A ghost called no-loads has been haunting the mutual funds industry. Things have reached a panic situation as the September 12, 2007, deadline (the day after tomorrow), comes closer — the last day to send comments to the Securities and Exchange Board of India (Sebi) on its August 22, 2007, proposal to waive load for investors buying mutual funds directly from asset management companies (AMCs).
What this means is, if an investor buys Rs 1 lakh worth of equity mutual fund units directly from its AMC, he won’t have to pay Rs 2,250 (it goes as high as Rs 6,000 for an NFO - new fund offer) as commission to some invisible distributor. The entire Rs 1 lakh will be invested and not Rs 97,750. Implications: roll that for 30 years at a compounded annual growth rate of 15 per cent and this investment grows to Rs 66,21,177 compared to Rs 64,72,201 in case he pays load — a difference of Rs 1,48,976. The moot point remains: why should an investor be forced to buy mutual funds through a distributor?
Opinion in The Indian Express, September 9, 2007