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24 years back, when a client approached Goa MFD Hari Kamat to invest Rs.60,000 in PPF, he was unaware about the return potential of mutual funds. Hari educated this client about ELSS and encouraged him to put 50% each in ELSS and PPF.
Since then, this client makes equal contribution in ELSS and PPF every year. While we all know ELSS will create more value for clients, the main question is what would be the difference in absolute terms? In 24 years, while PPF contribution of the client grew to Rs.45 lakh, his ELSS investment became a whopping Rs.1.92 crore indicating a difference of close to Rs.1.50 crore.
Here is the actual account statement of the client. Please note that we have not put name of the investor and the scheme.
Recognising his efforts in making a big difference in clients’ life, Axis MF and Cafemutual came together to celebrate the extraordinary work and accomplishments of MFDs through Sanjeevani MFD Awards 2023 at Cafemutual Ideas Fest. The awards felicitated eight inspiring MFDs who are ‘Sanjeevani’ for their clients and have become an indispensable part of their lives. Hari was one such winner.
Hari started his career as a PPF agent. Later, he shifted his focus to mutual funds. He has converted many FD clients into disciplined mutual fund investors.
Sharing with us two things that worked for him in converting FD clients, Hari said that he first encourages such investors to put some money in short term funds like liquid funds and ultra-short term funds and do STP in hybrid funds or ELSS depending on the risk appetite of investors. “I don’t recommend FD investors to directly invest in equity products. I first tell them to start with low duration funds which are less volatile and do STP with small amounts every month to take advantage of rupee cost averaging.”
Another activity that has worked for Hari is the tax advantage of mutual funds over FDs. While this benefit goes away from April 1, 2023, he still finds debt funds lucrative considering the deferred taxation. He said, “Investors have to pay tax every quarter on accrued interest in FDs and savings bank accounts. However, they can defer their tax payment in mutual fund till the time of redemption. Also, compounding works better in mutual funds and they are more liquid compared to bank FDs.”
