SEBI has abolished the Entry load for the Mutual Funds. That means after the NFO (New Fund Offer) if any investor wants to enter into that particular Fund, he had to pay certain amount as Entry Load as he is going to invest in the middle of the Fund’s life cycle. Now, SEBI has abolished it. This was not necessary for the Assets Management Company (AMC) but they thought it would be nice idea to charge the investors and now SEBI has taken a stand for the investors as in time of such financial turmoil. SEBI is more concerned about the investors and it want to bring in the faith that things are all fine.
SEBI does its job perfectly but the fund houses and brokerage houses are the ones who implement according to their choices. They strictly don’t adhere to the rules laid down by SEBI and this is not a good thing, but not many people really care about it. They just don’t care. If you have an online trading account, let me know how many times you have actually looked into the details of commissions and how much you have charged and have you ever realized that you have been over charged or not? Once?
I think the answer mostly is No. It is not our mistake but we are very lazy and believe that everything will go fine and honestly speaking they don’t. It is always good to be vigilant. If you are not, then don’t blame others for your losses. AMC gets millions to be managed and they have a systematic way of doing things. There are many such AMCs and all of them have only one single goal get the best of returns. Each AMC have their own super professionals who are good at managing the funds and they do their best to get the best returns.
Now, the AMC have been told not to charge the Entry Load, they wanted to make money by exit load. Exit load as the name suggests, when an investor leaves the particular fund, he has to pay certain amount of commission as he is leaving before the life cycle of fund completes. SEBI wants the money to be parked and so does the AMC hence there is no freedom to investor in this case. The regulator has allowed fund houses to charge the exit load within the stipulated limit of 7% and without any discrimination to any specific group of investors.
The fund houses were charging differently for different class of investors depending on the amount of subscription that means. If someone has invested more than a lakh then the charge was only 2% and someone who has invested Rs.10,000 7%. This has been brought into the notice of SEBI and I don’t know what is going to be the result of such a thing.
Fund houses are very smart they somehow or the other ensure that they make money by taking it away from the investors. They are one of the coolest lot to make money easily from others money. It is good to know about these things.
Engineer's Finance 