small investor, financial literacy, financial awareness, financial inclusion….what an amazing array of words we have created for bureaucrats, politicians, businessmen, capital market pundits to meet and eat!

Frankly if you want to climb the Himalayas you need to join a Gym get into good shape and then climb the Himalayas.

In the investment arena you have bureaucrats with indexed pensions regulating a market in which they do not have the guts to invest. Many of the promoters who enter the markets have no respect for the regulator or for the little fool who parts with his money. So one day if the promoter is caught with his hand in the cookie jar, he breaks the jar and goes away to do something else. Amazing how our regulators take a fee and give a license to anybody and everybody who claims to be interested in the business. Once upon a time there were 600 category 1 Merchant bankers, and there was enough business for about 6 of them. Every group worth his salt had a finance company which was a CAT 1 Merch Banker!

Then everybody became a member at NSE (including yours truly through a corporate entity). Then zillions of them closed down.

Now the only 2 businesses in the financial services business which makes money are banking and broking. Life insurance and mutual funds in the current form will not make money unless there is something which I cannot understand. If you thought brokerage was so low and it cannot be profitable, think again. If you invest Rs. 100,000 in a mutual fund, SEBI decides how much the asset management company can make. If you buy a ULIP IRDA decides your profit margin – and post 1st Sep the margins would have been crushed.

However in brokerage business you can go into the market with Rs. 100,000 and lose Rs. 100,000 to brokerage. Sounds cruel, well I have heard horror stories – readers are welcome to share their experiences.

What can the regulator do? Put a limit on how much brokerage a brokerage firm can charge from a client – either as a %age of his / her portfolio or as a % age of the profit that a customer makes.

Will it happen? Of course not.

Should it happen? But of course. 🙂

PS: I read somewhere that so much of good legislation has happened in the past one year that the Retail investor’s life will now be fine. The changes being the changes in banking, Irda, abolishing of mutual fund loads,….

BUT I am sure that things will not change anything for the ‘retail’ investor – after all there is no law against foolishness :). And the retail investor is very poor in execution.