These days, I’m constantly bombarded with news and ads about mutual funds. It seems like every other YouTuber is singing praises for SIPs as a smart choice for long-term investing. They claim that mutual funds outshine traditional options like recurring deposits and fixed deposits, promising returns of over 15%. But, just today, I stumbled upon a video on social media where someone made a bold accusation: mutual funds are nothing but a huge scam. Their argument? Mutual funds don’t provide clear information about the shares you’re buying. There’s no transparency regarding the number of shares or stocks you’re actually getting for your monthly SIP investment.
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This is absolutely not true. Mutual funds are pass-through risk tools - the returns and the risk are passed on to the end customer.
All the AMCs are supposed to disclose the investments they are making. You can even request the portfolio holdings, fund factsheet etc.
An element of SCAM is the buyer’s mindset that the markets will keep going up like this and every 3 years his investment will double. That froth/bubble has to burst someday. But it is not the fault of the AMC or its fund manager - after all they keep buying if you keep giving them funds.
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just to add over @viswaram … I think Mutual funds are one of the most transparent products in India. Just compare it with advertisements of real estate or betting category products.
Mutual funds can not promise you sky high returns. They are bound by with stringent rules to prevent misspelling.
Ofcource some customer due diligence is necessary. if someone is thinking twice while buying 1 kg onion but with blink of eye put his life saving in mutual fund or stock which (s)he doesn’t understand, its sorry state of affairs’,
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The person might be an insurance agent. They tend to defame MF like this. Personally experienced.
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No mutual funds are not a scam. Don’t argue with lic agents and click bait Youtubers.
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Really? please ask the person to check the MF documents. There is a portfolio section which gets updated on monthly/half yearly basis.
I just got a portfolio document for LIC Flexi cap MF just by googling.
For more info go here → https://www.licmf.com/snapshot/lic-mf-flexi-cap-fund/LIC17
I m not promoting LIC MF, just giving a sample of what shares and quantities are present in a MF.
All Equity and debt MF are mandated to provide this info on regular basis.
So how and where you are getting such misinformation?
Regarding mutual fund being a scam. Please explain what the is the scam?
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Thank you, everyone, for taking the time to help clear my doubts. I recently started investing in mutual funds with great enthusiasm, so encountering negative opinions about them was quite surprising. Your insights have successfully dispelled my doubts
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There are nuances within the MF world.
Excerpt:
Which is Better, Active or Passive Funds?
In the Indian context, the distinction between index funds and mutual funds primarily revolves around fund management. Active management, a key feature of mutual funds, may appear enticing as it seeks to surpass market benchmarks. However, it’s crucial to consider that even the most seasoned investment professionals often find it challenging to consistently outperform market indices.
When examining your investment choices, it’s important to keep in mind that while some investment experts occasionally achieve superior results, their performance tends to be inconsistent. S&P Dow Jones Indices’ scorecard, which evaluates the performance of actively-managed mutual funds against major indices, provides valuable insights. Over a one-year period, it revealed that 51.08% of actively-managed mutual funds in India underperformed the S&P 500, while 48.92% outperformed it. These statistics, however, undergo significant changes over longer time frames.
Over five years, only 13.49% of actively-managed funds managed to outperform the S&P 500, and over a decade, a mere 8.59% achieved this feat. Therefore, depending on your investment objectives, opting for low-cost index funds can be a prudent choice, given that the majority consistently deliver better results than actively-managed mutual funds in the Indian market.
Source;
Proceed cautiously…