More the merrier – or not?

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 Posted by Quantum on Thursday, August 20, 2009

There are 38 mutual fund houses at present and more than 1,500 mutual fund schemes.

That is a recipe for confusion!

To further add to the permutations and combination, there are different plans and options within each scheme. With more mutual funds and mutual fund products sprouting up every month, the process of deciding which mutual fund to invest in is becoming more complex for investors.

But why is there so much confusion? Do we really need so many different types of schemes and plans?

Confusopoly

Scott Adams, the inventor of Dilbert comic strip (www.dilbert.com), introduced the word confusopoly in the world of investments. The word is a combination of confusion and oligopoly, defining it as "a group of companies with similar products who intentionally confuse customers instead of competing on price". Examples of industries in which confusopolies exist (according to Adams) include telephone service, insurance, mortgage loans, banking and financial services.

Structured financial products seem to exist on the premise that the more complicated the product, the better it is.



Source: http://dilbert.com/strips/comic/2008-01-31/

While economists may laud the virtues of choice and free will, in case of mutual funds schemes, more is definitely not the merrier because the foundation on which so many schemes have been created is flawed.

In the past, many mutual fund houses had the same underlying investment objective of a mutual fund, changed the name, created a new “wrapping paper” around the old product and sold it to gullible investors.

The rule for many financial services companies seems to be: whenever there is no true product differentiator or price advantage to talk about, let’s shift the focus towards creating enticing communication and advertising campaign. And then let’s offer hefty commissions to distributors; give them expensive gifts and holidays abroad as an incentive to sell our products. Every rupee spent on advertising, commissions etc. goes directly or indirectly from the investor’s money! To crack down on these malpractices, Sebi has recently abolished entry loads on Mutual Funds, which will curb the wrongdoings to some extent.

At Quantum Mutual Fund, we never wanted the regulator to tell us to do what we felt was right. We were the 1st and only Mutual Fund which decided to take the Direct to Investor Approach voluntarily
From day one.

Quantum Mutual Fund has created simple products that make sense to our investors. For any investor wanting to invest in equities, we have one flagship diversified equity fund - Quantum Long Term Equity Fund

We do not believe in launching sector funds that follow fads and soon die off. The only 3 variants for investing in equities we have are an ELSS scheme, an Index Fund ETF and a Fund of Funds because they all serve a different and meaningful route for creating a well balanced, diversified portfolio.

If you want to earn good returns on your investments through a process driven method which aims to avoid unwanted risks, we would be happy to touch base with you and answer all the questions you may have about investing in the Quantum Long Term Equity Fund .

However if the aim of an investor is to make highest returns in the stock market, hook ya crook, then the Quantum Long Term Equity Fund is not for such an investor.

Happy investing – and safe selecting! Always make an informed choice. Do let us know by adding comments to this article!