disclaimer: I do not even hint that you will learn about AA by reading this piece, but here it is.

We now officially have 100,000 people licensed to sell mutual funds, and about 50,00,000 people licensed to sell ULIP. All of them of course have to understand asset allocation. Presumably.

So the asset allocation fun happens like this. A client wants to do a SIP of Rs. 100,000 per month. Now depending on the IFA and his background he will suggest 20 funds of Rs. 5000 each or 5 funds of Rs. 20,000 each. Greater chance of the former than the latter.

Now searching for 20 funds is not easy, but the client is impressed by such a big offering – Hindi mein isko ‘pitara’ kehte hain!

So now the IFA or the bank RM has to tell him why he should invest in large cap, mid cap, multi cap, small and micro cap, foreign funds, Asian fund, American bluechips, European, South American, funds.

Oh he has to now invest in value, deep value, growth, growth with aggression fund, equity savings fund, equity income fund also.

Assuming that the client has to invest only in equity.

That is hardly the case.

Client needs to invest in debt too.

So here: liquid fund, short term debt fund, longer term debt fund, longer term debt fund, gilt fund – short term and long term of course. Of course there are Fixed Maturity Plans too.

Then for some people a combination of Monthly Income plans, balanced fund (flavor of 2017 thanks to 2 fund houses selling this very very aggressively).

Now, all the mutual funds have all these funds but NOBODY knows when what will sell. So for the common man this is a clear case of confusion. Forget the investor, the IFA who is supposed to tell you the difference between the various funds is mostly ‘stumped’ if you ask her why so many schemes…she will not have an answer for that.

Why this obfuscation?

No clue, but it has to lie in the sales team requests. It is easy to sell ‘more funds’ rather than ask clients to invest Rs. 55000 single sip..but he will happily sign 11 cheques of 5k.

The IFA feels secure that he has given a client 11 funds – some at least will do well. Either growth or value – one has to do well, right?