Book review | Let’s Talk Mutual Funds: Monika Halan shares the recipe for wealth creation in her latest book

Indian stock markets are touching new highs at the time of writing this article. From a family gathering to a hangout with friends, markets have, again, become the talk of the town. Friends have started asking for a tip to invest. Newspaper front pages are filled with the news of markets. Instagram feed and message section is full of reels on stock-picking.

As we have often heard, stock markets have made riches from the rags and vice versa. However, we have not listened to the success story of an Indian retail investor who kept investing consistently by being agnostic to markets. For example, if someone had been investing just ₹5000 every month, with a 10 per cent annual increment, in any index mutual fund, for the last 20 years, he would be a crorepati now. That’s the power of discipline, compounding, and the India story!

Mutual fund–alas, for many Indians, this word is new or something no-no. Many people are unaware of the financial products available to meet their short-term, mid-term, and long-term goals. The discussion about finances is also discouraged. “After the sex conversation, it is the money talk that is the most difficult in families,” Monika Halan writes in her recent book Let’s Talk Mutual Funds.

In her latest offering, Halan, a well-known financial journalist, provides a lucid and comprehensive guide to this complex and often misunderstood investment vehicle. She deftly explains the history, mechanics, and various types of mutual funds, making even the most abstruse concepts accessible to the lay reader.

She also does an admirable job of dispelling some myths and misconceptions surrounding mutual funds. For example, she debunks the notion that mutual funds are only for the wealthy and explains how even small investors can benefit from investing in mutual funds. “Using investment products for future needs is not just about gathering the highest returns, it is also about the certainty of the money being there, of liquidity, of costs and understanding the risk,” she stresses why mutual funds are a better financial instrument.

The book’s structure is divided into three parts. The first part discusses the concept and the history of the mutual fund in India. She narrates the brief history of the mutual fund sector– from a monopoly to a competitive field with better regulations. The only company authorised to sell mutual funds in the pre-liberalisation era was the Unit Trust of India (UTI), a government entity. The scam done by the UTI in mutual funds (US-64) was revealed only after it became open to competition.

SEBI also imposed many regulations to limit the entry load, front commissions to avoid mis-selling, allow direct funds, reduce the expense ratio, and correctly label the funds. The author’s first-hand experience with these regulations makes the narrative compelling.

The book’s second part discusses the categories of mutual funds and the technical terms related to them. Halan explains some terms like Net Asset Value, SIP, SWP, STP, expense ratio, and exit load, which are necessary before investing in mutual funds. She also details various types of risks associated with mutual funds, including market risk, credit risk, liquidity risk, fund manager risk etc.

Mutual funds are not associated with the only stock markets. Some mutual funds also invest in the money, bullion, and bond markets. There are 37 mutual fund categories as mandated by the SEBI. Broadly, they can be categorised as equity, debt, hybrid (combination of equity and debt), and other funds. ELSS funds are famous for three years of lock-in and tax exemption under the 80-C. Index funds are renowned for giving market returns without taking an additional risk and keeping expenses low.

The third part of her book is about selecting the mutual fund schemes for your portfolio according to your goal and risk appetite. She lists strategies to determine the consistent performers from the active and passive mutual funds.

Halan’s writing throughout the book is erudite yet engaging, and she peppers her prose with pithy insights and witty observations. India is a rapidly growing economy with a young and increasingly affluent population with structural reforms and infrastructure taking place. This book will surely help retail investors to stay long in India and get richer with the country!

The reviewer is an independent columnist who writes on international relations, and socio-political affairs. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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