Mutual funds in the aftermath of October bloodbath

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: exposed to two market risks – one on the portfolio where the assets purchased change in value with the market, and then also on the traded price of the units which are listed on the market. Hence, this avenue could as well be detrimental, say sceptics.

The point is that investing in mutual funds, like any other investment, will be fraught with risks. There is no wishing it away and this is something that the retail investor has to come to terms with. And this is one area where the regulator will have to look into – investor education.

“My colleague, who is a double graduate, still thinks that mutual funds and shares are the same,” says Prabal Sarma, a Mumbai-based executive. There are a lot many initiatives under way and there is enough groundwork done. However, a lot is still left to be done and this is one of the key learnings from the bloodbath.

Sebi has, interestingly, taken an initiative in this direction that must be lauded.

And that is undertaking a survey to understand the Indian investor’s psyche, their preference for investments in different instruments, like equities, bonds and mutual funds and to know the reasons for not investing in securities market.