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| September 15, 2017 |
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Impact 
Participation of the individual investors in mutual funds has been steadily rising over the last few years. But considering a plethora of schemes on offer, it isn’t easy to shortlist the suitable products for one’s portfolio.
As you might be aware, the Securities Exchange Board of India (SEBI) has been working to clear the roadblocks that could potentially confuse and/or discourage investors. Besides safeguarding their interest. Over the last few weeks, we have been writing about SEBI’s focus on scheme mergers. When requests didn’t work, SEBI adopted a high-handed approach towards the mutual fund industry. And with no other option left, mutual funds are meekly falling in line.
As per the SEBI estimates, there are around 2,000 active schemes on offer. However, it aims to bring down the number of scheme by almost 40%. The SEBI-appointed committee is likely to allow classification of mutual fund schemes in 30 subcategories, and a fund house can offer only one scheme in each category. In other words, if all existing mutual fund houses offer one scheme for each category; there would be a little over 1250 schemes even after the merger.
SEBI is likely to issue guidelines for scheme mergers.
Industry players cautiously welcome the move.
What it means to distributors?
While scheme mergers will reduce the options available to investors, it’s unlikely to have any significant effect on the way mutual fund products are distributed. Distributors may keep pushing schemes to earn high commissions. However taking care of this issue, SEBI has already created a Chinese wall between mutual fund advisory and mutual fund distribution. Right now banks, Non-Banking Financial Companies (NBFCs) and other body corporates are allowed to offer investment advisory services through Separately Identifiable Departments or Divisions (SIDDs), under the banner of one company. Recently, SEBI has proposed to cancel this provision. And, instead, has suggested separating subsidiaries offering investment advice within 6 months.
SEBI has already voiced its intent to prohibit mutual fund distributors from offering any incidental investment advice. Nonetheless, distributors aren’t freed from their duty to check product suitability before recommending it to an investor. However, distributors will still have to mind suitability of the product to the investors. For an investor to invest in a particular scheme, the distributors have to acquire the investor’s signature signifying that he/she has disclosed the following:
- The list of mutual funds where he/she is a distributor
- The commission earned or to be received
- Suitability of the product sold to the investor
- Disclaimer that he/she may not be acting in the best interest of investor
SEBI has allowed existing mutual fund distributors to change their profession and become investment advisers if they wish. They will continue to be entitled to earn trail commissions for the business they have generated already. However, they can’t continue to be distributors after they become advisers.
Impact of scheme merger on investors:
While the scheme merger is aimed at helping investors select right schemes for their portfolio, a count of over 1,250 is still very high. But you need not worry about this. PersonalFN’s unbiased mutual fund research services will always hand-pick the right mutual fund schemes for your portfolio. You may opt for Fund Select, and Debt Select reports to gain insights from these detailed reports.
To reduce your efforts further, opt for ready-made portfolio services. PersonalFN has launched the Exclusive Report on SIP-worthy mutual funds— The Super Investment Portfolio – For SIP Investors.
After our rigorous shortlisting process, we go a step ahead when picking funds that are SIP-worthy. Under this, PersonalFN conducts a detailed analysis on how SIPs in the top shortlisted funds have performed, across multiple market conditions and timeframes. Only those funds that successfully pass this evaluation are chosen.
Don’t miss out on early bird discounts. Subscribe to the report here.
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Impact
he S&P BSE Sensex and NSE’s Nifty 50 are once again near all-time highs.
Valuations have reached a tipping point.
Maybe it's time to exercise caution? But how?
Well, in such market environments, investment in mutual funds through Systematic Investment Plans (SIPs) could be a good route. Through SIPs, you can stagger your investments, and if the market does go through a correction, you will be in a situation to accumulate more units through your regular monthly or quarterly investments.
Even for those who missed the Sensex rally over the past few years, now is another opportunity.
Why do we say this?
Nearly a decade ago, the S&P BSE Sensex hit the milestone of 20,000 points for the first time. Currently, the Sensex is near the 30,000 mark. So, had you invested a lump sum in the market a decade ago, you would be sitting on paltry returns — a CAGR of 4.14%.
To read more and Personal FN’s views over it, please click here.
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Impact
"We need a different strategy for overcoming failure, one that builds on experience and takes advantage of the knowledge people have but somehow also makes up for our inevitable human inadequacies. And there is such a strategy - though it will seem almost ridiculous in its simplicity, maybe even crazy to those of us who have spent years carefully developing ever more advanced skills and technologies. It is a checklist." – Dr Atul Gawande, author, ‘The Checklist Manifesto’
Checklists are simple list of elements to reinforce a process and to ensure that procedures are repeated with the same level of quality, so that nothing is missed out.
This is why airplane pilots run through a checklist before take-off. There can be dire consequences if a pilot inadvertently overlooks key indicators. Likewise, an investor can face negative consequences, in the form of poor returns or capital losses, if investment mistakes are made.
Thus, a checklist of the key essentials will make it clear where there are inefficiencies and what can be improved and changed to make a process more efficient.
To read more and Personal FN’s views over it, please click here.
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Impact
The Securities And Exchange Board of India (SEBI) makes headlines in financial newspapers for its straightforward and impactful actions. Recently, it released a discussion paper inviting views of all stakeholders on issues that concern the capital market regulator. SEBI seems focused on regulating the derivatives market, which, it feels, requires more regulations.
The level of speculation in derivative markets was one of them.
According to various media reports, SEBI is trying to change the settlement systems that have led to a proliferation of speculative trades.
The present contract system in the derivatives segment works on a minimum lot size basis. This means, someone interested in entering derivatives contract, in future as well as in options, has to make a contract for the minimum lot size prescribed for the stock or an index. The lot size is decided in such a way that the total value of contract falls in the range of Rs 5 lakh and Rs 10 lakh.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
How often have you made a New Year’s resolution or set goals and stuck to it?
You know, resolutions like…
✔ Exercise daily
✔ Lose Weight
✔ Eat healthy
✔ Spend less time on social media
✔ Save more / Invest more
The list can go on; however, only a few individuals are able to stick to the resolutions and achieve their goals.
The main reason why 90% of resolutions fail is because that the goals are poorly set or lack a process-driven approach.
Regular readers of PersonalFN would be aware that we strongly advocate the need to set SMART goals. Goals that are –Specific, Measurable, Adjustable, Realistic, and Time-based.
In fact, even when individuals set clearly defined goals, there is only a 50% success rate. One of the main reason behind this, researchers have found is that many people quit because the goal is too big requiring too much effort and action all at once. In short, to follow through on a resolution, takes more effort than people anticipate, and they easily give in to their behavioural biases.
Therefore, when you decide to “Save for daughter’s higher education worth Rs 12 lakhs in 5 years,” the effort behind investing every month, paperwork, market volatility, media noise, behavioural biases, and much more in between can detract you from your goal.
To read more and Personal FN’s views over it, please click here. |
The Government is all set to launch ‘Project Insight.’ If you thought, it’s something to do with infrastructure, that’s a misconception. Surprise! It aims to follow a non-intrusive approach to collecting information about your lifestyle. No, this doesn’t mean objecting to what you eat, own or visit. It’s just going to keep a watch on your lifestyle, through the information you reveal about yourself on social media. If the Income-Tax Department finds any discrepancy in your declared income and your lifestyle status, it might knock your doors. ‘Project Insight’ appears to be an extension of Operation Clean Money.
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Why Your Salary Needs To Be Used Productively
How To Link Aadhaar With Your Mutual Fund Investments
All You Need To Know About Insta-Credit Cards
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Strike Price: A strike price is the price at which a specific derivative contract can be exercised. The term is mostly used to describe stock and index options in which strike prices are fixed in the contract. For call options, the strike price is where the security can be bought (up to the expiration date); for put options, the strike price is the price at which shares can be sold.
(Source: Investopedia)
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Quote: "If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.”- Benjamin Graham
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