There are revolutions of various types... some very noticeable , some hidden...Political, agricultural , cultural...
But nothing can close to this.
The Fiscal revolution.
In 1993-4 , the Mutual Fund space was opened to private players.This was the euphoric period of IPOs and Harshad Mehta was behind everyone's memory. With great reluctance, few informed investors started investing.Internet was not around , so information was not common.
In the ensuing 20 years these few investors were richly rewarded... while a majority failed to comprehend the concept and avail the opportunity.
With some public connect over print and AV media people took nimble... very nimble steps... and something happened.
The Mutual Fund space was flush with funds.
In 2017 the Mutual Funds of MFs as we call them became the biggest Domestic investor in the Indian market .
To give you an idea the Total size of Indian Budget stands at Rs. 21.47 Lakh Crore for yeaar 2017-18.
Compare this with the size of Indian Mutual Fund Industry Rs.17.54 lakh crore at the end of March 2017.
The slow to catch on - Indian investor has ultimately realised the virtue of slow and steady investing on one hand and the Power of compounding on the other.
SIP and STP are buzz words now .
I get daily 8-10 phone calls with the flawed question- "which is a good SIP plan?"
The question shows poor understanding of Mutual Funds- but nonetheless...
Why is it working- the concept of Mutual Fund that is?
Why there hasn't been any scam in this space so far (barring that of the grandfather scheme of UTI- called US64)? Not that there cannot be any in future- but let's talk about what happened so far.
The credit can be fairly given first to the concept of MUTUAL itself and then to the governments of the day.
Overlaying itself over the era where the share price was a very opaque issue. Which means whatever or whenever you bought a share - you could be sure that you got the highest price and vice versa while selling.
But when you bought a MF unit- the price that you would pay would be the one that was declared as the NAV at the end of the day (rather evening). It did not matter who bought the MF units - my purchase of 100 units got the same treatment as someone else's 10,000 units. There was no preferential treatment and price was universal. This is an important feature of MFs even today.
Then there were continuous improvements in the structure:
- Cash purchases were banned.
- Third party cheques and DDs were not allowed.
- In 2007 - entry load , which used to be a hefty 2.25% was removed by SEBI.
- Insistence by the SEBI of the Fund employees investing in their own funds.
All these ensured that clean money of genuine investors was flowing into the market.
The rise of Mutual Funds gave employment to a new genre' of trusted (largely) financial advisors, MF industry employees and the cult of STAR FUND MANAGER.
The fortunes of various fund houses changed by the entry and exit of a handful of Fund Managers who enjoyed cult status.
Toady people like Prashant Jain who despite heading the fund house that they once worked in at a lower level- still individually manage the funds. The AUM of his funds may far exceed the GDP of small countries.
One of the features of MFs is that in case of a downturn you do not have to rush in to take your money out like people do in direct stocks. Since it is the responsibility of the Fund manager to buy and sell- you just have to sit back and enjoy the show. If you are continuing to have some funds for investing- it makes more sense in investing it in a market crash rather than running away- as I have fortunately learnt.
Mutual Fund concept is a very Indian kind of concept where you are not bothered about the vagaries of life (market in this case). It gives equal opportunity to various classes of people to increase their wealth according to their input without bothering to learn too much.
So there you are enjoy the show while the market is rising and make sure that you also buy the ticket to the show when they are falling.
Posts
