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CONTRARIAN Why investing in a mutual fund is, definitely, your best bet. By Sanjay Jha
Despite a modest turnaround since then, they are still far from being the runaway successes they had hoped to be. This, I believe, is rather unfortunate. A cursory look at the stockmarket in the last few years reveals either bearish or volatile trends. As for the debt markets, you could have had your fingers burnt by an unscrupulous non-banking finance company. And while our banks have a history of being the safest fixed-return proposition, the interest rates they offer are relatively unattractive. Given the state of the markets, I may be in a majority of one but I still believe that the mutual funds are the most appropriate long-term investment for you. I have seven reasons for displaying this strong conviction: I. Besides that paragon of reality, the Unit Trust of India, there are high-quality asset management firms that bring a wealth of professional expertise to money management. E.g.: ITC Threadneedle, Templeton, Alliance Capital, Birla Capital International, DSP Merrill Lynch, Prudential-ICICI et al. So, you have several options in terms of choosing an investment manager. II. Despite the stockmarkets, some of the equity schemes -- like ITC Threadneedle's Top 200 and Templeton's India Growth -- have out-performed the indices. Actually, this is an opportune moment for you to enter the stockmarket albeit through the mutual funds. However, you must not expect returns in the short run; only after a period of three years will the gains accrue. III. With competition rising, the mutual funds are trying to make themselves more attractive for investors like you. For instance, most of the schemes launched in recent times absorbed the 6 per cent issue management load. In addition, their emphasis has been on reducing the exit fees, especially if you have to make a redemption in an emergency. IV. Since most of the mutual funds have introduced a variety of schemes with distinct features, you enjoy the option of selecting one from a large menu after analysing which matches your preference in terms of the risk-reward equation. Even corporates may be able to find a (money market) scheme with, say, instant liquidity, a high degree of safety, and stable returns. V. Most of the mutual funds use hi-tech and set exacting service standards in order to increase investor satisfaction. As a result, for example, you now enjoy the option of accessing Investor Service Centres across the country, which allow you the sale or purchase of units, attend to requests for changes of address, provide you with additional statements of accounts etc.. VI. Importantly, the mutual funds have also managed to introduce greater transparency levels in their operations over the years through (daily) NAV announcements, (half-yearly) portfolio disclosures, and (periodic) customer contact programmes. Unlike the past, they are, finally, placing an emphasis on pro-actively reaching out to their customers nationally. VII. Finally, one of the most redeeming features of any investment in a mutual fund is the tax-benefit that accrues both for the retail as well as the corporate investor as also in the re-investment of the capital gains under Section 54(E) A and B of the Income-Tax Act. Now that you have all but finished reading this, I just hope you've already picked up your telephone to dial the mutual fund of your choice! |
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Amidst all the hullabaloo that
surrounded the primary and the secondary markets five years ago, many mutual funds --
launched with considerable marketing razzmatazz around the same time -- were completely
mispositioned in the mind of the retail investor. 