A fund is known by the label it keeps | Latest News India - Hindustan Times
close_game
close_game

A fund is known by the label it keeps

None | ByDhirendra Kumar
Aug 26, 2012 09:40 PM IST

SEBI’s move to evolve an official fund labelling system will help investors make the right choices. Dhirendra Kumar writes.

SEBI’s move to evolve an official fund labelling system will help investors make the right choices.

HT Image
HT Image

The week before last, the markets and mutual funds regulator Securities and Exchange Board of India (SEBI) had announced a large set of changes to the new rules that govern mutual funds, IPOs, financial advisers and a few more. The SEBI board has taken the decisions regarding these changes and they’ve been announced publicly but the formal notifications and the actual regulations are yet to be issued.

Hindustan Times - your fastest source for breaking news! Read now.

One of these is something that finds only the briefest six-word mention in the press release, has attracted no comment in the media and yet could end up having a huge impact on how investors evaluate and choose (or reject) mutual funds.

SEBI’s press release says that the regulator will “Evolve a system of ‘product labelling’”.

Product labelling basically means creating a categorisation system that helps investors make sense of the large number and variety of funds that are available. From cars to airline tickets, consumers need such categorisation while making purchase decisions in all kinds of products where the choice is large and the product complexity high.

However, in the case of most non-financial products, the biggest anchor for the categorisation is the product price.

It’s unlikely that a car buyer will accidentally buy a Mercedes instead of an Indigo, but in the absence of the pricing signal, equivalent mistakes are quite common among mutual fund investors.

However, while SEBI prepares an official labelling system, investors have a number of other ones available which may not have a statutory status but are just as useful to the investor. Most fund research outfits have evolved their own systems, with Value Research’s system being the oldest, having been launched in 1992 and evolved continuously since.

A labelling system where investors can start their investing process with choosing a category that best suits their goal would be invaluable, provided the labels can be mapped to real-world investing needs and the funds which carry the label really do fit the bill.

Unveiling Elections 2024: The Big Picture', a fresh segment in HT's talk show 'The Interview with Kumkum Chadha', where leaders across the political spectrum discuss the upcoming general elections. Watch now!

Get Current Updates on India News, Election 2024, Mukhtar Ansari Death News Live, Bihar Board 10th Result 2024 Live along with Latest News and Top Headlines from India and around the world.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On