World Investor Week 2023

India will celebrate World Investor Week, an initiative of International Organization of Securities Commissions (IOSCO), from 9^th to 15^th October 2023. In India, World Investor Week is a global campaign to promote investor education and protection. IOSCO is a global association or market regulators e.g. SEC (United States), SEBI (India) etc. IOSCO’s covers 131 markets regulating 95% of the global securities market.

World Investor Week 2023

Every year (since 2017) in the month of October IOSCO carries out a week long campaign known as World Investor Week. The global campaign promotes investor awareness and protection in all markets covered by 131 markets. The three main themes of World Investor Week are Investor Resilience, Crypto Assets, and Sustainable Finance. Other themes covered in this year’s campaign, Frauds and Scams Prevention, Basics of Investing, Technology and Digital Finance. The fundamental themes of World Investor 2023 are essentially continuation of themes World Investor Week 2022 held in 3^rd October 2022 to 9^th October 2022. Before we discuss about learning of World Investor Week, it is important for investors to understand how your financial interests can be protected and why is investor education important to protect your financial interests.

What is investor protection?

Investor protection refers to the measures and mechanisms set in place by the financial market regulator, e.g. SEBI in our case to protect the investor from financial losses that may be caused by malpractices, frauds etc by companies, merchant bankers, intermediaries etc. Since its formation in 1988 SEBI has instituted a number of measures to protect investor’s interest e.g. simplification of share transfer and allotment process, role of sub-brokers etc.

SEBI also has processes in place for investor grievances redressal. To that effect, SEBI has setup a portal SCORES (acronym for SEBI Complaints Redressal System). If you complaints against any listed company or SEBI registered intermediaries, you can go to SCORES website (www.scores.gov.in) and file your complaint after providing necessary details e.g. Name, Address, PAN, mobile number, email address etc.

Why is investor education important for you?

Investor education and awareness is very important in protecting your financial interests. Some investors think that investor education is only for experienced investors or for High net worth individual (HNI) investors. Investor education is relevant for all investors including new investors. Why is investor education important?

• Investor education will help you to understand basics concepts investments. One of the most important concepts in investing is an understanding of risk. Without a good understanding of risks you can make wrong investment decisions.


• Riskometer is useful pictorial tool that can help you understand the risk in any mutual fund scheme. SEBI has fixed 6 risk levels in Riskometers e.g. low, low to moderate, moderate, moderately high, high and very high (see the diagrammatic representation below). The product labelling of mutual fund schemes by Asset Management Companies (AMCs) has to be done in accordance with the Riskometer.
  
  

  



• You should also know your risk appetite. How your risk appetite is linked with your age, financial situation and your investment objectives? You can use the Riskometer to select the appropriate mutual fund scheme according to your risk appetite.


• It is equally important for you to understand that the relationship between risk and return, so that you can make informed investment decisions.


• Lack of investor education or awareness can lead to you make hasty or uninformed decisions which can lead to financial loss.


• Financial or investment education is crucial for you to meet your financial goals. You need to understand how and where to invest so that you can meet your financial goal, while minimizing risks


• Investor education is also important for experienced investors. The world of finance and investments always keep evolving with advancements in technology, change in industrial landscape, changing regulations etc. You should constantly update your knowledge so that you can keep abreast of the latest developments and be aware of risks and opportunities.

What can we learn from World Investor Week?

• Investor resilience is one of the main themes of World Investor Week. As a resilient investor, you should have adequate savings in liquid investments (e.g. overnight liquid funds, ultra-short duration etc) to help you tide over exigencies e.g. involuntary loss of employment, unexpected large expense e.g. hospitalization / medical expense of a family member etc. Financial planners suggest that you park sufficient funds to meet at least 3 – 6 months of expenses in an emergency fund.


• The importance of diversification in building a resilient investor portfolio cannot be understated. As an informed investor you should understand that risk exists in all investments; higher returns come with higher risks. There are two kinds of risks in equity investments – systematic risk and unsystematic risk. Systematic risk affects the entire market; it is also known as market risk. Unsystematic risk refers to stock or sector specific. Diversified equity mutual funds reduce unsystematic risks by diversifying across multiple stocks and sectors.


• Asset allocation is equally, if not more important in building a resilient portfolio. Asset allocation refers to spreading your investment over different asset classes like equity, debt, gold, international equities etc. Different asset classes have different risk profiles e.g. equity is more volatile than debt. You should invest in different asset classes according to your risk appetite. Furthermore, different asset classes have low correlation of returns e.g. equity and debt has low correlation, equity and gold usually have negative correlation etc. Diversifying your portfolio over multiple asset classes will make your portfolio more resilient across different market cycles. Your asset allocation will depend on your risk appetite. You should consult with your financial advisor or mutual fund distributor if you want to know your risk appetite and suggested asset allocation.


• As a resilient investor, you should always factor inflation in your investment decisions. A resilient portfolio should be inflation proof, since inflation reduces the purchasing power of money. In other words, your portfolio should be able to generate inflation adjusted returns. Equity as an asset class, has historically given inflation beating returns over long investment horizons. In the last 20 years, Nifty 50 TRI has given nearly 16% CAGR returns. Gold, as an asset class, is also considered to be a hedge against inflation.


• Sustainability is another theme in World Investor Week. Sustainable investment is linked with investor resilience. The importance of sustainability is growing in importance, globally, in recent years especially among institutional investors. It is also extremely relevant for retail and HNI investors. When you investing in a stock, you should consider whether the company is ready to face the challenges that may come across its way in the future.
  
  Sustainability refers to how your investments will perform in the future in the face of changing risk factors e.g. environmental risks, social risks, corporate governance, regulatory risks and change in Government policies. When investing in a fund, you should try to find out whether the fund manager has sustainability as one of the factors in the investment strategy of the fund.


• The other themes of World Investor week are Frauds and Scams Prevention, Basics of Investing, Technology and Digital Finance. If you are investing in mutual funds through an intermediary or taking investment advice, you should ensure that the intermediary is an AMFI registered mutual fund distributor or a SEBI registered investment advisor (RIA). You should never disclose your personal information e.g. PAN, Aadhaar, account number etc. You should never share your account password or OTPs with anyone.

Role played by mutual funds

A mutual fund is a pool of investors’ funds that is invested in diversified portfolio of stocks, bonds etc. Following are the benefits of mutual funds with regards to investor resilience, sustainability and investor protection:-

• Mutual funds offer risk diversification benefits since they invest in a portfolio of stocks or bonds of different companies / issuers across different industry sectors.


• Mutual funds are managed by professional fund managers whose objectives are generating capital appreciation or income or both for the investor over the intended investment horizon of the scheme.


• Mutual funds can help you in asset allocation by offering products of different asset classes, e.g. equity, debt, gold, international etc. Hybrid funds provide asset allocation solutions for different risk appetites and investment needs.


• Ideally, mutual funds tend to give good returns to those who invest for the long term. It may be through the Systematic Investment Plan (SIP) or lump sum investments for a fixed term.


• You can invest a small amount of money in mutual funds every month or any other interval from your regular savings through SIP. Through SIP, you can start early and invest over long investment tenures, thereby benefitting from the power of compounding. SIP investments can make you a resilient investor because it makes market timing irrelevant.


• Mutual funds can also enable you to make sustainable investments. Schemes that take into account ESG (environmental, social and governance) factors in selecting stocks are known as ESG funds. Mutual funds provide you the option of actively managed funds and passive funds in making sustainable (ESG) investments.


• Technology and Digital Finance are playing increasingly important roles in mutual funds. You can do online / digital KYC, online mutual fund transactions (lump sum / SIP / redemption / switch / STP / SWP etc) through web based or mobile apps and also monitor your portfolio online / digitally through web based or mobile apps.


• Authorized mutual fund online transactions platforms like AMCs, RTAs, NSE, BSE, MFU etc provide safety / security through two-factor authentication e.g. e.g. PAN / user id / password and OTP on your mobile. Two factor authentications add an extra layer of security to prevent fraud and theft. However, as an aware investor, you should also be alert and not disclose personal information or OTP on an unexpected call.


• Nomination is a facility which enables an investor to nominate a person or persons who can claim the units held by the investor in the event of death of the investor. Nomination is a simple and inexpensive way of ensuring that your investments are smoothly passed on to your loved ones. If you do not appoint your nominee, then your loved ones will have to produce legal documents like Will, Legal Heir Affidavit etc to get your investments transferred to their names, which will take time and will have legal costs involved.

Aditya Birla Sun Life Mutual Fund and investor education

Aditya Birla Sun Life AMC Limited (ABSLAMC Limited) has been a pioneer in the field of investor education since 2013, continuously striving to build a community of knowledgeable and empowered investors. ABSLAMC Limited's endeavour is to enhance individuals’ financial literacy, enabling them to make well-informed investment decisions while understanding the inherent metrics of risk and return. The themes of World Investor Week 2003 deeply reflect and resonate with ABSLAMC Limited's commitment to investor resilience and sustainable investing, which is at the heart of their educational efforts, emphasizing the importance of grasping the basics of investing and aspects of investor protection. For ABSLAMC Limited, technology has been a key driver to increase financial literacy - You can access the digital learning platform through the website -https://mutualfund.adityabirlacapital.com/Investor-Education

Disclaimer: An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund.

All investors have to go through a one-time KYC (Know Your Customer) process. Investors to invest only with SEBI registered Mutual Funds. For further information on KYC, list of SEBI registered Mutual Funds and redressal of complaints including details about SEBI SCORES portal, visit link https://mutualfund.adityabirlacapital.com/Investor-Education/education/kyc-and-redressal for further details.