In June of this year, to attract more investors, SEBI slashed the ‘additional expense’ charged by Mutual Funds to just 5 basis points. Now, how effective this move is/will be in bringing in more cash flow is yet to be seen. However, as it stands now, the majority of existing investors hasn’t yet been passed on such or similar benefits. Many of them, uneducated about MF and heavily relying on their advisers, are still paying much more than they should and getting marginal returns. In short, they are literally being cheated one way or another.
(Courtesy:MyMoneySage
Now, the question comes is there is any way to track if the mutual fund is cheating you? Certainly, there are many ways you can identify if you’re being cheated. However, the existing ways don’t assure that you will be able to spot cheats.
First of first, initially, the chances of scams and cheats in Mutual Funds was very high. However, down the line, when it came into the mainstream, in India, the regulatory work and policies became very robust to ensure the safety and protection of the investors. Today, we have 3-tier structure of Mutual Funds:
• Sponsors,
• Trustees, and
• AMC.
This enables multiple layers of safety.
Plus, the fund managers are bound to involve the investors in certain decision-making. They are made answerable to the people. This provides you the flexibility of saving your invested money if, at any time, you feel cheated.
So, overall, in India, we have a kind of infrastructure, where mutual fund scams are very difficult to start and flourish. So, if you do get cheated, you’re basically asking for it. Yes, really.
The idea that mutual funds guarantee return is completely flawed. It doesn’t guarantee you anything. Second, it’s much more than invest-and-forget. In order to expand your portfolio and enjoy greater returns, it’s essential that you stay informed. You must know where your money is going, how that industry and company is performing.
The easiest way you can be cheated on is when you hire ‘any broker’ without doing proper research work. And the next big mistake is blindly trusting that individual. The less reliant you are to the middlemen, the lesser the chances of cheats and frauds.
So, in the end, it all comes down to you—your own decisions and research work. Cheats and scams in mutual fund are fast becoming a thing of the fast. However, if you still do stumble with any of these cheats and scams, you have no one to blame but yourself.
Here are few of the don’ts:
• Not do proper research
• Investing just because others are
• Expecting your money will double in a couple of years
• Be assured of NO loss
• Choosing a broker without any second thought
All the best!
Also read:
