Market Magic

Wanna invest in MFs? Beware of the ad trap

Hi Friends,
We are seeing a lot of mutual funds taking onto the advertising route to lure the investors nowadays. Some of the ads are really great to watch, but the messages imparted by them are not always the right information for the investors.

In simple words, they all are promising the moon to the investors. While, the risk profile of mutual funds are undoubtedly lower than direct exposure to the stocks, even MFs are not devoid of market risks.

In this article on ET, I've tried to decode some of the common features of these ads that are promising very little short of assured and great returns.

Also, please check out this space for more safeguards and some basic tips to be followed before investing in MFs.

Wanna invest in MFs? Beware of the ad trap

Mutual funds are the toast of the season in the world of investment. Fund houses are coming up with new schemes with great fervour and the investors are lapping up every new offer with even greater enthusiasm. As a result, the MFs are garnering record-breaking cash collections with every new fund offer (NFO), while existing schemes are also being offered to the investors.

As per the recent data, the new Reliance Equity MF scheme collected a record of more than $1 billion nearly in its NFO, which is the first ever billion-dollar mop up by a new scheme in the India’s mutual fund history.

There is nothing wrong with investors showing this unforeseen attraction for mutual funds, especially the equity-focused funds, given the current state of Bull Run continuing for quite some time on the bourses and the recent budget proposals aimed at giving a boost to the MF investments.

However, what is a point of concern is the investment premise that is driving this bull run in the MF segment. Market observers believe that investors, especially the retail ones, are mostly following a herd-mentality and are primarily being driven by the greed to cash in on the ongoing record-breaking rally in the equity market - rather than cementing their investment decisions with proper analysis of the market trends.

Moreover, investors are falling prey to the advertising and promotional gimmicks of the fund houses which are promising the moon for the investors. More or less, all the fund houses assume that investors are gullible when it comes to investing their hard-earned money - at least the advertising campaigns run by various MF houses suggest in that direction.
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posted by Arhaan @ 9:24 AM