Date: December 05, 2007
Ref. No. Port/NS/0105/2007

 

A SMALL INVESTOR WINS BATTLE AGAINST MFS

NO MORE ENTRY, EXIT LOADS ON BONUS UNITS

A MUTUAL fund investment will no longer be such a heavy cross to bear. A small investor's campaign to keep bonus units and reinvestments free of any charge has borne fruit after three years.

The Securities and Exchange Board of India has written to some investors saying entry and exit loads should not be charged for units given as bonus or against reinvested dividends. This means only original investments can attract a levy, and all further gains will accrue to the investor - without any cuts.

It's a major victory for investors who have been helplessly losing a part of their legitimate earnings for no reason.

Sebi recently proposed that investments done directly - that is, without an agent - shall not attract an entry load, typically about 2% of the proposed investment. That, coupled with the latest communication, should make mutual funds cheaper for investors.

An entry load is a charge an investor pays for buying mutual fund units and the exit load is what he pays for selling them. Having entered a scheme once, investors earn dividends that they can take in cash or put back into the scheme to get more units. Occasionally, the fund manager converts earnings from the scheme into units and distributes them to the investor proportionately. Investors pointed out that a bonus or dividend would amount to gains from such investments and not a further purchase.

PMS Department