Practical tips for Mutual Fund investors

Useful Tips..Hmmm!

The Stock Exchange Board of India (SEBI) is responsible for regulating and developing the Indian Securities markets and more importantly, to protect the interests of Mutual Fund investors such as you and me. In pursuance of this responsibility, SEBI has built an admirable investor awareness and education machinery and investor grievance redress mechanisms that may be amongst the best in the world.

Take a dekko at http://investor.sebi.gov.in/ and you will get a sense of how comprehensively your regulator is seeking to improve the investing eco-system for you.

As a mutual fund investor, do look at http://investor.sebi.gov.in/Reference%20Material/MFunds.pdf for some handy tips. Some of the ones we especially like and will be writing about separately are as follows:

  • Take a holistic view of your financial goals and invest accordingly.

Perhaps the most important of all principals in investing is articulation of your financial goals. This will help you to better select investment products. And regularly reviewing your goals and the performance of your investment choices can help identify and address any shortcomings in your plan.

  • Be aware that a scheme with a lower Net Asset Value (NAV) is not necessarily a better purchase than a scheme with a higher NAV.

While easily understood, this fact may sometimes be overlooked when comparing schemes or even different options between schemes. For example, NAV of Scheme A with growth option will be higher than the NAV with dividend option of the same Scheme A. Either may be suitable for you depending on whether you are looking for regular income or long term growth. Just useful to keep an eye out while making the decision to invest.

  • If you choose to avail the services of MF distributor, then ask for the list of fees and charges applicable, before investing and pay him / her according to the services rendered and advice offered.

They will tell you it’s free for you, but it’s not. Mutual Funds pay distributors a commission, sometimes quite handsome, for every Rupee of money they collect from investors. And different funds have different commission structures, so technically a distributor may be more incentivized to sell a particular fund over the other. Surely you get our drift..! In fact, SEBI has recently put in place regulations requiring disclosure of commissions in Investor account statements. Aye, we say and doff our hats to SEBI again!

  • Do not expect unrealistic / guaranteed returns

It is important to reach for the stars but investing doesn’t work like that. Set realistic goals that allow you to make investment choices that are within your risk tolerance. And remember that you need to enjoy the present as much as you need to save for the future. Chasing that professional or personal dream will be more fulfilling than making risky and concentrated financial bets.

  • Do not fall prey to market rumors / ‘hot tips’/ ‘opportunity knocks only once’ kind of advice
  • Do not be swayed by market sentiments
  • Do not invest on any explicit / implicit promises made by anyone
  • Do not invest in any scheme just because of incentives / gifts / inducements etc. offered
  • Do not indulge in impulse investing

These are very useful “Do nots” and the message is to develop a personal financial plan and stick to it through the ups and downs of markets. Needless to say, avoid tips from tipsters, well-meaning ones may not know your financial situation adequately and acumen or worse still, they may want you to buy to make their market.

Though we pulled out a few points to write about them, do take the time to look at the full note. It’s a handy reference to the Do’s, Don’ts, Rights and Responsibilities of a Mutual Fund investor.

Visit www.kuvera.in to invest in “Direct Plans” of Mutual Funds and save BIG on commissions!!!

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5 Responses

  • Chetan Gupta

    October 26, 2017 AT 10:51

    I want to invest 15k in mutual funds, please suggest me some good funds as my time horizon for the investment is around 7-8 years.


    • Gaurav Rastogi

      November 13, 2017 AT 04:38

      Chetan, please visit our “Top Rated” funds section and you can select the best funds for your use case https://kuvera.in/explore/top-rated

      These are the consensus top rated funds across multiple MF rating websites.


  • srinivas

    June 25, 2018 AT 17:56

    Hi,
    How can I make sure that Invested funds are performing as expected to reach my Goals


    • Gaurav Rastogi

      June 27, 2018 AT 07:54

      We track your goal progress and advice periodically about any rebalancing if required.