The Hindu Business Line : Investor concerns

It is but natural that the clients are tempted to churn the mutual fund portfolio, as in the case of equities, when the NAV (net asset value) goes up. The distributors may have a say in this, but it is up to the clients to take a decision.

To check the exodus of distributors in search of higher commissions, it would be wise to first check the present commission pattern and make it more attractive.

The effect of amortisation of issue expenses should be increased in the case of the first two years to check the outflow to a certain extent.

Also, the clients should be made aware of the full details regarding the entry and exit loads so that they can assess the possible outcome in the event of exits.

The emerging market scenario provides ample opportunity for retail investors to sell a particular stock as soon as a gain of 20-25 per cent is guaranteed.

Soaring index values take the NAVs to new highs, compelling clients to book profits and switch to new avenues. The AMFI should initiate steps to educate the clients as to alternative possibilities. The Association should also consider steps to guarantee a minimum return to the investors as the NAVs may slide along with the indices.

Investors cannot forget the days when some were cheated by a few of the mutual funds in the past. So it is natural for retail investors to follow the maxim, `higher NAV means booking profit through exit'.

C. P. Velayudhan Nair

Kochi

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