‘Few investors hold equity MFs for 10-15 years’

Investors can benefit from systematic investments to get best returns



Investors can take advantage of the many simplifications done to the investment process through online systems and tools, says N K Prasad, President and CEO of Computer Age Management Systems (CAMS). He notes that investors do not hold equity mutual funds over the long term though data shows that they can earn good returns. Excerpts from the interview.

What are some of the recent simplifications in the mutual fund investment process to ease life for investors?

SEBI, asset management companies and investor servicing companies such as CAMS have brought about many simplifications during the last year that have eased investors’ lives.

The regulator recently permitted the instant access facility to select liquid fund schemes that allows repayment of money to investors on the same day within a limit of ₹50,000 or 90 per cent of the current value of the investment, making liquid fund investments instantly accessible on all days, including non-business days.

SEBI has permitted setting up of eKYC-based paperless MF accounts, based on biometric authentication, and OTP-based eKYC for setting up paperless and presence-less MF accounts, with an investment limit of ₹50,000 per year. AMCs have developed websites, and distributor portals to facilitate seamless electronic transactions by investors.

CAMS offers setting up online accounts and has launched myCAMS, a mobile app that allows investors to transact seamlessly at any time, which includes scheduling transactions.

We also offer a unique CAMS one-time mandate facility for investors to buy units of multiple mutual funds serviced by CAMS without having to issue cheques using net banking/NEFT/RTGS options for settlement.

CAMS has also facilitated cost-efficient servicing of systematic investments via National Automated Clearing House (NACH), standing instructions and direct debits.

Are some processes still manual and not moved online?

Yes. For example, the NACH mandate, which needs to be registered by the investor’s bank; first-time account set-up for investors desiring to transact flexibly through paper in addition to digital access; investors preferring to subscribe via cheques; those in remote areas not having access to biometric-based Central KYC (CKYC), remain mandatory manual processes.

In addition, certain critical account maintenance processes like change of bank mandate, nominee registration and transmission remain manual in conformance with regulations, offer document terms and industry best practices.

While digital options are offered by AMCs and CAMS, many investors and intermediaries continue to use paper for CKYC and account set-up.

How can investors get transaction information for tax purposes?

Most AMCs send financial year-end statements to investors via e-mail or physical copies. An investor can seek a statement of account via mail-back services offered by CAMS or make a call to the call centres operated by CAMS or AMCs.

CAMS has launched a new mail-back report based on PAN of the first holder, which provides details of subscriptions, dividends paid or reinvested, redemptions during the financial year across all MFs serviced by CAMS, which is very helpful for tax purposes. All these services are offered free of cost to investors.

Based on your data, what are the benefits of holding MF investments over the long term?

Most equity mutual funds have delivered superior risk-adjusted, tax-efficient returns over the long term, despite market cycles and volatility in capital markets.

There are many schemes that have compounded and multiplied the original investment 50 times and more in the last 20 years.

From our data, we see that very few investors stay invested for a long period of 10-15 years. The average ageing of equity assets is just under 1,000 days.

Investors can benefit from the disciplined nature of systematic investments to get best returns from the volatile equity asset class over a long period of time.

Ideally, investors should redeem equity mutual fund investments for meeting life-cycle financial goals as professional fund managers manage the volatility and market cycles.

What has been your experience with direct plans; how are retail investors taking to it?

Nearly 41 per cent of industry assets are currently in direct plans. Initially, institutional and HNI investors moved to direct plans.

Of late, we are seeing even retail investors moving partly to direct plans, evidenced by over 20 per cent gross sales of equity in direct plans.

How do you invest in MFs through regular plans or direct plans?

My personal investments are in direct plans.

How can investors without a PAN invest in mutual funds online?

Investors can set up an MF account via eCKYC and various digital options. Such investors, however, need to adhere to the limit of cumulative investment of ₹50,000 per mutual fund per annum.

How can investors start and stop SIPs?

Investors having an MF account can commence SIP via paper by submitting request for registering systematic investments and NACH mandate.

Investors preferring the online option can use iSIP and register for net banking with the AMC as the biller.

Investors can stop a running SIP any time by submitting a request at official points of acceptance to cease the registered SIP or use the online option.

Given the banking settlement cycles, investors are advised to submit cancellation requests well before the subsequent SIP date published in the scheme offer document terms.

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