There are finfluencers (financial influencers) who influence people on social media platforms about which mutual fund to invest in, which stocks to buy, which IPO to buy, what’s the market trend etc. Finfluencers generating content on financial topics, are rapidly rising in popularity on social media. Many finfluencers earn a lot, even lakhs, by making videos on initial public offers and posting them on social media platforms. Most important fact is they are totally nobody. There is no reason to listen to them. They are just social media personality that give quotes, life lessons and business advice which they take from Google and based on which they give business advice. In short, they deceive their followers.

A finfluencer usually promotes a broking firm by adding a link to open an account. They get a commission for each account opened using that link; some even get a share of the firm’s earnings from these accounts.

In June 2024, the Securities and Exchange Board of India (Sebi) has taken a bold step by banning regulated entities from getting associated with unregistered finfluencers. This crackdown targets anyone who provides financial advice or makes claims about securities without Sebi’s registration. Earlier, Sebi had noted concerns about finfluencers promoting some of the IPOs falsely instead of objectively informing the investors of its merits and risks. People invest their hard-earned money into various financial products with having actual information. 

SEBI’S new regulations create a distinct separation between qualified financial advisors and unregulated online influencers. Regulated entities such as brokers, mutual fund houses, research analysts and financial advisors are now strictly prohibited association with unregistered finfluencers. This ban includes partnerships for marketing purposes, sharing client information, or receiving financial benefits from their activities. Sebi is also establishing a secure payment system for registered investment advisors (IAs) and research analysts (RAs) to collect fees from their clients. This ensures that investor payments are directed only to authorised professionals, making it easier for investors to distinguish between registered IAs/RAs and unregistered finfluencers.

Younger people are increasingly turning to content on platforms such as TikTok as they are more aware of their personal finances, with #fintok currently at 927.8 million views. The influencers often share their personal financial journeys, offer financial literacy education, and promote various financial products and services. They may collaborate with financial institutions, promote budgeting apps, or review investment options. Like other influencers, they can monetize their influence through sponsored content, affiliate marketing, and other means.

There is high appeal in financial information that comes in bitesize, light-hearted formats and Gen Z and millennials are turning to finfluencers to improve their financial education and boost financial literacy levels.

Sebi’s move addresses the troubling alliance between market intermediaries and shady influencers. ‘Finfluencers’ have been linked to discount brokers, driving up trading activity and often misleading investors with false profit claims on platforms like YouTube and Telegram.

Finfluencers have played an impactful role in spreading financial awareness and motivating investors to actively participate in the finance market. However, their activities remain unregulated, posing risks to investors. Some famous finfluencers are Shaunak Udupa who enjoys 150k subscribers, Rachana Ranade with 4 million subscribers, Anushka Rathod enjoys 17.3k subscribers, Sharan Hegde 1.1.k subscribers.  

Recently, the Securities and Exchange Board of India (SEBI) has taken a stern stance against a social media influencer, Mohammad Nasiruddin Ansari, widely known as ‘Baap of Chart.’ Recently, SEBI imposed a ban on Ansari from the securities market, accompanied by a substantial fine of Rs 17.2 crore.  Ansari is the sole proprietor of the firm Baap of Chart (BoC). He promoted himself as a stock market expert on various social media platforms and invited investors/ clients to enrol for various “educational courses” offered by him. According to SEBI’s order, Ansari marketed his stock recommendations as educational training, but he was trying to sell them. Ansari is a self-proclaimed investment expert who used to provide stock recommendations under the moniker ‘Baap of Chart’ through platforms like X, Telegram, and YouTube. However, his actions did not go unnoticed by SEBI. Along with his associate Rahul Rao Padamati and their company Golden Syndicate Ventures, Ansari has been barred by SEBI until further notice.

Market regulator Securities and Exchange Board of India has issued a draft circular in which it has asked companies that are coming out with a public issue to include audiovisual (AV) presentation of disclosures made in their offer documents for interested investors. In the draft circular dated March 19, the regulator said that the IPO’s AV presentation should start with a disclaimer that investors must not rely on any other content, such as those made by finfluencers, and that the lead managers of the issue be responsible for the content and information made available on the AV. Sebi said: investors are advised not to rely on any other document, content or information provided on the offer on the internet/online websites/social media platforms/micro-blogging platforms and by the finfluencers since the same is not approved/commissioned/paid by the company or its promoters/directors/KMP (key managerial personnel) in any manner.

By this move, SEBI wants to eliminate unregistered finfluencers providing illegal investment advice through social media channels. Restrictions have been imposed on intermediaries, such as brokers and mutual funds, from engaging unregistered finfluencers for product promotion. The rise of finfluencers signals that people have money to invest.

Net asset value (NAV) stand for a fund’s per unit market value. This is the price at which investors buy the fund shares (number of units) from a fund company and sell them (redeem) to a fund company. The number of buying and selling units is important to investors because they are based upon the NAV – that is the price per unit. NAV is simply the price per share of the fund. Just like stocks have a share price; mutual funds have a Net Asset Value.

Investors must understand that redemption involves thorough research about the performance of the fund and clarity about the reasons for redemption. Decisions can go wrong when investors make such decisions based on sentiments and hearsay.  If the fund is underperforming, an impulse action is to redeem units. This is just not the right thing to do. Mutual funds are managed by professional fund managers who take proactive decisions and try to factor-in the perceived market movements. However, if a mutual fund scheme is time and again underperforming for a long period, one may choose to exit.

NAV does not change throughout the day like share prices and thus, they get updated at the end of each trading day. NAV is calculated by dividing the total value of all the assets minus all its liabilities. It is calculated only at the end of every market day, after taking into account the closing market prices of the securities that the scheme or fund holds.

Remember this fact that for open-end mutual funds, NAV is a useful factor for tracing share price movements. However, it is not useful for assessing overall fund performance. This is because mutual funds are required by law to distribute at least 90% of their realized capital gains and dividend income to investors each year. When a fund pays investors the required allocation, its NAV reduces by the amount of the distribution. Therefore, investors should not track only NAV, as they may get concerned about the drop but in fact, the net value of their investment is unchanged. The reduction in NAV is counterbalanced by the amount of distribution they have been paid.

Open-ended fund is a scheme in which an investor can invest and redeem shares at any time. In contrast, a close-ended mutual fund typically has lock in period. For closed-end funds, share value is determined in the secondary markets, which are the formal exchanges, where the shares are traded. The NAV of a closed-end fund is the price per share multiplied by the total number of shares. Obviously, the value of a closed-end mutual fund changes continuously throughout the trading day and trading cycle.

The Current Value of Investment is the ‘Market Value’ of the Investment based on that day’s NAV of the Investment in the invested Scheme. It depends on the plan of the mutual fund.  On all business, working days, depending on the scheme type, NAV is declared in the evening at or before 9 pm.

When you need to redeem your mutual fund:

If you have purchased mutual fund through an AMC (Asset Management Company) or Distributors, to redeem funds through offline modes, you need to send a duly signed redemption request to the AMC’s or the distributor’s office. A standard redemption form asks for details like your name, folio number, plan and scheme details, and number of units you wish to redeem. In addition, all the holders have to sign the slip. The proceeds from the redemption will be credited to the registered bank account.

In case of redemption if bought online, such units can be redeemed online through a trading account or the AMCs website. You simply have to log in, select the fund and the number of units you wish to redeem and confirm your order. Besides, online and offline, central service providers like CAMS (Computer Age Management Services Pvt. Ltd.), Karvy, etc. offer the option of redeeming mutual fund bought from several AMCs. You can download the form online or visit the nearest office. Please note that these agencies might not service all the AMCs.

These are few points you need to remember while redeeming:

Applicable NAV: the NAV will be applicable only for redemption requests received up to 3 pm on any day.

Time taken: Once the redemption request is effectively received and verified, it takes up to three working days for the proceeds to be credited to the registered bank account.

Investment in funds with Lock-In Period: Schemes like Equity Linked Savings Scheme (ELSS) cannot be redeemed up to 3 years from the date of investment. As an investor you must know what your investment advisor is investing on your behalf.

Exit Loads and Applicable Taxes: Based on the duration after which you are redeeming the funds, your transaction might attract certain amount of taxes and exit loads. Inquire about the same before finalizing a transaction. Some Asset Management Companies (AMCs) have sales charges, or loads, on their funds (entry load and/or exit load) to compensate for distribution costs. Funds that can be purchased without a sales charge are called no-load funds. Entry load is charged at the time an investor purchases the units of a scheme.

Author’s Advise: There are over 7,000 mutual funds, each with different goals and objectives. Some invest in bonds; some in stocks, some in index funds, and some in speciality so on and so forth. Some are balanced funds owning both bonds and stocks. Some are conservative, some are aggressive. Some are structured to produce dividends and interest income, others invest for growth.

A growth fund is a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts. The portfolio mainly consists of companies with above-average growth that reinvest their earnings into expansion, acquisitions and/or research and development.

As an investor it is better to understand the basic facts about the mutual funds. You need to pick a mutual fund that will be good returns on your investment while saving the principal amount. You need to define your investing goals and objectives. For example, if you’re not planning on using the funds for a long time, you can focus on long-term growth. If you don’t like risk or need to use the money in the next few years you will want to focus on safety. If you pick a growth fund, while you needed safety, you should know that the growth fund is vulnerable to market risks. Have a good financial advisor, who is your well-wisher first. Remember a basic fact, if you are redeeming from one scheme and investing into another scheme of the similar kind is called ‘churning’ and it is not advisable unless you are backed by sound knowledge and sound logic. Play safe because mutual fund investments are subject to market risks.