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Mutual Fund Agents & Distributors Commission & Misselling Cases

Shitanshu Kapadia
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Mutual Fund Agents & Distributors Commission & Misselling Cases

Do you know Mutual Fund Agents & Distributors makes a lot of money from the commission? You must have seen dedicated desk at banks, where so-called mutual fund agents named as relationship managers are sitting. They are trained to promote mutual fund and insurance products which earns them a hefty commission. They try to sell products without understanding investor need and risk profile. Their sole aim is to increase their revenue income or complete the monthly target.

Please note that any regular fund (except direct fund) where you invest your money you are directly or indirectly paying commission to the agent. Most of the mutual fund agents, sub-brokers and distributors work primarily for the commission, investors interest is a secondary part for them.

Misselling cases mutual funds

If you are mutual fund investor it is very important for you to understand different mutual fund commission rates and how mutual fund agents is doing mis-selling of mutual funds. In this post, we will talk about these aspects.

Also Read – Top 10 Direct Mutual Funds – 5 Star Rating by Value Research Online

Mutual Fund Agents & Distributors Commission

The mutual fund agent commission consists of three parts.

Commission from Client

A first commission is a direct commission paid to the agent for the services. This amount is in between 0.5% to 2%. This commission is not one time it is periodic every time you make an investment, you need to pay this commission. So, whenever you are selecting mutual fund agent figure out this commission against what type of advice you are getting.

Upfront Commission

An upfront commission is a commission paid by the asset management companies to the agent for the first year. The commission rate varies from fund house to fund house and type of mutual fund. The upfront payment for equity mutual fund is higher compared to debt funds.

Trail Commission

Trail Commission is the main source of earning for many mutual fund agents. Trail commission is the commission paid to an agent by asset management companies. This commission is paid to the agent every year till you remain invested in the mutual fund. Trail commission is calculated based on the percentage of the asset under management.

Trail commission is part of the expense ratio of the fund. A Trail commission from equity funds ranges from 0.2 – 1% and for debt fund it in the range of 0.1-1%.

So, mutual fund agent’s income purely depends upon investment amount and fund you select for the investment. The prime reason behind mis-selling of a mutual fund is for earning higher commission income.

Also Read – Direct Mutual Funds Platforms for online Investment in India

How to Identify Mutual Fund mis-selling?

There are various ways to identify mutual fund mis-selling.

  • If your mutual fund distributor is asking you to invest in New Fund offer, probably he is trying to mis-sell mutual funds, or
  • If agent is trying to sell mutual fund without understanding your risk profile, it may be case of mis-selling, or
  • If you are holding more sectorial and thematic funds in your portfolio which are sold by agent, it may be case of mis-selling, or
  • Your agent is trying to sell close-ended fund to you or if your portfolio holding contains majority of close-ended funds compared to open-ended diversified funds, or
  • If your portfolio contains majority of schemes which are not performing as per benchmark index, or
  • Making a false statement or sharing misleading information about mutual funds, or
  • Hiding associated risk of the scheme.

What you can do to save yourself from Misselling?

I hope as an investor you are clear with reason behind mis-selling. Here are few quick suggestions which investor can follow to avoid mis-selling.

  1. Deal only with SEBI Registered Investment adviser.
  2. Ensure that investment advisor understand your risk profile and suggest proper plan matching with your financial goals.
  3. Asking enough questions to determine if the recommendation is right.
  4. Check how the investment adviser is backing up his/her recommendation. It should be based on the facts and figures.
  5. Invest only if you are convinced about product and it is matching with your financial goals.
  6. Prepare direct mutual fund compared to regular mutual funds.

Note – Idea of this post is to make investor aware about mis-selling happening at certain banks on the name of relationship manager. It is not against mutual fund agent or their profession.

CAN SLIM – Stock Market Technique for identifying Best Stocks

Shitanshu Kapadia
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CAN SLIM – Stock Market Technique for identifying Best Stocks

CAN SLIM is a stock market technique for identifying best stocks. Identifying the best stock for the investment is a difficult task especially if you are new to the stock market.

Let’s do one small exercise, take two minutes and answer one simple question.

  • How will you identify the best stock for investment?

Well, your answer will be stock market research, fundamental analysis, stock market tips, a recommendation of stock market brokers, technical analysis etc. Whatever the case, one thing is sure that if you don’t do your homework correctly you are likely to lose money in the stock market. You have to be firm in the selection of stock. If you don’t know how to select stock here is a stock market technique to identify Best Stocks for Investment. The method is known as CAN SLIM. CAN SLIM is the combination of fundamental analysis and technical analysis.

CAN SLIM

Also Read – Best Stocks to buy in India for long term Investment

CAN SLIM – Stock Market Technique

CAN SLIM is a popular stock market technique for identifying best stocks for investment. It is techno fundamental strategy. CAN SLIM is a technique developed by the co-founder of Investor’s Business Daily Mr. William O’Neil in his book ‘How To Make Money In Stocks’. He is among Top 20 greatest investors of all time. CAN SLIM means a combination of fundamental and technical analysis, technical analysis suggests an entry and exit point for stock and fundamental analysis gives confidence of holding stock. In short, it is a combination of “WHAT to buy or sell” (Fundamental) and “WHEN to buy or sell” (Technical). This strategy gives benefits of both worlds.

The CAN SLIM stands for

  • C – Current Earnings
  • A – Annual Earnings
  • N – New
  • S – Supply and Demand
  • L – Leader or Laggard
  • I – Institutional Sponsorship
  • M – Market Direction

Current Earnings

Current Earning is an important parameter for Shortlisting Company. A profit of the company should be growing. You will find current earning in a quarterly result statement of the company. The company profit should be growing at least around 18-20% quarter-on-quarter. (Last three to four quarters). Big accelerating earnings growth attracts the attention of large institutional investors and is expected to take the stock price higher.

Annual Earnings

Current earning (Last three to four quarters) is short term view. You cannot ignore the long-term annual profitability of the company. You should try to find a company with consistent, stable and sustainable profits. The profit should be growing 20-25% over the past three years. A return on equity should be 17% or above.

New

The new thing plays a significant role in the success of a company. Most of the company who turn out as multibagger has one thing common newness and innovation.

New idea, new product or services, new market, new leadership, new condition or innovation is important for growth in the market. You should find out a company that constantly innovating in product and services. A notable example of this is Apple’s iPhone.

Also Read – 10 Multibagger Stocks of Jhunjhunwala Dolly Khanna and Porinju

Supply and Demand

The demand for the stock must be high while supply is low. A share in short supply and higher demand, have the inherent potential to rise faster. And oversupply of shares and weak demand will cause the price to decline. You should look for stocks that have stronger buyer demand especially institutional investor must be interested in the stock. It is an important parameter when it comes to technical analysis of the stock.

Leader or Laggard

Mostly all industries have few leaders and many laggards. You should find out a leader and forget laggard. In order to find a leader you can use ‘relative price strength’. A relative price strength should be 70 or higher. Another way to identify leader is by PE ratio. PE ratio of leader would be comparatively higher compared to laggard.

A stock in a leadership position helps a lot. The biggest market winners tend to be the fastest-growing leaders in a strong and rising industry.

Institutional sponsorship

Institutional sponsorship or investors means FII, Mutual Funds, Insurance companies etc. An institutional investor should be interested and have a stake in the company to support a hike in price. This happens if a stock is very good for investment.

Market Direction

A Market direction means the market trend. It is generally seen that stock moves along with the market trend. Use the market direction to time your buy and sell decisions. Market direction is categorized into three confirmed uptrend, market uptrend under pressure, and market in correction. As per CAN SLIM one should invest during times of definite uptrends.

Over to you

The CAN SLIM method is the simplest method to identify stocks that have a greater possibility to see a price appreciation. The entire CAN SLIM method shows seven traits and all of them should work together. Let me explain – When current earnings, annual earnings are on the growth trajectory and new product or innovation take place (the CAN of CAN SLIM method) it attracts investor and demand of stock is likely to increase (supply and demand of method). These types of stocks are likely to become a leader and institutional sponsors will be surely interested to buy such stocks. This will be beneficial to the investor during a market uptrend.

I hope CAN SLIM method will help you in identifying the best stocks for investment.

Do you use this method for identifying stocks for investment?

Free Virtual Debit Cards in India for online payment

Shitanshu Kapadia
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Free Virtual Debit Cards in India for online payment

Virtual Debit Cards in India – Virtual Debit card means prepaid card. It is like a normal debit card, but it is virtual, not real. This type of card is also known as Electronic Card or e-card. You can use this card only for online transactions. It is an easy and secure way of transacting online without providing card information. If you are looking for a good virtual debit card here is a list of Free Virtual Debit Card in India for online payment.

Virtual Debit Card

What is Virtual Debit Card?

A virtual Debit card is a card available either online at the website or inside Mobile banking app. You can use this card for doing shopping online. Virtual debit cards are cheaper compared to a physical card as no expense is involved in creating and shipping. Virtual Card cannot be used at PoS machines or ATMs for cash withdrawal or for recurring/ installments payments or for any other transaction that requires a physical card. The key features of the virtual card are given below.

Key Features 

  • The cash limit of this card is low. This card is valid until the expiry date which is mentioned on the card.
  • This card can be created anytime online after validation.
  • It is easy to use this card. Any customer having internet banking facility with transaction rights can create a virtual card.
  • No additional interest as a card is generated by using deposited amount in the account.
  • It is secured to use this card as card number is new and usage is mostly allowed only once.

Also Read – What is Virtual Credit Card and How does it work?

Fee Virtual Debit Card in India for online payment

Kotak 811 Virtual Debit Card

Kotak 811 is the first Free Virtual Debit Card. Kotak 811 Virtual Debit Card is offered on mobile banking app. This card is generated automatically once you open Kotak 811 account. To get your virtual debit card details, tap on 811 on the home screen of Kotak Mobile Banking App. You can find the card number, validity date on the front of the card and tap on ‘show’ to get your CVV details. You can use this debit card to make an online purchase. It’s an international virtual debit card.

Axis Virtual or Online Debit Card

Axis bank also offers virtual or online debit card. This card is offered complimentary on Axis ASAP account. This virtual debit card can be accessed online using internet portal or banking app for axis bank. You can get reward points on the usage of the virtual debit card. You can also opt for a physical debit card. Your virtual card will be blocked on receipt of the physical debit card.

SBI Virtual Card

State Bank Virtual Card is a limit Debit card, which can be created using the State Bank Internet Banking facility. The maximum amount of card permissible with SBI is Rs.50000. SBI virtual card is valid for 48 hours or for a single transaction. A customer of SBI can create virtual card anytime. SBI card is issued by marking a lien on the selected account and actual debit to the account will take place only when the Card is used. SBI virtual card is a domestic debit card. You can use this card for online payment in Indian rupee only.

HDFC NetSafe

HDFC NetSafe is an online secure payment solution by HDFC. The NetSafe allows you to generate virtual card by using existing physical card. You can daily generate 5 virtual cards. This card is valid for 48 hours. The maximum limit of this card is Rs.75000.

Why one should use Virtual Card?

A virtual card has no physical existence and it can be used only for the specific time period. It is less risky to use this card for an online transaction. The card usage is protected via OTP, which is sent only to a customer’s registered mobile number. This means a chance of fraud is very less. As this card does not exist physically it cannot be cloned.

The virtual Debit card has a low limit and it can be used only for online transaction. If you are a frequent user of a credit card for doing online purchase, you should think of using a virtual card as an alternative to a physical credit card.

Hybrid Funds – Key Features, Types and Benefits

Shitanshu Kapadia
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0
Hybrid Funds – Key Features, Types and Benefits

Hybrid Funds means funds made by combining two or different category of assets equity and debt. As hybrid fund invest in two asset categories investor can avail the benefit of both. The Hybrid Fund offers maximum diversification and moderate returns. A hybrid fund is a combo of equity and debt. There are various types of hybrid funds available to Indian stock market investors. The decision of investing in hybrid mutual funds depends upon investors risk profile and investment objective. Prior to recategorization Hybrid fund was known as a balanced fund.

Picture this: You’re at a buffet, and instead of loading up on just spicy curries or bland salads, you mix ’em up for the perfect meal. That’s hybrid funds in a nutshell! These mutual funds invest in a combo of asset classes, mainly stocks (equities) for that growth kick and bonds (debts) for stability. Sometimes, they even toss in a bit of gold or real estate to spice things up. In India, the Securities and Exchange Board of India (SEBI) keeps a close eye on them, ensuring they’re categorized properly so investors know what they’re getting into.

Why bother with hybrid funds? Well, life’s unpredictable, right? The stock market can swing like a pendulum, and pure debt funds might not keep up with inflation. Hybrid funds aim to smooth out those bumps, offering a middle ground. They’re managed by pros who tweak the mix based on market vibes, saving you the headache of doing it yourself. And get this – they’re accessible to everyone, from fresh-out-of-college millennials to retirees eyeing steady income. No wonder they’ve become a staple in many Indian households’ investment plans!

hybrid funds

How Do Hybrid Funds Work Behind the Scenes?

Ever wondered what happens after you invest? The fund pools money from thousands like you, then allocates it per the scheme’s mandate. For instance, an aggressive hybrid fund might park 70% in blue-chip stocks from NSE giants like Reliance or HDFC, and the rest in government bonds or corporate debts. Fund managers use tools like fundamental analysis and economic indicators to decide – it’s like having a financial wizard on your team. And with SIPs (Systematic Investment Plans), you can drip-feed investments, averaging out costs over time. Simple, effective, and oh-so-convenient!

Types of Hybrid Funds

Hybrid funds aren’t one-size-fits-all; they’ve got varieties to match your risk appetite. Think of them as different ice cream scoops – some bold, some mild. Here’s a rundown:

Aggressive Hybrid Funds

These are for the thrill-seekers! With 65-80% in equities and the rest in debt, they chase higher returns but with a cushion. Ideal if you’re young and can handle market dips. In India, funds like HDFC Hybrid Equity Fund have delivered solid gains over the years. Pros? Potential for double-digit returns. Cons? Volatility can keep you up at night.

Balanced Hybrid Funds

The middle child – balanced and reliable. They keep equity at 40-60%, blending growth with stability. Great for moderate risk-takers, like working parents saving for kids’ education. SEBI mandates no arbitrage here, keeping it straightforward.

Conservative Hybrid Funds

Playing it safe? These allocate just 10-25% to equities, focusing on debt for steady income. Perfect for retirees or those nearing big life goals. They offer regular dividends, acting like a pension supplement. But returns? More modest, around 7-9% annually.

Dynamic Asset Allocation Funds

These chameleons adjust automatically! Fund managers flip between equity and debt based on market valuations – high P/E ratios? Shift to debt. Low? Go equity-heavy. It’s hands-off for you, but requires trusting the manager’s gut.

Multi-Asset Allocation Funds

Why stop at two? These invest in at least three assets – stocks, bonds, gold, maybe commodities. In volatile India, they shine by hedging against inflation or rupee dips. A bit more complex, but diversification on steroids!

Equity Savings Funds

Sneaky smart – they use equity, debt, and arbitrage (buying low, selling high in derivatives) to minimize taxes and risks. Often treated as equity for tax purposes, they’re a tax-efficient hybrid option.

Arbitrage Funds

Though sometimes lumped in, these focus on price differences between cash and futures markets. Low risk, but returns hover around fixed deposit levels. Good for parking short-term cash.

Each type suits different life stages – aggressive for the young guns, conservative for the wise owls. Mixing types in your portfolio? Even better!

Who should Invest in Hybrid Funds?

Hybrid funds are comparatively safer bets than pure equity funds. These funds provide higher return compared to debt fund. This fund is suggested for conservative investors with moderate risk appetite looking for income generation or capital appreciation. The equity component of fund offers the probability of higher return, at the same time, the debt component offers a cushion against market conditions.

As there are multiple types of hybrid funds available in the market, as an investor you must be careful in the selection of the right hybrid fund. If you are a conservative investor go for conservative hybrid funds or Arbitrage fund. If your risk-taking capacity is higher you can go for aggressive hybrid funds.

Points to consider while investing in Hybrid Funds

One should consider following points while investing in Hybrid Funds.

Risk – A Hybrid fund is not completely risk-free. It is less risky compared to equity fund as debt component is involved.

Return – Hybrid funds do not offer guaranteed returns. The returns entirely depend on market condition and performance of underlying assets.

Expense Ratio – Expense ratio is one of the important factors while making a decision of buying a mutual fund. You should select a fund with a lower expense ratio.

Investment Horizon – A Hybrid fund is ideal for medium-term investment horizon. The recommended investment horizon for a hybrid fund is 5 years.

Tax on Gain – Long-term capital gain tax and short-term capital gain tax both are applicable to mutual funds.

FAQs

What makes hybrid funds different from equity or debt funds?

Hybrid funds blend both, offering balance, while pure equity chases growth and debt focuses on safety.

Are hybrid funds suitable for beginners?

Absolutely! Their diversification makes them less intimidating than stocks alone.

How are hybrid funds taxed in India?

Equity-oriented ones (65%+ stocks) get LTCG tax at 10% over ₹1 lakh. Debt-heavy follow debt fund rules.

Can I withdraw from hybrid funds anytime?

Yes, but check exit loads – usually 1% if redeemed within a year.

What’s the minimum investment for hybrid funds?

Often ₹5,000 for lump sum, ₹500 for SIPs – super accessible!

Do hybrid funds guarantee returns?

Nope, markets fluctuate, but their mix aims for steadier performance.

Wrapping it up, hybrid funds in India are like that reliable friend who keeps you grounded yet pushes you forward. With their key features like diversification and flexibility, various types to suit every taste, and benefits ranging from tax perks to balanced returns, they’re a no-brainer for smart investing. Whether you’re dodging market volatility or building a nest egg, incorporating hybrid funds can supercharge your portfolio. So, why wait? Chat with an advisor, pick a fund, and start your journey today. After all, in the wild ride of Indian markets, a hybrid approach might just be the ticket to financial peace.

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