In 1991, during the IPO of its Mastergain mutual fund scheme, the (then) Unit Trust of India collected Rs 1.45 lakh crore. I bet you are shocked by that number and think Dhirendra is making it up. Well, you're right, but not quite. I am making it up, but this number does have a justification.
When Mastergain was launched, the Sensex was around 1,800 points, and UTI collected Rs 4,472 crore. Today, the Sensex is at 64,500 points, give or take. It means that in a rough equivalence proportional to the growth of the equity prices, Mastergain's collection is equivalent to Rs 1.45 lakh crore. It was a closed-end fund, and submitting an application at launch was the only way to invest. No wonder UTI had received 65 lakh applications. Even today, more than three decades later, these are incredible numbers.
The important question is, why did this happen? Why were people so desperate to invest in this fund? The reasons are simple. It was the time of the Harshad Mehta-induced bull run, and there was a desperation to invest in stocks. Combine this with the fact that the ordinary retail investor could not do so! The markets were a relatively closed system, stockbroking was a racket, and brokers would not entertain any regular person as a customer.
There were many reasons behind the same, but that's ancient history now. The important point is that there was a considerable demand for equity investing, and Mastergain was one of the few avenues to satisfy the demand at the time.
You do realise that these 65 lakh forms were paper forms that people queued up to buy and then deposit. Most banking, cheque clearing, record-keeping statements, unit transfers, etc., were paper-based and manual. Many investors had long-running issues because of faulty records, signature mismatches and other problems. I know because I was one of them!
Things were not all that different in 2002, when Mutual Fund Insight's inaugural issue came out. Things also did not change for most mutual fund investors, even when the 10th-anniversary issue came out.
Digitalisation has come late to mutual funds, but now, it's all there. Much of the infrastructure is external to mutual funds, like Aadhaar, internet banking and UPI, but it has proved to be a lubricant to move things smoothly for fund investors.
For any revolutionary change to happen, a large set of conditions have to come together. Finally, the revolutionaries themselves have to realise that the conditions are ready, and they only have to move ahead and act.
The question is, are you ready to switch to a revolutionary new way of being a mutual fund investor? I ask this question because what we have discussed above is the 'how' of investing and not the 'what'. The procedural parts have become simple and reliable without depending on anyone. You can transact directly over a computer or a phone, invest in funds, redeem them or take any other action directly without involving anyone with motivations different from yours.
Even though you may have felt that you could make any investment, in reality, you had very little freedom. Someone had to tell you what to do if you wanted to invest. It could be someone from an organisation like a bank or an individual whose business involved selling financial products. You had no way of getting independent information about where you should invest.
However, the worst aspect was that you entirely had to depend on the sellers to decide what to do. Sellers only sell products, but the investment process must start and end with you, your financial needs, and the course that your life is going to take.
It should be easy and quick to learn about mutual fund investing, choose an investment, and transact with minimal friction. The democratisation of investing that can come through such access can have a transformative effect on the whole investing activity.
The 'how' has been taken care of. We're here to help you with the 'what' and 'why'.
Also read: What, how, where and why
This editorial appeared in Mutual Fund Insight November 2023 issue. To read the cover story and other insightful analyses, columns and articles
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