Monday, September 28, 2009

NEW MISS SELLING THREAT AND SIP REINVESTMENT

A significant numbers of investors are now opting to stop their existing sip. The reason behind such a move is that they are now taking advantage of the new SEBI guidance effective from 1st august ( no entry load).

We find that after scrapping the 2.25% entry load on sip a investor saves more and invest more resulting higher return. Say an investor is doing a sip investment in 4 schemes with each Rs.10000/ per month. This amounts to Rs.40000/per month .When he makes investment in new system of no entry load he saves Rs 10,800 PER ANNUM as entry load . This results to higher return as the full amount of Rs.40000/per month gets invested each month Rs39100 per month under the earlier scheme.
Some section of investors are adopting this method as rest remains unaware. But in the coming days all investors irrespective of sip investment amount will opt for this new advantage.


At the same time again a miss selling have erupted form the Mutual Fund distribution system. After SEBI scrapped the entry load and made the advisors of Mutual Fund to charge ADVISORY FEE, some advisors are charging fees in different forms without any guidelines and hard ground reasons. The various names under which the advisors are charging are Visit charges, ‘consultation charges’, ‘advisory charges’ and ‘redemption charges’ and many more fascinating names. Visiting charges and advisory charges are the same since no one goes to a doctor without a disease. But a tight leash needs to be affixed at the back of this fee based model. Investors would be classified according to their investment the advisory fee to be paid. In other words a slab is the need at the moment. Otherwise we will get another set of new Miss selling through advisory business. SEBI needs to look in to these matters too when they have taken oath to abolish Miss Selling.

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