Khota Paisa

Mutual Funds – Going The Wrong Way

Posted in General by khotapaisa on February 14, 2010

A few days back, I read a news about these new mutual fund enabled ATMs called Super ATMs. It seems that SEBI is going ahead with this concept of super atm which would allow the investor to access mutual funds at the click of a button. What surprised me was the need to commoditize MFs. Why does the investor need to be able to buy/sell fund at the click of a button? First of all mutual funds, unlike stocks, are not tradable entities. Mutual funds are not designed to be bought/sold daily. Secondly, financial products (specially investment products) are complex products. They need to be understood well before being bought/sold. This means that funds, like any investemt product, MUST NOT be bought or sold without advice or knowledge. Infact, the more easy you make it for the investor to buy/sell funds, they more likely they are to churn or tap into the portfolio. Having said that, I am not against use of technology/automation to make life easy. But the question is how easy? A more prudent step would have been to spend the money on investor education. Another significant step would be to make it mandatory for fund houses to regularly release fund paramaters like standard deviation, churn ratio, sharpe ratio etc. This would be a big step towards pushing product information towards the ingestor as against the current pull-based mechanism where the investor has to put effort to get these information. There are so many issues with the mutual fund industry and the last thing it needs is the so-called Super ATMs.

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5 Responses

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  1. Lokesh said, on July 27, 2010 at 3:33 pm

    Hi, I would like to share the below portfolio that i have made. Pls make the necessary additions/deletions in the same. The purpose is purely wealth creation and not tax saving.

    1) SBI magnum sector Contra fund, Growth option – Rs. 3000/month (enrolled in SIP for last 3 months)
    2) Reliance growth fund, Growth option – Rs. 3000/month (enrolled in SIP from last month)
    3) Birla Sunlife frontline enquity – would like to consider for 2000 pm
    4) HDFC Top 200 – would like to consider for 2000 pm
    5) Infrastructure bond of rs. 20,000 pa for tax saving

    Pls advice if this Mutual fund portfolio is good or you would like to delete or add some funds for wealth creation.

    In addition to this i am having 70,000 per annum in PPF and have started NPS of rs. 2000/ month. also have a LIC jeevan anand of 20,000 pa for last 6 years.

    • khotapaisa said, on July 27, 2010 at 9:45 pm

      You don’t need any advice. You are perfectly on track. Keep investing.

  2. Lokesh said, on July 28, 2010 at 4:47 pm

    Thanks.

    For MF’s – whether should i opt for growth option or dividend option ?

    I have taken growth option for SBI and reliance. Should i do the same for HDFC and
    Birla MF’s.

    • khotapaisa said, on July 28, 2010 at 8:15 pm

      Growth option is preferable in most cases. You may opt for growth option for other fund(s) as well.

  3. Lokesh said, on July 30, 2010 at 11:11 am

    Many thanks.


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