Last few years all MF related regulations and changes by SEBI and also some by IRDA for insurance have been for the benefit of clients and industry at large.  The regulators want better and quality advice to the investors from their distributors/ advisors. An industry exists because of clients only.

In spite of long term gain in reality, why there is just 4% of total investment in equity. If experience of most has been good then why short term losses and in some cases notional losses affects their long term investment decision?  Why retail investors are still averse of investing in equities? Yes today some are investing but frankly how many of them are doing with real conviction?

We all blame investor’s psychology – greed and fear in investment decision making. But who has created this greed and fear? They themselves or someone else. A strong conviction developed by correct understanding of risk can only counter the investor psychology.

How many know the real interpretation of risk? For most risk means only loss or chances of loss . We always talk risk of product or market but why not talk risk related to client also? Why not talk of risk of mismatching communication to client? Why not talk on risk due to too many communication to clients? Why not talk of changing communication pattern with changing situation to increase sale? The risk at best is expressed as, “ Mutual Fund investment is  subject to market risk pl read offer document before you invest “ but does any individual who is selling elaborates that when executing the deal?

Risk is capitulating to greed and fear at a wrong time . Risk is not understanding what you really want but opt for what influenced . Risk is in not understanding product sales communication properly and its suitability. Risk is straying from objectives and goals . Risk is not understanding own mental fortitude and preparedness in case of negative notional return or negative  realization in return from what expected .

The psychology of an individual keeps changing with changing situation and realization of notional or actual return on investment. Every individual is unique and so is his experience. Even the same amount of return on the same amount of investment can invoke different reactions.

Investor education is not only talking about inflation, financial planning and then positioning the product. Some add fund management concepts , explain market , economy etc. Yes these are good information for one to know . But more important is that these are changing dynamics and for a lay man understanding of change, various risks due to change and its impact on return on investment as also equally important .

In Investor education we have to make him aware of WHY, HOW AND WHEN to invest.  I would further extend it to WHY he should not be investing in ………, HOW he should not be investing in ……… and WHEN he should not be investing in ………. i.e care and caution also . So we have two extremes and between these two extremes the risk of losing money and risk of losing opportunity of making money lies and the whole needs to be explained to client . Asset risk has to explained in terms of withholding period .

Investor education objective should be creating right conviction and should be process oriented keeping the client more into focus . Yes it may be a long drawn one but the result will be there to stay and not short term one .

•  If the client has not made any investment till date why he has not done . Need to understand his psychology and ignorance level first . Remove small doubts and fear with logical and practical examples which he can correlate with his life easily.
• Helping Client do some introspection of his own investment and disinvestment decision. Data are with the AMCs / Insurance Cos and they can help the client
• Make them aware what right and what wrong they have done through analysis on return, product , time horizon.
• Make the client feel what led to that decision. Was it a well thought one or impulsive .
• End with learning for not to repeat some, be cautious from some and above all identify what is really wise and prudent.

I think SEBI , AMFI , AMCs , Insurance companies all have to play a vital role . We always learn better when we understand our mistakes. So the starting point for Investor Education is the one who are manufacturing the investment products. AMCs should not capitalise of investors ignorance for more sales. Any buy in has to have conviction of investor .They need to learn from the past from own actions and inactions. Use that learning a powerful tool for guiding investors and advisors. Investor education starting point should start with AMCs own education of Investors understanding of …………