eading the Irdai (Insurance Regulatory Development Authority of India) draft on updating regulations for unit-linked insurance plans and traditional policies, you get the impression that somebody gave an aspirin when what was needed was a heart surgery. Product structures in finance are taking on a new importance globally because mis-selling and unsuitable sales can be reduced by taking the tricks and traps out of these products. This simply means that the costs and benefits are better defined and marked so that investors are able to understand the features of the products properly. Product structure rules also deal with early exits and their costs so that investors are not trapped in products they buy.
Starting soon your mutual fund will cost less. The capital market regulator, the Securities and Exchange Board of India (Sebi), has put out rules that further tighten the mutual fund industry norms to take care of the loopholes found and misused by the industry. You can read the circular here. There are four changes that impact you.
One, for costs related to the scheme, mutual funds will now pay only out of the scheme account and not from any other source or account. What was happening was this: some of the bigger fund houses were using their profits to pay commissions to distributors to kick up sales. Remember that after a certain scale, it does not cost much more to run a fund house; so as the fund size grows, costs should actually come down.
A short video series aimed at a better informed investor
Episode 1: Stock markets scare people because of the risk of volatility, but there is a lower risk way to get the returns equity can give. Watch!
Other links to the same video:
and on Facebook
It is a little surreal to hear an economics Nobel laureate flag issues and provide solutions to some issues that personal finance writers across the world have been flagging for many years now. The occasion was the RH Patil Memorial Lecture to mark 25 years of the National Stock Exchange. Patil was the first chairman of the exchange that was set up in the aftermath of the 1992 stock market scam. Delivering the lecture was Robert C. Merton, Nobel Prize-winning economist and professor of finance at Massachusetts Institute of Technology.
Will Smith was clearly one of the big stars at the HT Leadership Summitlast week. The packed hall of suits and saris at Taj Palace Delhi went a little crazy when he bounded onto stage emitting war cries to get the energy of the room up. That prompted actor Farhan Akhtar who was moderating the conversation to say: we can do this for 30 minutes and then take questions, to another round of mass hysteria in the room. But jokes apart, Smith the star came across as a feet-on-the-ground person who found his spotlight the minute he got himself into a plan. In fact, some of the one-hour talk was around money and I found lots of money lessons in that time. Here are five of them.