Skip to main content

Can stock market brokers serve mutual fund investors?

Mutual fund products may be available through stock market brokers now, but there is a big question over their ability to serve investors properly
Even though investors can now buy funds through stock brokers, I fear that in practice, this may be a little bit like trying to order a glass of milk in a bar. You may want the healthy option, but when the establishment is used to serving only the heady and intoxicating stuff, then that’s what they’ll try and serve to you. Brokers are a convenience for those who don’t have access to mutual fund advisors, but they are unlikely to be suitable advisors.

Don’t get me wrong — I’m not saying that the new system of allowing the stock exchange’s system to sell mutual funds is bad. It definitely expands the potential reach of mutual funds across the country. It also gives the mutual fund industry an electronic transaction platform, on which the industry itself has looked incapable, or unwilling, of making any visible progress. The exchanges’ network is said to extend to over 2 lakh terminals across 1,500 towns and cities.

That sounds good on a brochure, but the culture of stock investing in India is one which would be lethal to sensible mutual fund investing. The world of a stock broker is one in which most clients hold investments for a few days and ‘long-term’ is perhaps a month or two. A friend of mine has already received a call from his broker, who has enthusiastically described the methodology that they will follow when the business takes off: they will analyse mutual funds’ declared portfolios to see which stocks are likely to go up and then they will ask clients to take ‘tactical positions’ (his words) in the funds where they like the portfolio. This is a completely counter-productive way of investing in funds, but one which, I guess, would come naturally to someone whose primary skill is supposed to be stock selection.
This broker has figured out that basically, funds are a new type of trading instrument where he’ll get about 0.5 per cent from the asset management company (AMC) rather than the pittance he gets as brokerage currently. Of course, this particular one didn’t even seem to be aware of the concept of exit loads, but I think it’s clear under the new system, at least some stock brokers are more likely to be part of the problem rather than part of any solution.

I’m sure that there are stock brokerages that already have a fund business and, presumably, a system to advice investors on the virtues of stable, long-term investments. But I’m not counting on the phenomena becoming widespread. Ever since the new system has been announced, the media has used the word ‘trading’ for the new facility. Trading is a most unfortunate word to use in this context. Trading is the very opposite of what one should be doing in mutual funds. The principles of equity fund investing remain the same — invest gradually, invest for the long run in funds with a good track record and invest mostly in diversified funds. Just because they are being sold through a stock exchange’s system doesn’t mean that mutual funds have suddenly become suitable for active buying or selling, even if newspaper headlines say that funds can now be traded on the stock exchange

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now