MFs to 'dance' on Exchanges?

The Securities Exchange Board of India (SEBI) is now planning to enable investors to buy and sell their mutual fund units through the stock exchanges. The fund houses will also be allowed to sell New Fund Offers (NFOs).

It would be optional for the fund houses to use this platform. If the fund house decides to opt for listing its units on the stock exchange, it would benefit them through lower distribution costs. We analysed the pros and cons for the investors if SEBI decides to do so.

PROS:

• Infuse convenience in mutual fund transactions
• Reduce paper work
• Promote liquidity
• Help in portfolio tracking

CONS:

• Lure to engage in trading activities might result in a deviation from long term financial goals
• More trading will lead to higher transaction costs which will impact the return on investment

We believe that despite the cons, the pros make this proposed initiative a positive for the retail investor.