Too many Mutual Fund (MF) schemes have made the industry a sea where one needs to pick a mutual fund scheme to turn out to be a pearl for one. So over the years, the industry is working at par with stock market, wherein you need to dig in the best of scheme for yourself.
The mad interest for MFs has led to the evolution of asset management companies, so to curb such a situation market watchdog, SEBI is considering reducing MF schemes to half. So, hearing this news can spook investors in such schemes which can go off the shelves in sometime.
Here's what you need to do as an existing investor in the MF scheme?
The advisory panel has revealed a clear guideline on the category of mutual fund schemes. And considering that, SEBI has proposed that an AMC shall have only scheme under one category.
What will happen?
Several of the schemes shall be consolidated and hence the scope of a particular scheme may get larger. Interest of investors should be well kept in mind and there is no chance that a scheme can altogether be closed.
As per FundsIndia "If AMCs are to reduce the number of funds, it is inevitable that there will be mergers. However, it's unlikely that funds will close altogether - they will simply be merged into similar larger funds".
Investors take and proactiveness on the likely merger of schemes
The merger shall mean investors now need to review their existing holding which is now being merged into a new scheme, whether or not it meet goals, timeframe and investment purpose of the existing investor in the scheme. In case the new merged scheme goes well with his profile, the investor can continue with the scheme.
Else he should be opting out of the scheme and reinvest the proceeds into some appropriate funds. Applicable taxes shall be levied as per fund and the holding period of the scheme. So, at the end investors shall be better off in the process as they would be able to shortlist a quality fund without too much effort.