Key Points To Be A Responsible Investor In Mutual Funds
Mar 26, 2019

Author: Aditi Murkute

(Image source: Photo created by ijeab -

My neighbour, Mr Sharma (48 years) dropped by this Sunday afternoon for tea to discuss where he should invest.

Do you recall his story?

Mr Sharma and his son Sid had different views about investment and had lost a huge chunk of money in the market correction. At that time Sid realised that investment is about building wealth and investment decisions should not be irrational and impulsive.

Besides, Mr Sharma had made the investment mistake of relying on small saving schemes and fixed deposits to earn a low real rate of returns and understood it wouldn't help in creating wealth for his peaceful retired life. Especially that the interest he earned was taxable.

So, Mr Sharma decided to invest in mutual funds. Recently, he received an email from his bank about an equity fund. When he went to inquire about it at the bank, his relationship manager told him that it is best for him.

But he wanted my opinion before he invested in it.

I informed him, 'Whatever fund you invest into, do it responsibly!'

Banks have multiple relationship managers and each one has a sales target. They tend to make tall claims like, "You will get more than 25% returns if you invest in this scheme just for 3 years".

Very often agents / distributors / relationship managers use such statements to pitch some ponzi investment products, mutual funds, and insurance policies without considering the investors' needs.

Similarly, never take free advice because what you don't know is these so-called advisers are trying to cash on you and push unsuitable schemes to earn them hefty commissions.

Recently, my colleague Deepika highlighted in her article, "Beware Of Free Financial Advice, It Might Bomb Your Financial Wellbeing!", the various fraudulent activities that occur and you should not blindly follow any RM / Adviser/ agents/ distributors.

Thus, invest responsibly today for better returns in the long run.

Before investing, foremost focus on financial planning:

  • Set S.M.A.R.T. financial Goals,

  • Evaluate the number of years and the amount you will require to accomplish those financial goals. (education/marriage/retirement)

  • Assess your risk profile based on age, risk tolerance, risk appetite, income, and the number of years befall before the goals.

  • Based on above, create a strategic investment portfolio that will help you accomplish your financial goals.

This looks like a difficult task, you can take guidance from an ethical, research-backed, and unbiased financial adviser/planner.

To choose an adviser that puts the investors' interest at the fore, remember these key points:

  1. Choose your investment adviser after proper due diligence.

  2. Check the credentials of the adviser (mutual fund) by asking for a Know Your Distributor certificate provided by AMFI.

  3. Check your adviser's qualifications.

  4. Evaluate the attitude/rationalisation of the adviser, by knowing about costs in the form of commissions or expense costs.

  5. Evaluate whether they can provide you with enough after sale support.

  6. Ask for a track record of their advice.

  7. Ask your investment adviser questions that are relevant in the context of your risk appetite, investment objectives, and time horizon.

  8. Do not give in to claims made by the adviser read the documents carefully, do research about the product, verify and know the facts.

  9. Check the rapid increase in Asset Under management (AUM), because this indicates infused competitive pressure on the sales team, leading to mis-selling.

  10. Guides you in monitoring your investments regularly to know where your investments stand and to see whether these are meeting your objectives / financial goals.

  11. Your adviser allows you sufficient time to make decisions about your investment and financial planning.

Mr Sharma decided not to heed the bank's relationship manager's advice and invest in the 'suggested fund'. Instead, he decided to assess his risk profile and create a financial plan. He understood the importance of need-based investment advice from an unbiased and research-backed adviser who will help him achieve his financial goals.

He took PersonalFN's contact number, 022-61361200, and email id from me to get his own holistic plan. PersonalFN's Planning department has been operational since 2000, and over the course of these 18 years has amassed a loyal clientele, clients who have entrusted the company for 18 years because of the value they've received.

Editor's note: Are you looking for "high investment gains at relatively moderate risk"? We have a ready solution that could be suitable for you -- PersonalFN's Premium Report, "The Strategic Funds Portfolio For 2025( 2019 Edition)".

In the 2019 Edition of PersonalFN's Premium Report, "The Strategic Funds Portfolio For 2025", you will get access to a ready-made portfolio of its top recommended equity mutual funds for 2025 that have the ability to generate lucrative returns over the next 5 to 6 years. Subscribe now!

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