Mutual Funds – Reading between the lines

Mutual Funds are subject to market risk. Please read the offer document carefully before investing”. The very blogpurpose of this disclaimer is to meet the statutory requirements. Only very few people would have heard it when it is mentioned in the radio or television as it flashes by at lightning speed. In print media (Newspaper, Magazines) it is published in extremely small font. Only investors who know the statutory requirements would even be aware of the statement because the advertisements, with ‘namesake’ disclaimers, are hardly educative.

So, what is the mystery behind the ‘flash’ statement? The statement means that mutual fund scheme invests the money collected from investors in instruments which are subject to market risk. Every investor of a MF should read the offer document carefully before they invest their money with the fund house.

Too many mutual funds are simply index funds disguised as something else. And most of the rest are simply attempts to market a product that isn’t designed to actually add value (but sounds fancy enough to accumulate assets).

The 10 things that Mutual Funds don’t tell you affront even in the disclaimer J

  1. “Cheap funds often outperform pricey ones.”
  2. “We can’t beat the market.”
  3. “When skill fails, we just double (or quintuple) our odds.”
  4. “People aren’t buying our product…”
  5. ..Except when we pay them kickbacks.”
  6. “Hedge funds are our idols.”
  7. “Our boards are rubber stamps.”
  8. “Blame us for runaway CEO pay.”
  9. “We played a starring role in the financial crisis.”
  10. “Our lobby crushed bipartisan efforts at reform.”


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