Here’s How SEBI Plans To Make Mutual Funds Cost Efficient…    Aug 17, 2018

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‘Go green’ is the mantra of corporates these days!

Responsible corporate houses encourage their stakeholders to curb pollution and reduce carbon footprint. For example, companies resort to digital communication as a medium wherever possible, discouraging the print medium.

While all this might yield some environmental benefits, there’s one more equally important reason for companies to push green initiatives.

Cost savings are immense for big companies communicating frequently with stakeholders.

Normally, many business houses retain such savings.

But, the Securities and Exchange Board of India (SEBI) wants mutual funds to set an example for other industries.

Moreover, it’s also going to evaluate the possibility of bringing down the existing expense ratios of mutual funds, thereby reducing the burden of investors.

But SEBI doesn’t want to stop there.

It wants to leverage digital technologies to increase mutual fund penetration in India.

SEBI will encourage green initiatives in investor education programmes.

SEBI’s Annual Report 2017-18 makes its intentions crystal clear:

In an effort to make mutual funds industry more attractive for stakeholders, steps will be taken to bring cost effectiveness in the mutual fund industry by promoting go green initiatives through online transactions and examining the existing expense ratio applicable for various mutual fund schemes. Besides, measures will be taken to bring uniformity in various practices of the mutual fund industry in the areas of governance, risk management, due diligence process, channels of distributions, etc. SEBI will also explore the possibilities of increasing penetration through technology based initiatives by creating awareness through various digital mediums.

SEBI seems to be working with a formidable long term plan to enhance the share of mutual funds in the domestic savings.

As explained in one of the dated reports of SEBI, until a few years ago, mutual fund investors were more influenced by salient, attention-grabbing information. The report had also highlighted that investors were cost-cautious and were more sensitive to salient in-your-face fees, like front-end loads and commissions, than operating expenses.

Investors responded positively to the exceptional performance and effective marketing effort.

Responding to these finding, SEBI banned entry loads in 2009 and also streamlined the cost-structure of mutual funds. To encourage mutual funds to expand beyond the top-15 cities, SEBI sanctioned mutual fund houses to charge additional costs in the form of expense ratio to mobilize assets from smaller towns.

This move nudged the industry to create awareness among investors through various investor education programmes. Mutual Funds Sahi Hai campaign of AMFI (Association of Mutual Funds in India) has grabbed attention in the recent past, especially in post-demonetisation period. It has allowed mutual funds to reach to investors even in the remote areas.

Now that the penetration of the mutual funds is improving, the SEBI has set stricter parameters for allowing mutual funds to charge additional expense costs. In other words, SEBI has not only been introducing new measures, but has also been revisiting the older ones to make them sharper and more relevant. 

It seems going digital is SEBI’s next step. According to a report published by Ernst & Young (EY) titled, ‘Mutual Funds: Ready for the next leap’, Technologies such as mobile, social media, big data and analytics, cloud and artificial intelligence are transforming the mutual fund industry and continue to be a key growth enabler by facilitating seamless customer acquisition and real-time efficient processes.

SEBI is now likely to encourage the mutual fund industry to use high-tech solutions to heighten the efficiency in operations and investor-education drives. The capital market regulator would also encourage them to pass on the cost-savings made on account of digital technologies to investors in the form of lower expense ratios and better service.

Can you expect investing in mutual fund to become cheaper soon?

It depends on various factors; such as how aggressively the SEBI will push the mutual fund industry to lower the expense ratio, while maintaining the effectiveness of investor education programmes. How intermediaries such as brokers and mutual fund distributors respond to the technological disruption also remains to be seen.

Investing in mutual funds is cheap even today for intelligent mutual fund investors.

  • Smart investors invest in mutual fund schemes that have a proven track-record of performance across timeframes and market phases. This enables them to earn higher cost-adjusted returns.

  • Intelligent investors opt for direct plans for investing in mutual funds.

  • They prefer low-cost-automated robo advisory platforms.

Are you wondering what robo advisory platforms are and how to invest through them?

In simple language, robo advisory platforms are digital advisors that provide portfolio management and financial planning services online, without little or no human intervention.

About Robo-Investing]

Read: All You Need To Know About Robo-Investing

Intelligent investors stay clear of aggressive promotional campaigns of New Fund Offers (NFOs) since their cost structure is always high. They know their goals, risk appetite, and existing financial situation. Based on this, they chalk out a personalised asset allocation plan and invest in mutual funds through Systematic Investment Plans (SIPs).

Intelligent investors are increasingly flocking towards robo-advisory platforms.

Are you an intelligent investor?

Editor’s note

PersonalFN recently launched PersonalFN Direct—an unbiased robo-advisory platform.

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More reasons why you should invest through PersonalFN’s robo advisory platform

  • It can help you reap you extra returns of as much as Rs 30 lakhs in 30 years. It recommends direct plans only.

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  • It comes at a pocket-friendly price.

Happy Investing! ☺

Looking For A Robo-advisor? Here's How To Go About…


About two years ago Avanish earned a promotion as Zonal head.

Since then, he travels to different locations for at least two weeks in a month.

When he is in the town, he spends around 12 hours in the office.

When he returns home, he’s too tired to do anything else.

Fortunately, Sushma, his wife who teaches science in a school, manages the home exceptionally well.

There’s just one area the couple struggled with—personal finances.

Sushma had told Avanish that she’ll manage everything but investments.

Up until a few weeks ago, managing their investment portfolio was a tough exercise.

But now the couple feels it has become super easy

So what has changed so drastically for them?

To read more, please click here.

Expense Ratio Of Equity Mutual Funds In India The 3rd Lowest! But Here’s Even A Smart Way To Invest…


Do you think investing in mutual funds is expensive in India?

It certainly looks like it; especially considering the efforts that the Securities and Exchange Board of India (SEBI) is taking to nudge mutual fund houses to reduce expense ratios of schemes.

If you recall, about a couple of months ago, SEBI brought down the “permissible additional expenses” from 20 basis points to only 5 basis points.

According to the Foundation of Independent Financial Advisors (FIFA), India is the 3rd cheapest country to own a mutual fund. A news report in this regard was recently published by the Economic Times (a few days ago).

To read more please click here.

Should You Invest In Multicap Funds Now? Know Here…


Equity markets are generally volatile, even more so these days.

But do you remember any phase in the past when they weren’t?

So if volatility is your Achilles heel, the equity market isn’t a place for you.

If you can’t cope with stock price fluctuations, stay away from investing in equity assets, including equity oriented mutual fund schemes.

But do note that not all companies expose you to a same level of volatility.

The difference between big and small companies…

Big companies more often have stable businesses, strong financials and they are mostly managed by experienced people. As a result, their stock prices experience lesser fluctuations as compared to those of emerging companies.

Though smaller companies have a high growth potential, their businesses and earnings aren’t as stable as those of industry leaders. The movement of their stock prices is extremely unpredictable and volatile.

To read the complete note click here.

Plan Your Financial Freedom this Independence Day

India celebrates its 72nd Independence Day this year.

Every person has a personal definition of what freedom and independence mean to them.

As you hoist the flag, it’s time to ask yourself a few pertinent questions,

Do I have financial freedom?

‘Do I have the ability to do, have and do anything I want without financial constraints?’

‘What will it take for me to achieve financial independence?’

‘What’s my definition of financial independence?’

Financial freedom is a choice which differs with age. You see, financial freedom gives one the ability to enjoy the lifestyle one desires.

More importantly, financial freedom paves the way for financial independence.

To read more please click here.

New Fund Offer

Aditya Birla SL Frontline Equity Fund: Can Its Frontline Performance Sustain?

Equity Savings Fund as categorised by the market regulator, SEBI, is a Hybrid Fund. Meaning, it invests in equity and equity related instruments (including derivatives), debt & money market instruments, and would explore arbitrage opportunities. If there are no arbitrage opportunities available, the scheme has the flexibility to invest in debt.

Franklin India Equity Savings Fund (FIESF) is one such hybrid scheme from the stable of Franklin Templeton Mutual Fund. Under normal circumstances, FIESF will invest 65-90% of its assets in equity & equity related securities (including derivatives), and 10-35% in debt & money market instruments (including cash & cash equivalents and securitised debt). Further, the scheme may avail of arbitrage opportunities.

However, under defensive circumstances, FIESF may lower its allocation to equity & equity related securities to 15-56% (including derivatives), and increase the allocation to debt & money market instruments to 35-80%.

To read the complete note click here.

Fund Of The Week

Aditya Birla SL Frontline Equity Fund: Can Its Frontline Performance Sustain?

Aditya Birla Sun Life Frontline Equity Fund has retained its large cap style. It is among the few large-cap schemes with a history of over 15 years, along with a superior track record to its credit. Categorised as a large-cap fund, Aditya Birla Sun Life Frontline Equity Fund is mandated to invest a minimum 80% of its assets in large-cap stocks, defined as the top 100 companies in terms of market-cap. Historically, the fund has held a large cap biased portfolio that has been in the range of 80% to 90% of its assets, and it is expected to continue with similar allocation in future as well.

The size of Aditya Birla Sun Life Frontline Equity Fund has grown multi-fold in the last couple of years, and is now the largest fund in its category. With a corpus of well over Rs 21,000 crore, the fund is slowly moving towards a point where it may start feeling capacity constrain. However, it is not reflected in its performance yet. With a large cap focus, the fund seems to have a long way ahead

To read the complete note click here.

Financial Terms. Simplified.

Total Expense Ratio (TER): The total expense ratio (TER) is a measure of the total costs associated with managing and operating an investment fund, such as a mutual fund. These costs consist primarily of management fees and additional expenses, such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount, which represents the TER, most often referred to as simply "expense ratio."

About Robo-Investing]

(Source: Investopedia)

Quote: "For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.”‒Warren Buffett

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