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Retail Investors- Investing can be fun as well as rewarding

, December 18, 2015, 0 Comments

retail-investor-investing-fun-rewarding-marketexpress-inFrequently in a social gathering of friends, I am asked what I do for a living and when I reply that I am a fund manager working with a mutual fund, I get responses like: “I have lost money investing in MFs so I withdrew everything”, “I didn’t make any returns”, “mutual funds are so risky, I trust my money only in FDs and LIC policies”. A few “savvy” ones (or those who consider themselves to be so!!) say that they have figured out a better way of making money rather than pay fees to mutual fund managers and that is to invest directly. They claim to have made more money this way!!

When I prod such people further and ask them specific of the schemes they have invested in, I get vague answers. Most do not even know the names of the schemes they have invested in or whether it’s a debt or equity scheme. When I prod a bit more I discover that for most investments have not been in mutual funds at all rather in other types of non MF schemes!!! A few either got in and out too quickly (greed and fear playing out alternately) and those who claim to make more money having invested directly without any professional expertise (by trying to mimic portfolio of equity schemes, watching CNBC, taking tips from broking houses, etc)…well what can I say? There is a saying in Hindi which goes: jungle main mor nacha, kisne dekha!! (the peacock danced in the jungle, well who saw)

These people who I am talking about are people who live in a city like Mumbai: urbanized, highly educated well-to-do people. If these people are so ignorant of mutual funds and type of schemes offered by mutual funds and the difference from other similar sounding financial schemes, if they are clueless about their own investments, one can only imagine the plight of other savers. Given the lack of information and lack of disclosure of fees, commissions, returns in other non-mutual fund financial schemes it becomes even more a matter of concern. Therefore, retail investors should go back to the basics which according to me are the following:

Channel one’s savings purely into MF schemes. There are 40 odd mutual funds offering a variety of schemes which can meet the requirements of investors based on their risk appetite and investment horizon. In case you are a new investor, you need to be KYC Compliant.

Insurance schemes should be invested in purely for insurance purposes like health insurance or life insurance.

Asset allocation: Within one’s basket of MF investments plan asset allocation between debt and equity depending on one’s risk appetite and investment horizon.

Choose your distributor wisely: You also need to decide on whether you wish to make direct investments (which could entail more time and resources at your end) or whether you wish to route all your investments through a distributor. Make sure to check the credentials of the distributor/advisor (an established one with a long track record is preferable) before you route your investments through them. Multiple distributors for multiple saving options will only complicate matters.

Post tax returns: When deciding investment horizon and comparing returns from different schemes and options (including bank FDs, tax free bonds, PPF, etc), also check your post tax returns and try to minimize the tax liability as much as possible. Most investments, including MF schemes have favorable tax rates (nil or close to nil) for longer tenures. For short term investment purposes check out funds with least adverse taxation.

Actively monitor and track your investments and keep records in ONE place: Once you decide to invest and have done it, don’t just forget about it. Investments need to be monitored on a regular basis, no matter how boring you find the whole exercise. Try to simplify the process as much as possible with the least amount of physical paperwork. One way might be to make an excel sheet with all your investments be it MFs, PPF, tax free bonds, FDs,etc in one place with key details in separate columns like Folio no, date of investment, allotted units, user name/password for online access, nomination details, website links, contact nos and record of subsequent transactions).

As for me, I use the portfolio tool given by which I find simple and user friendly and free as of now! I can daily track the NAVs and market values of my various investments (the bulk of which are in MFs). Value research online also gives option to update Bank FDs and your direct equity investments within the same portfolio tool. Another option would be to check with your distributor or advisor if they have a software or system whereby you can monitor all your investments or they can send you a consolidated portfolio sheet at regular intervals.

There may be times when a non performing scheme or investment needs to be disposed of and the money redeployed into a better performing scheme. Hence monitoring your investments regularly is a must.

The ease and convenience of transacting in MFs, the disclosures given by the mutual funds and the low fees make them a far superior investment vehicle as compared to other investment options once you have figured out how you want to go about it.

Ultimately, you may learn that Investing can be a fun and rewarding experience and not a boring tedious exercise as most fear!!



The views expressed and information herein are independent views of the Fund Manager(s) and for informative purpose only and under no circumstances should be construed as an opinion or Investment advice. The information contained herein is not intended to be an offer to seek solicitation for purchase or sale of any financial product or instrument. Investment involves risk. Investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Sponsor, Trustee, AMC, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully