By Tensing Rodrigues*
If you have been watching TV lately, you must be quite familiar with the Mutual Fund Sahi Hai’ advertisements. It is a campaign run by AMFI, the association of MFs in India as a part of the investor awareness outreach program. So far so good. But I am disturbed by the adverse publicity being created by some probably with vested interest against this campaign. They find nothing wrong with the campaign or its content. They are not claiming that there are falsehoods in the advertisements. Their only complaint is that the campaign makes MFs too simple – oversimplified – for the common investor. And therefore, the gullible investor may act on her own and lose money.
Worse still SEBI has taken a cue from these complaints and advised AMFI to go slow with the campaign. Thank God not too many intelligent and well meaning people read what I write here. Or else they would have targeted me long, long ago. Because that is exactly what I have been doing for the last so many years – simplifying the MFs.
It pains me to see this happen. These are the very same people who killed the ULIPs, one of the best things to happen in the insurance area. I cannot accept that they are ignorant though that is also possible. Probably they feel threatened by any development that encroaches into their traditional hegemony. ULIPs and MFs have brought insurance and investment to the aam aadmi, the domains that have been the prerogative of the high and mighty for long. The bureaucrats and politicians have traditionally ruled the matters that should have belonged to the economics and business. They have fixed the interest rates on your provident fund and pension, and doled them out to win votes and curry favours somewhat like the religious elite who kept Sanskrit and Latin beyond the comprehension of the masses.
At the other end of the elite spectrum the punters on the Dalal Street have ruled the equity domain. With ULIPs and MFs the man on the street has trespassed into their holy precincts. And it is not a surprise that SEBI should empathise with them. It is for that reason that I thought that I would once again assert that making the MFs simple can only do good and assure you that MFs are indeed sahi for the aam aadmi. Yes, you will make mistakes as you learn to use them. You did scrape the car against the garage wall when you began driving. But that did not prove that the cars are only for the rich. You persisted, and you won. So shall you with the MFs.
Only be cautious. Do not over do. As they would say in Konkani: See the mat, and stretch your legs. Do not be greedy. Also do not be panicky. Plan over a longer horizon; MFs are suitable for long term investment, say five to 10 years. While investing in equity mutual funds think you are getting into business. You are not going to close your shop in few days or months. You will wait to be established in the market. So is with the MFs. For shorter horizons the banks are the best – SB and FDs.
Let me look at some simple truths that the campaign has sought to pass on to the common public. With MFs you are passing on the responsibility of taking day to day investment management decisions to someone who is better placed to take them and has the time for it. So you need not learn the theory and practice the tricks. Make a good choice. Go to a good advisor. You may ask me, if I am going to an advisor why do I need to understand MFs? You need to know the basics so that you can differentiate between a good advisor and a not so good advisor, so that you can understand what she tells you and so that you have the confidence to trust her or the prudence to reject her advice. Once you have done that you can rest with peace of mind. In coming weeks let us delve further into the question: Mutual fund sahi hai kya?
*The author is an investment consultant. Readers can send their comments and queries to firstname.lastname@example.org