Scrap the Entry Load
SEBI’s proposal to scrap the entry load when people invest directly in mutual funds is laudable. The direction of thought is correct because it is the investors who eventually make up the mutual fund industry and anything that helps them is good for the industry as well. It would perhaps be even more logical to scrap the entry load altogether. There is something very wrong about an entry load both from the investors’ point of view and that of mutual funds. It is difficult to understand why investors should pay a charge for investing money. From the funds’ viewpoint, they are losing an opportunity to convince investors that mutual funds are the best investment avenue. Scrapping entry loads will increase investment substantially. Perhaps an exit load for redemption within a minimum specified period could remain. This would be consistent with the general principle applicable to investments redeemed before the end of a bare ‘minimum commitment’ period.
An ‘entry load’, as its name suggests, is not customer-friendly. The mutual fund industry is the only one where an investment incurs a cost on entry instead of earning income. Ideally, funds must meet all costs from the income they earn by deploying the assets under their management. It is unfair to ask investors to bear the cost and, indeed, damaging for the industry in the long run. We often wonder why more people don’t invest in mutual funds. Illogical charges, like entry load, are not the best way to attract investors. The entry load is often the equivalent of interest income for three or four months. No wonder many investors do not go the mutual fund way!
Kamal Thacker, 71/3A Purnadas Road, Kolkata 700029

Read the Fine Print
Apropos “Watch that Credit Card Spend” (MoneyLIFE, 13 September 2007), credit is really a trap because once you take a loan, you pay interest on it and, naturally, the principal also has to be repaid. There is a famous saying “Jitni chadar ho utne pair pasaro” (spend as per your income). The telemarketing calls from banks and credit card companies show that credit is easily available today. A trap is laid by saying it is free of cost but there are always interest implications and other charges. One must read the terms and conditions, read the fine print which mentions charges and read between the lines before being lured by freebies. Remember nothing is free. One has to pay for services or credit.
Mahesh Kumar, Kolaba Chambers, C-25/5, Connaught Place, New Delhi 110 001

Great Interview
The interview with my favourite actor Amitabh Bachchan in your 30 August 2007 issue was very interesting. It has been a long time since the legend has given such a long interview to any magazine and he has talked about topics which he has not discussed before. It was a great read. On behalf of Amitabh Bachchan’s fans, I thank you for this great interview. Keep it up.
Abdul Rahim, Chennai, by email

Retirement Plan
I am a regular reader of MoneyLife magazine. I am 37 years old, married, blessed with a three-year old son and working for a BPO. I am not very happy with my job and plan to retire early, say by the age of 47 years, provided my financial planning works out well to support me after retirement.
I have seen mutual fund advertisements where an investment of a lakh of rupees becomes Rs22 lakh over a period of eight years (from 1999 to 2007). Kindly advise if I invest in such mutual funds a lump sum of five lakh rupees for 8-10 years, what is the chance that I will be able to make a crore of rupees by 2017, when I will be 47 years old? Kindly advise me which mutual fund schemes will give me such returns over a 8-10-year timeframe.
Omar Khan, by email

You would have noticed the legend that accompanies all equity and fund investments - that they are prone to risks and past returns are not necessarily an indicator of future returns. MoneyLIFE does not provide individual advice. We crunch the numbers and give you facts; the ultimate decision has to be yours. We would also advise you to be an alert investor, not expect to just sign a cheque and forget about your investment until you are 47. -- Editor

Credit Card Blues
My father-in-law, a senior citizen, has a Stanchart credit card and was later sold a Manhattan credit card by their sales agents. He was not informed that if he does not use his Manhattan card in the first six months, he would have to pay a penalty charge. He did not use his Manhattan card and they debited him Rs2,000 and recovered the money from his savings account with Stanchart. They deactivated his existing Stanchart credit card, which had a credit balance of Rs17,000.
Repeated calls to them over the past three weeks proved futile. One executive said we need to de-link the regular card and the Manhattan credit card. The executive assured me that the card will be de-linked by 6th September, as the penalty charge had been reversed and there were no overdues. On 11th September, it was still not done and I was told that the card cannot be de-linked if you have a savings account and it would require three more days. Even when the cards are de-linked, we will need to approach Stanchart again to activate the card which has a Rs17,000 balance. Please publish this in your esteemed publication so that in future no one gets harassed in this manner.
Puneet Singh Kochar, by email

When we took this up, Stanchart replied:
Mr Mohinder Singh Narula has been our customer since 1995. There is a nominal charge of Rs.250 that is debited, if there is no usage for six months. This is communicated to all the customers through the tariff of charges that is sent along with the credit card. All charges debited to customers are intimated and Bank does not debit any charge without prior communication. Non-usage fee of Rs250 was debited to the customer card account in February 2006. We have been sending the statements to the customer’s mailing address updated in our records. Our records do not indicate that the customer contacted us earlier, disputing the charge of Rs.250 against the non-card usage charge. Since we did not receive payment towards this, financial charges were debited and got accrued over a period of time. Owing to the overdue in the card account, all cards, which were linked to this account, were invalidated on 23 October 2006. This is as per our standard practice. Subsequently, during the month of November 2006, the Bank had reversed these charges and had nullified the outstanding in the account as there was no activity/repayment in the card account. Based on your email, we have spoken to the customer, clarified the matter and communicated to him that the card is being reinstated. I do understand that the customer’s request for the activation of the card should have been acted upon much faster. Thanks for bringing this to our attention. We are very much committed to “Treating Our Customers Fairly” and will continue to improve.
Sai Narain CDK, Head Service & Strategic Initiatives, Standard Chartered Bank, by email

ULIPS Are Sold Like Mutual Funds
I read MoneyLIFE regularly and, indeed, it is very useful and informative. In the world of complex finance this provides a great overview. One thing I would like addressed is the recent IRDA guidance on ULIP-based insurance schemes. IRDA created panic among the public and quickly retracted its earlier statement. What is the real story? Is ULIP a good investment or not? How can one exit these schemes with minimum damage? The ULIP agents sell it as a mutual fund, which is very misleading and amounts to downright cheating. You would do a great public service if you address this.
Sangeeta Bhonsle, New Delhi, by email

Portfolio Advice
I congratulate the MoneyLIFE team for innovative style of research and recommendations. I have been a subscriber since its launch. As a retail investor, I am benefiting more since I started reading MoneyLIFE. I wish to clean up and reshuffle my portfolio, since I am stuck with some scrips that are not moving up for a long time. I request the ML research team to analyse an enclosed Excel sheet and give me a word of advice about each scrip.
Irshad Ahmed Khan, Nagpur, by email

We regret we will not be able to analyse individual portfolios. However, we advise you to keep reading MoneyLIFE and follow what we have to say about your specific scrips when they come up in our unique stock screens from time to time. -- Editor