If you have grown up in an Indian metro chances are you are dealing with a lot of government run or supported institutions. People do not like or in most cases do not trust those institutions. A bank statement has to be checked regularly to see if some new charges have been added, given a choice people go to a private sector hospital, Jet Airways vs. Indian airlines is clearly favoring Jet. One of the private sector institutions that the media loves us to believe are the mutual funds.

Surprisingly or not there are too many people who swear by the mutual funds and a HUGE number who hate them. The direct tax code is making mutual funds an easier option than direct equity by bringing in a capital gain tax so perhaps the popularity of the mutual fund is likely to go up. However if tax was the only consideration I would rather buy a ulip and take the proceeds tax free. The media keeps saying (their knowledege in many cases is restricted to reading mutual fund brochures) ‘you cannot pick stocks’. Look at some of the research guys (my job forces me to read at least 50 research reports a week) and some of the fund managers and you will be convinced you can pick stocks far, far better than them.

Also fund managers are benchmarked against their peers – very few fund managers (young ones) can dare to pick a portfolio very different from what the successful funds are doing. I have heard one trustee ask : ‘if that share is good enough for ….fund why is it not good for your scheme’. For a fund manager it is heads you lose and tails you lose. So what does a really smart fund manager do? Please the trustee. And please the media – which does a quarterly or even a monthly beauty parade. And the judges of this beauty parade cannot calculate the NAV, but can write articles on fund manager performance and even tell the common man, ‘you cannot pick stocks’. Amused.

There are too many people beating the fund managers these days – except the top 4-5 funds like Top 200, dsp 100, hdfc equity,…and a few others. 43 fund houses, 500 schemes to buy 200 listed shares is a tad too much. Have to agreee with Mr. Bhave. Sorry Amfi.