

5.How is SEBI to regulate if the fund manager chooses to pass on information of his intended future purchase or sales to a selected few who make use of it for themselves and of course compensate the fund managers in some manner? Possibility cannot be ruled out.Funds can also be used to influence the markets for serving vested interests of the promoters.

6. Last but not the least educated people who take trouble and work hard to earn , are less interested in looking after their savings and investments and growing it by making direct investments in equity. They think equity investments is very complex or risky and choose to hand over control and responsibility to these funds. Money in right hands will help build the nation so why be shy of being rich or wealthy when the means are legal and ethical?

 I am surprised that mutual fund investors don’t see through the reasons why a share of a promoter of mutual fund of Rs.10/- quotes at near 2000 while none of its mutual funds give comparable returns or dividends to its investors.

Why people don’t see why only industrialists who borrow from banks, banks mainly the private sector ones, share brokers, agents and promoters of equity funds keep getting richer while the savings of common people grow only at sub optimal rate.

Do not join the crowd and majority , they are often wrong take my help by enrolling on www.moneymonk.me