MF Investors Are Making Lesser Returns than their Schemes, finds Axis Mutual Fund

Mutual fund investors earn much lesser returns that the schemes they invest in, shows a recent research done by Axis Mutual Fund. The reason—mutual fund investors are churning their portfolio which is affecting the returns.
 
As reported by The Economic Times, the research has taken into account the inflows and investor behaviour in equity and hybrid funds for the period of last 18 years and in debt funds for 12 years. The research points out that panic and FOMO both impact investor returns considerably over a long investment horizon both in lumpsum and SIP. 
 
 “The findings of the study are quite comprehensive and give us a sense of the damage being suffered by investors. Across categories and time periods, investor returns are significantly worse than both point to point fund returns as well as SIP returns,” says the report published by Axis Mutual Fund. 
What should investors do? 
 
Start early and invest regularly to get the full benefit of compounding
 
Have a clearly defined asset allocation plan and monitor it regularly
 
Do not get swayed by market noise in the short term – especially when the market is going through a correction. These things are part and parcel of the equity markets.
 
Invest in funds/ strategies that can deliver over the long term rather than following risky short term market fads.
 

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Changes in Our Business Model
 
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • The investools will have to be reworked and will offer model portfolios. We will have to suspend the restructuring tool.
 
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
 
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder