Mutual Funds Sahi Hai?
It was October 2020 and the 11th edition (Covid-19 edition) of the Indian Premier League (IPL) was underway. I was watching one of the league games and an advertisement during the break drew my attention. In the ad, Rohit Sharma & Shreyas Iyer, both regulars for the national cricket team & captains of their respective franchises, were sitting on the couch playing some video game. Rohit is showing Shreyas the past performances of various players in the game to which the latter replies, “Wish we could track the performance of Mutual Funds the same way.”
When something is endorsed by the leading cricketers in India, the product generally has a youthful vibe. But here we are talking about Mutual Funds, a financial product, which is probably last on the list of preferences of today’s youth who predominantly are the millennials. However, if we look around, we can find that the times have changed. With the advent of the digital age, most people (read: millennials) have access to instant information as never before which has made people more financially aware.
And the Asset Management Companies (AMC), companies that manage mutual funds, having become aware of this fact have started promoting Mutual Fund investments in an aggressive manner. People are being bombarded with advertisements and marketing campaigns to start an investment or inculcate the habit of periodic investments (Systematic Investment Plan) in order to avoid the potential opportunity costs due to missing out on such investments. And AMFI (Association of Mutual Funds of India) is at the centre of all this. AMFI is a self-regulating organization (SRO) of the Mutual Fund industry which was formed in 1995 by coming together of the then registered AMCs. Today, most of the mutual funds are members of AMFI.
The reason behind giving a brief introduction of AMFI is that in the past few years, it has been running a campaign — “Mutual Funds Sahi Hai (Mutual Funds are right)” to encourage people to invest in the MFs. The fact that a private industry body (and not a regulatory authority) has been so assertive in promoting its own products across all mediums might seem suspicious due to the masked conflict of interest. On the flip side, the product being marketed here is an investment product and hence, it can be deemed as more valuable to the customers than any other consumable. These thoughts used to regularly pop up in my mind sometime back and probably you also might have experienced the same. Hence, understanding how beneficial is this Mutual Fund Sahi Hai campaign for us as investors is imperative.
Through this Mutual Fund series, I will be explaining the fundamentals guiding the MF business to gain a better understanding of how the industry functions. We shall explore various factors related to various types of funds that will help you in making better-informed decisions. Though I am no expert in the subject, I would like to share with you all, whatever knowledge and experience I have gained over the years. Also, I am keen on listening to your inputs on the topics that will be put forth in the coming blog posts.
In this series, one article shall be published every Sunday at noon. However, as an exception, the next article shall be out tomorrow, i.e., on 12th April 2021.
