There has been a lot of controversy over celebrity advertisements in mutual funds and this has led to the intervention of the Securities and Exchange Board of India (SEBI) in the matter. No matter what the final decision or guidelines may be it is of importance that the individual investor is able to understand the implications of any celebrity endorsements and what they actually mean. This would be helpful to them while making their investment decision and at the same time it would also set a precedent for the things on which the investor will rely. Here is a detailed look at the issue for investors and the manner in which they can deal with it.
Endorsement
The manner in which celebrity endorsements work is that there is some well known personality who will be featured in an advertisement or other promotion and marketing material. The celebrity would be talking about the benefits of the investment and this is meant to attract others to follow the same route and try out the product or service. The idea is that the celebrity is well known so this would influence others to take a similar action. Lots of people like to do what famous people do as this gives them a feeling of living a good life and this also raises confidence in their minds because if a celebrity is using something then the thought goes that there would be some merit in the product or service.
Financial product
When it comes to a mutual fund the situation needs to be seen in a different manner because a mutual fund is not a physical product but it is a financial service. The investor is putting their money into a mutual fund because they expect it to deliver returns according to their expectations and goals. This is not something that is mass produced and hence would be of a common feature but rather there would be different results for the investor depending on the time period when they invested in the fund and the market conditions that are experienced. The manner in which the fund manager is able to manage the fund also plays an important role in the whole situation. If there is a celebrity endorsement then the investor has to understand what is being said. If there is something about the returns then this is visible even without someone telling you about it. On the other hand if there is a claim that a celebrity is using a particular mutual fund then the investor has to understand that every person has their own needs and if this is right for the celebrity then well and good. But the key part for making the decision is whether this is right for the individual investor and whether this meets their needs.
Goals
The investor when making an investment in a mutual fund has to focus on their goals as their main objective. What is it that they want to achieve and what needs to be done to get to the goal is the important thing. This requires selection of a mutual fund and a scheme which is suitable for their needs and this might not be similar to what others want. At the same time the determination of the performance of the fund which is going to give returns to the investor is the portfolio of the fund. The investor can see the portfolio as this is transparent and they can consult experts or advisors on the manner in which this is constructed but just an endorsement by a famous person might not be enough. This has to be known as mutual funds are a separate route.