Seen some fantastic stories on the mutual fund industry. There is only one problem, you cannot drill down from the story…if you do that, you will quickly find ‘page not found’.

See some typical terminology

‘There is rampant mis-selling in the mutual fund industry – and this should stop’. So out of sheer curiosity you drill down and ask:

– who said there is mis-selling?

A: everybody says there is mis-selling why do I have to specifically say who is mis-selling.

Q: What is mis-selling?

A: everybody understands what is mis-selling, why does it have to be told separately?

Q: yes, but can you define it?

A: No.

Q: Can you explain it?

A: Of course! If people have been cheated it is mis-selling.

Q: Last 3 years return on a fund is 24% p.a. while it is 8% in PPF. So you should invest in Equities. Is this a fair pitch?

A: Of course yes. It is true is it not.

Q: will the client get 24% over next 3 years?

A: Maybe…why not? If not 24% he WILL get at least 17-18%…so it is not mis-selling.

Q: How many active distributors are there in India selling mutual funds?

A: I do not know but Mr. Sinor told me that 41,000 active agents are there in the mutual fund industry.

Q: Vow! that is great….well, er, ‘what is an active agent?’

A: a person who is selling mutual funds…

Q: selling means?

A: registered with a fund house.

Q: well, er, does registered means active?

A: how many times do I have to say YES.

Q: So how have you arrived at this figure of 41000?

A: well I added up …those registered with Reliance, UTI and Hdfc …

Q: what about double counting?

A: Oh!!

Q: If a person has done Kyd, and gets at least one cheque a month from FRESH SALES he is active…is that your definiton..?

A: I must go Subra there is a call…but I promise to call you back…bye….

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  1. Sorry Dheeraj the link you had sent was an article with too many inaccuracies. If you see my blog I do come down heavily on the mutual fund industry, but let us face it, for the common man there is no alternative – it is still far superior to direct equity investing. I know tons of people who invest in direct equities and do well, but I know JUST TOO MANY people who lose their shirts. At least if you do a SIP in Hdfc top 200, Templeton India Growth Plan, Franklin India bluechip, Prudential Icici Discovery over a 7-10 year period, you should be able to get a return superior to PPF. That is a promise. Also the author talks of ‘professional management’ – he does not know what he is talking. When we say ‘professional management’ the opposite of that is managing as a ‘proprietor’ i.e. owner. As a professional I get fees, as a prop i run the risk. Prof management means you pay fees that is all. For e.g. Prashant Jain is a professional manager, Rakesh is the prop.

    Many such inaccuracies including the return calculations…so had to delete the link, comments are welcome!

  2. Its Ok Subra. Infact I wanna write in last post like in you could remove that link if doesnt sound good.

    Eavryday first thing I do in morning is reading your articles. 🙂


  3. Subra,

    If there are inaccuracies, its all the more important to be shared and point out the inaccuracies. It will help common man understand how facts are misrepresented.

  4. look it is demand and supply, if clients STOP buying shit, manufacturers will stop making shit. Nobody buys a horse carriage right? so it is not made. Clients buy shit and then blame the manufacturer. See the movie industry – so quickly they adapt to client taste do they not?

  5. Even in direct equities, many don’t invest; they trade. That evolves into trading into derivatives (less margin money and low cost). Even Rakesh advised last year (during Diwali) that success rate in trading is just around 2% and people would be better off by investing regularly through mutual funds.

    The latest fad is commodity trading and I’m hearing many stories where the capital invested got totally wiped out. One commodity broker told me that in general, it takes 6 months for some one who actively trades to completely loose his capital.

    Having been from broking industry and knowing successful investors, when you say ‘tons’, it is not a representative sample. It is the percentage of the universe you know.

    The general data we keep getting about average holding period etc. shows that the idea of long term investing is yet to catch up in this country – even among people who sell and buy mutual funds.

    When you go to a broker, even with a long term investing perspective, he gets no financial incentive from your behaviour and hence encourages and convinces you to churn.

    My personal conviction is that Indian equities would provide superior returns than any other asset class for next 2 decades. The best way for a common man to build wealth is to invest regularly for a long term. There is nothing uncommon about most of us.

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