Helping You Build Wealth With Honest Research
Since 1996. Read On...

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Revealed
India's Third Giant Leap

This Could be One of the Biggest Opportunities for Investors




Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.

AD

Mutual fund investments to get safer
Mon, 2 Nov Pre-Open

Investors have a natural tendency for safety when it comes to investing. After all, they are parting with their hard-earned money. To most people, the return of capital is very often as important as the return on capital. Thus, many tend to stick with safe bank fixed deposits. But what about other options?

People consider equities risky. We know it's not as simple as that. However, we do recognise that when it comes to safety of principal, debt usually trumps equity. This is the reason why debt markets around the world are larger than equity markets. We see this in the Indian mutual fund industry too.

The total AUM in debt funds is higher than the AUM in equity funds. Most of these debt funds invest in safe commercial paper or government bonds. It's no wonder people think they are as safe as bank deposits.

Unfortunately, that is not true. The recent fiasco in JP Morgan AMC is a case in point. Concentrated investments in the debt of Amtek Auto ended badly when the company was unable to repay. In a recent issue of the 5 Minute WrapUp, we presented our view on the Amtek Auto saga.

JP Morgan AMC had restricted redemptions during this time. It also passed on the loss to investors. This came as a rude shock. Although the AMC did not break any rules, SEBI has decided to step in. The market regulator, as per an article in the economic Times, is reviewing the rules and circumstances in which AMCs can take such decisions.

Further, new investment limits for fund managers are also on the cards. SEBI could curtail mutual fund's sector and stock exposures. In addition, a new cap on exposure towards a business group could also come into effect. These moves could help prevent a repeat of such a fiasco.

We believe such a move would be in the interest of retail investors. The growth in AUM of the industry has been sharp recently. Thus, in absolute terms, specific investments made into a particular stock or debt paper has also grown in size over time. This does increase the likely-hood of mutual funds facing liquidity pressures.

As long as, a fund manager's flexibility is not hampered by the new rules, it will be a step in the right direction. We view this as another instance of the SEBI stepping up for the retail investor. Hopefully, we can look forward to a higher level of safety in mutual fund investments going forward.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Mutual fund investments to get safer". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited).

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.