Expense Account, Mint
There is a hilarious mail exchange a friend forwarded me between him and his portfolio management scheme (PMS) “relationship manager”. Friend invests money five years ago and forgets about it. 2011 tax time approaches and he pulls out the PMS to see how it did. Where did my Rs 8 lakh reach after five years of cooking? Rs 9 lakh? Shock and disbelief. It grew 0.87% a year! Does a quick check and finds that the Sensex grew 10% a year over that period. Asks PMS “relationship manager” what happened. PMS manager (I swear I am not making this up) says: look carefully, we actually gave a return of 4.62% per year. You get the figure of 0.87% because the difference is our charges. For managing your money, you see. I’ve advised friend to ride the bus called a mutual fund (buy out of the Mint50 list) and forget about these get-rich-quick PMS schemes. At least he got his money back. His other story… OK, OK, another time.
Expense account, Mint
here is a famous saying: you count hours and days, while the years just fly by. This looks certainly true of changes in the road rules around banking, insurance and mutual fund products in the year gone by in the world’s second fastest growing economy. It takes a sweeping look at the past 12 months to realize the magnitude of what just happened, whereas tracking each change as it happened was just one more story to be reported on. Now that the dust-up between regulators is over, at least for the time being, it’s a good time to take stock of the changes and what they mean for our money lives.
The year saw two major changes in banking as the regulator, the Reserve Bank of India (RBI), made significant changes to make our savings earn more and loans cost less. From 1 April, a new formula that calculates interest on money in the savings account has come into effect.
Expense Account, Mint
You could not have missed the large ads in the last two weeks, advertising 100% returns over the last year. Are they lying? Is this another scam? It is too good to be true. None of the above.
The advertised funds have indeed doubled your money over a year. And so have at least 100 other funds. No magic, it’s just that the market indices, the Sensex and the Nifty, have doubled over the last year as the Indian economy rebounds after reacting to the global slowdown. A fund would have had to do some really stupid things to give returns less than 100%—as around half the funds have actually done. You’d have been better off buying a passive fund than investing in these managed funds.