More Transparency To Benefit Mutual Fund Investors
More Transparency To Benefit Mutual Fund Investors Transparency is a strong indicator of future growth of any business and mutual fund is no exception. The changes introduced by the market regulator, SEBI in the last one year such as scrapping the upfront commission and reduction in the maximum allowable total expense ratio that can be charged by the fund houses, will go a long way in the bringing in more transparency to the mutual fund investment. To further increase the transparency in the investment in mutual fund, the finance ministry has asked SEBI to implement the recommendations of Sumit Bose Committee. One of the recommendations of the report is to disclose trail commission to investors at the time of sale.
This may not be welcomed by many MF distributors who are already disgruntled by the compression in the expense ratio that resulted in lower commission to them. Nevertheless, these changes are going to increase investments in mutual funds and increase their business as well.
The committee has further recommended that the fund house should also disclose risk other than the ‘market risk’ such as change in Fund Manager of the fund. Also, the fund house should inform all investors when the fund manager of a scheme changes. Although the ‘market risk’ remains a dominant risk while investing, other risks cannot be overlooked. Ignoring them can lead you to a poor investment decision, thereby impacting your portfolio returns.
Our cover story this time delves deep into risks other than the ‘market risk’, which is of equal importance for an investor. You can ignore them at your own risk. The recent liquidity crunch and the sharp fall in the NAVs of many equity and debt funds highlight the importance of other type of risks associated with investing in mutual funds.
In one of our interesting special reports, we have covered how the number of stocks in a mutual fund scheme and its returns are correlated. The results defy conventional wisdom and it will be interesting and an eye-opener for you.
Wishing you all a Happy and Prosperous Diwali.