Investor education goes 3 dimensional!!
Many a times we miss out on great opportunities due to our sheer ignorance. The lack of awareness is the main reason for our ignorance. Ignorance not only prevails in our day-to-day life but also is widespread when it comes to making investment decisions. This ignorance or lack of knowledge and education towards investments leads investors to fall in the trap of self-centric agents / distributors / relationship managers who in order to fill their own pockets mis-sell products to ignorant investors by painting a rosy picture of the investment product. In fact such products may not be worth investing at all.
Citing this, the capital market regulator – Securities and Exchange Board of India (SEBI) is planning to embark on a national strategy to create investor awareness. The national strategy is proposed to have a three-dimensional strategy going forward comprising of:
- Mass media campaign;
- Co-ordinated approach with various regulators for financial literacy initiatives and
- A national strategy for financial education
Earlier, SEBI had already taken a few steps in this direction. Around 27 investors’ associations exist at present and they are undertaking investor education initiatives, such as educating first-time investors. Sebi has at least 250 resource persons, who are conducting investor education programmes across India through small-scale seminars. Sebi recently also launched a mobile helpline number for investors. The capital market regulator has allocated Rs 50 crore for the purpose of investor awareness, out of which around Rs 10 crore has already been spent.
Impact of such an initiative on investors…
In general the initiative taken by the SEBI will stand to benefit the investors (first-time investors or otherwise) as they will be educated on various investment topics and will be able to make smart investment decisions. This will curb mis-selling to a large extent as a well-educated investor will be in a better position to make smart investment decisions. Also, with more and more awareness amongst the investor community, there is a strong likelihood of retail investor participation increasing in the equity markets as well.
In our opinion such an initiative by SEBI is vital in increasing the awareness which can deepen the markets and decrease the myths which investors develop for a particular investment avenue. It is noteworthy that different investment avenues have their distinct characteristics and as such the ‘one size fits all’ adage is meaningless.
SEBI is right in focusing on financial literacy as this will boost the confidence amongst investors while making their investment decisions and at the same time greater participation by investors will usher in growth for the capital markets as well as mutual fund industry.