India’s business houses are hardly the paragons of virtue as everyone knows. Many of the business houses are known to siphon money from the public companies to their private coffers through various legal and illegal means. It is difficult to find a company in India which has good corporate governance and the trust of investors. […]
Any BRICs investor can tell you intuitivity without performing extensive spreadsheet analysis that putting money into debt has proven to be more profitable than equity over the last five years. Now an article from PIMCO runs through the numbers and shows that investing in emerging market fixed income has been much more profitable than equities. […]
I have always said that investing in Indian mutual funds is a dumb idea given the lack of regulation , under performance, high fees and front running and fraud conducted by mutual fund managers. It is best to invest in a good ETF with low fees such as the Nifty Bees ETF which was one […]
Mutual Fund Companies have seen a steady growth driven by the growing financial assets being generated by the fast growing Indian economy.But the Mutual Fund Industry like other sectors such as Real Estate and Telecom too has come under the spotlight for some illegal activity.While you can’t call the industry corrupt because of some fraudulent activities it does raise questions on the industry ethics.Top Mutual Funds in the country like HDFC and L&T have been fined by the stock market regulator SEBI for front running.For those who don’t understand what the term means,front running is an illegal activity whereby a fund manager or fund official makes personal gains by making trades on his account before doing a trade for the fund.This causes losses for the fund investor and is akin to stealing.However like other corrupt practices in the stock market industry,SEBI lets them go with small fines which don’t deter more such frauds.It is also not unknown that some fund managers connive with company promoters and market operators to rig and do circular trading.Not only is this a problem,another massive problem with the industry is its underperformance as compared to the benchmarks.While earlier mutual funds were known to outperform the benchmarks like the Nifty,a recent Crisil study has dispelled this myth.Given these disadvantages of mutual fund ,it is time to invest in Indian ETFs though not a lot of variety exists in the Indian stock market yet.
Mutual Funds are one of the most common ways to invest in equity and debt and a large mutual fund industry is involved in this endeavour.There are large number of high paying professions in Wall Street which depend on the mutual fund industry which include stock brokers and sales persons.However the amount of cost of mutual funds is not proportionate to the gains they give out.This is the reason that Exchange Traded Funds (ETFs) and passive funds which have lower expense ratios and expenses are gaining billions of dollars in money.The reason is that a large number of mutual funds regularly underperform the benchmarks.This has caused massive heartburn amongst investors who have to pay large amounts of fees for the services of the professional fund managers.This has been the trend historically and found amongst numerous countries as well.Besides the costs of the sales and distribution of these mutual fund with their hefty commissions also falls on the investor ultimately.However the prevailing custom of investing in mutual funds is not easily broken despite the underperformance of the mutual fund industry.Most of the advantages of mutual fund can now be found in ETFs which have much lower costs.They also remove the disadvantages such as the possibility of a bad mutual fund manager.
Note corruption is nothing new for the Big 4 firms with another one PriceWaterhouseCoopers caught red handed in the massive billion dollar Satyam corruption scam.Two of the partners of PWC were sent to jail in the fraud which involved cooking the books for almost 8 years.Having a Big 4 auditor is a must for any well known big public company.However the reputation of these Big 4 continues to get besmirched with newer scandals.It does not take a rocket scientist to guess that bribes were involved as rules were circumvented and Corporation Bank top brass was also involved.Government Tenders are a massive hotspot of corruption as they are opaque and powers rest with a few.Lack of transparency results in massive embezzlement of taxpayer money.Corporation Bank.Note Relaince India’s biggest company is facing an investigation along with the oil and gas regulator DGH.Recently LIC Housing Finance one of India’s largest housing finance companies was involved in a scam as well alongwith top official form other PSU Banks for taking bribes.This resulted in a massive stock price fall for a number of these companies.Expect Corporation Bank stock to take a similar dive hurting the shareholders.Investing in the Indian stock market has become more dangerous than ever where a corruption scam hides under every stone.Government companies which are considered safer by investors too are being proved problematic with PSU CEOs now being jailed for scams.India’s largest aluminum company NALCO CEO has been jailed for accepting gold bricks in bribes