Mutual Funds alert! Avoid greed and become rich, but do not fall for these offers

Zee Business Money Guru show: Selling MF dividend plans, ULIP plans, promising risk-free returns like a bank, saying fixed maturity plans are like bank FD, all fall under the category of mis-selling.

Mutual Funds Mis-selling: There is no meaning of dividend in mutual funds as it's your money that mutual fund houses return to you from time to time. Photo: Reuters

Zee Business Money Guru show: Mutual funds are gaining popularity among the salaried individuals as they allow them to invest via plans that are monthly, quarterly, half-yearly and annually, whichever is suitable for them. The majority of the Mutual Fund investors choose the monthly mode (as told by the tax and investment experts), which is also known as SIP or Systematic Investment Plan. However, the limited knowledge of mutual fund investors can lead them to take wrong decisions. Sometimes they also become targets of mis-selling. To ensure they get their proper rewards, investors must do something that is in their interest. According to tax and investment experts, while investing in mutual funds or buying an MF scheme, an investor should immediately reject mutual funds dividend plan as the money given through dividend is investor's money and leaving it in the plan for a longer time will provide geometric growth to the money.

Elaborating upon how mutual fund houses execute this plan is Pankaj Mathpal, Managing Director at Optima Money in Zee Business Money Guru programme. He said, "Selling a mutual fund dividend plan, ULIP plan, promising risk-free return like bank, dubbing fixed maturity plan as Bank Fixed Deposit, etc. fall under the category of mis-selling." He said that in a mutual fund, there is no life insurance and hence Mutual Fund ULIP Plan is completely a mis-selling concept that an executive executes by luring investors with an offer where they can get higher returns along with life insurance. However, in reality, such a concept doesn't exist in mutual funds.

On Mutual Funds, Dividend Plan, Mathpal said, "There is no meaning of dividend in mutual funds as it's your money that mutual fund houses return to you from time to time after deducting some tax liabilities as well. So, it's better to avoid the greed for money in short-term and you should remain invested for long-term so that your interest should also earn interest and help your money grow geometrically."

Mathpal also said that mutual funds investment are subject to market risk and hence no one can guarantee a fixed return. So, if an investor avoids this opportunity being offered by the mutual fund houses to be greedy under their mis-selling trick, they can become richer through their investments.

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