After more than three years, mutual funds are witnessing huge inflows from investors. Thereby proving, once again, that retail investors get in when the market begins to rally. But, as soon as the market goes down sharply, or moves sideways for a prolonged period, they lose patience and look for an exit. Our analysis of mutual fund flows data over the past 15 years has shown just that. Huge inflows have been reported at high market valuations. This poor sense of timing leads investors to low returns and, hence, they prefer to fixed-income investments that offer smoother returns in contrast. In our Cover Story, we analyse this behaviour of investors with past data with an exclusive survey to judge current investor sentiment. You will read about what drives this behaviour and where you should expect the market to be headed based on different economic parameters.
On the topic of investors’ trying to time the market, dynamic equity plans of mutual funds, which are supposed to free the investor from trying to time the market, have failed at their job. Our analysis has shown that majority of the schemes have even failed to outperform a systematic investment in an index over the past three years. We are not surprised. Turn to our Fund Pointer section for more.
As we have highlighted in the past, pension plans of insurance companies are a bad deal. What is the other safe and smart option available to savers to create a solid retirement corpus? In the Retirement section, our columnist and legal expert, Shirish Shanbhag suggests a far better and tax-efficient option— public provident fund.
In her Different Strokes section, Sucheta writes on the stand taken by RBI governor Dr Raghuram Rajan against the key recommendations of the Financial Sector Legislative Reforms Commission. Over the years, Moneylife, as a pro-consumer entity, has noticed that it requires persistent efforts and loud media reports to secure action against the exploitation of financial consumers. Would Dr Rajan reassure financial consumers that they are soon going to have a system that is just and fair?