Saturday, December 3

Are you getting the right mutual fund advice?

A new investor messaged recently: he asked for help with his mutual fund investments in his favorite mutual fund forum. And the advice confused him even more. “People started recommending random schemes and then they were debating about active v passive investing. I am totally confused,” he confessed. Our friend is not alone. A large number of investors, especially new ones, depend totally on various mutual fund sites and forums for their investments.

This is not a rant against mutual fund forums or recommendations. Even we offer recommendations (see our mutual fund recommendations here) and respond to readers’ queries. We also follow certain groups because sometimes there are meaningful discussions on mutual fund investments. But if you are dependent entirely on them for your mutual fund investments, reviews, remedial actions, you may be in for trouble.

No, this is not to blame you or those who are advising you. But a few observations, and from our experience in handling questions. Most often the questions are incomplete. New investors never offer full background information. Even crucial factors like financial details, goals, investment horizon, risk profile, etc. are never offered. A simple question like can I buy or sell this mutual fund scheme is complete in itself for them. But an expert would struggle to answer the query.

You would have noticed most real experts always add qualifying remarks to their response. Sure, most new investors find such remarks confusing. They often complain that the answer is not complete. But the trouble is, as explained earlier, without complete information about the investor, it is never easy to recommend investments or buy- sell recommendations.

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