Many a times we get carried away by tall claims made by a distributor / agent / relationship manager about the financial products they intend to sell. Very often we also fall prey to the tall claims, and inadvertently end up making investments, which don’t suit our investment objective and / or the appetite for risk. While different regulators have emphasised on the need to curb mis-selling and attempted to preclude it several initiatives, the fact is that mis-selling is still rampant. Hence given that, we are of the view that it is vital for every investor to be responsible and prudent enough while taking investment decisions and have in place proper checks and balances to prevent from being a victim of mis-selling and to be a responsible investor.

Recently coming across a complaint of a fraud, the Securities and Exchange Board of India (SEBI) lent a helping hand to investors by laying down certain checks to be followed by investors before entrusting their hard earned money to a portfolio manager. These checks are as follows:
 

• Check whether the entity is registered with SEBI as a portfolio manager
   
• Before taking up an assignment of portfolio management, the portfolio manager must enter into an agreement in writing with the client / investor clearly defining inter se relationship and setting out mutual rights, liabilities and obligations
   
• Ensure that the portfolio manager provides a disclosure document to the client / investor, giving details about the services offered at least two days prior to entering into the agreement
   
• No SEBI-registered portfolio manager can accept any initial investment of less than Rs 25 lakh from clients
   
• The portfolio manager cannot guarantee or assure the returns on client’s / investors’ investments.
   

Impact of such an initiative on investors...
SEBI’s effort in pronouncing these check points is intended towards enlightening the investors on the aforesaid points before dealing with so called portfolio managers.. Investors thoroughly going through the above check lists will be in a better position to take the right call and safeguard themselves from self-centric distributors / agents / relationship managers and all those who pose to portfolio managers.

 

Our view:

We believe that portfolio management services (PMS) provided by various financial institutions are rather complex products and usually involve a big ticket investment. Investors who wish to opt for such fancy products need to first understand such products well, their cost structure, profit sharing ratio with the portfolio manager, etc.

But we think that mutual funds are a far better avenue of investing your money in the capital markets, as they offer the following merits:
 

• Diversification
• Professional management
• Lower entry level
• Economies of scale
• Innovative plans/ services for investors
• Ease in liquidation
   

However immaterial of the route which you opt for while investing in the capital markets, it is imperative that you make responsible decision and invest your hard earned money by having done your checks & balances appropriately and also select your investment advisor wisely.

 

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rhen@the-efse.org Mar 24, 2012 BGU: It will give you 3 times the Russell 1000 index. So if Russell 1000 goes up 3% your stock will go up 9% On the other end BGZ will do the opposite. That is why it is aellcd 300% inverse Russell 1000. So if Russell goes down 3% this ETF will go up 9%now you only have to decide whether you expect the market to go up or down within your time frame. Then bet on the one that makes profit in your scenario. If you expect the market will go up then go with BGU. If you expect it to go down then buy BGZ.Now BDD and BOM do the same thing (with 200%) for commodities.There are about 30 similar ETFs that do 2 or 3 times some market average. Here are a few more: FAS, FAZ, TZA, EDC, TNA, TYH.As you see the idea is to do better than the market. Decide on the direction and go with it.Remember: I would NEVER give this advice if you were to invest real money. These stocks are not good for long term investment.

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