I remembered something uncanny with DHFL NCD which I would like to share -
When the Public Issue came out in 2018, my Mutual Fund Distributor, asked me to invest in it. He was rather pushy about it.
Yes, like many I too started off with an MF distributor and with regular mutual funds. Later when I started reading, I realized his commissions are not based on how the funds are performing but instead adding to my cost with higher TER regardless of the fund’s performance. That too he had signed me up for multiple ELSS funds with 3-year lock-in and 1 retirement fund where the lock-in is 5 years saying the locked-in funds perform better because people can’t exit soon with a little hiccup of market. Later, when I realized I have been trapped, I confronted him and broke up with him. It’s quite painful to wait for the locked-in units to release so you can exit from them and clean up your portfolio. This was another lesson for me to realize everyone else who wants to manage your money, has their vested interest, and only if you are aware of what it is for them and how much, etc and if you accept it fully, only then proceed.
All new investors, please beware of MF distributors trapping you with ELSS funds where you have to wait out to get out. @nithin, one more reason I back the idea of a Nifty 50 based ELSS fund by Zerodha AMC (hopefully soon) because even if it would have a lock-in of 3 years as any ELSS fund has, the investor is actually investing money on India’s economy, which is a good cause, unlike betting on the biases of any active fund. One can be bullish on India forever and thus I had said that the Nifty 50 based ELSS fund can double up as a retirement fund corpus as well.
Coming back to the DHFL NCD incident, so my MF distributor was a little pushy about it. I said, okay I would do it online. But he insisted I apply by filling paper form. I don’t like paperwork so I was a little hesitant. I said it’s too much work whereas I can do the same with a single click of a button in my Demat account.
He then told me that he would get a commission if I fill a paper form citing his Agent code and apply for the DHFL NCD. I asked how much he would get. He said 10%. If I apply for 50k, he would get 5k. And he was willing to share a part of that commission back with me. Imagine!
There are a few times in my life I have gone against my intuition and this was one of them. It rang an alarm in my heart that 10% commission for just signing up. There’s something fishy. But somehow I didn’t listen to it completely. If only. Though I didn’t fill the paper form and didn’t apply through my MF distributor, but later when my HDFC Securities Relationship Manager called me and asked me to put in it since it has AAA ratings, I somehow snoozed the alarm and gave in.
I am sharing my personal experiences and mistakes so people know how you are played out in the market. How our minds trick us sometimes. A lesson here is if someone is trying too hard to sell you something, please stay away. There must be some catch. Find out. Discover better things that are not shouting and nobody is paying attention to them. There can’t be a better way. Also, if everyone is running in the same direction doesn’t necessarily mean it’s the right way.