would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
The Chairman of the Securities and Exchange Commission (SEC) of Sri Lanka has, in an interview given to The Island Financial Review on 28.04.14, advised retired workers that investments in the stock market would bring substantial returns which would enable a retiree to live comfortably, compared to what deposits in a bank would bring. However, not everyone who invests in stock market (SM) derived funds get any reasonable return. On the other hand, people who invest in these funds run the risk of losing even the capital let alone any return. Let me give my experience so that people could think twice before they invest in SM funds.
In 2010, I telephoned a bank to find out their fixed deposit interest rates to deposit part of the money I received from my EPF after life-long service. I was told by the officer who answered my call that if I could keep the money for a minimum of three years, he could suggest a better scheme of investing in funds based on stock exchange and that it would bring a higher return than what their FD would. I was also told that such investments were better than investing in individual stocks.
He later visited me at home and explained how the fund worked; it operates on a unit value system that depends on the stock exchange performance. He further said that there was no risk involved and the scheme was government approved. Since the bank itself was a reputed one (I believed), I accepted the bank’s assurance and invested Rs. 2 million. After the money was paid to the bank, I was told that the fund would be managed by an insurance company rather than by the bank.
After one year, the fund grew to Rs. 2.2068 million which was approximately a 10% gain. At the end of the second year, I was shocked when I received a statement showing a balance of only Rs. 1.678 million in the fund, much less than even the capital. When I inquired, I was told that the stock exchange did not perform well and as a result the unit value had dropped and hence the lower balance. I was then told that if I wished I could freeze the fund and unfreeze it when the unit price went up.So I followed the advice given.Initially, I was never told that such a thing could happen.
Subsequently, I inquired several times about the stock market performance and asked them to let me know when to unfreeze the fund. I never received any advice on it. Finally, at the end of the third year when I could withdraw the money, I was told that I could withdraw only Rs. 1.762 million which was the outstanding balance. This is a loss of Rs. 238,000 on the capital. In addition, I had lost three years interest which even at 10% would have brought me a revenue of at least Rs. 660,000 had I deposited my capital in a bank! Altogether it was a loss of nearly Rs. 900,000 that I had to suffer investing in SM funds.
When I withdrew the balance, I appealed that I be given at least my capital back, but the company was not prepared to consider it saying that it was my mistake for not monitoring the movement of the stock exchange and taking precautions. Later, I learned that there were many others who were in my predicament.
Retirees are compelled to go for supposedly high interest paying schemes simply because they are unable to survive with the very low interest paid on deposits by banks under current government regulations. The additional 1% interest paid to senior citizens does not make any significant difference towards making ends meet.
The question now is who gains from our losses – is it the company who handled our funds or anyone else? Perhaps the SEC Chairman could find that out before he advises the public where to invest. Further, the media should give publicity to the fact that there is a possibility that investments in SE funds could rob investors even their capital.
Actually, the government should not allow this kind of funds to operate that erode depositors’ capital whenever the SM performs poorly which is beyond the control of depositors. The depositors should not be penalised for no fault of theirs’.
Robbed retiree
In 2010, I telephoned a bank to find out their fixed deposit interest rates to deposit part of the money I received from my EPF after life-long service. I was told by the officer who answered my call that if I could keep the money for a minimum of three years, he could suggest a better scheme of investing in funds based on stock exchange and that it would bring a higher return than what their FD would. I was also told that such investments were better than investing in individual stocks.
He later visited me at home and explained how the fund worked; it operates on a unit value system that depends on the stock exchange performance. He further said that there was no risk involved and the scheme was government approved. Since the bank itself was a reputed one (I believed), I accepted the bank’s assurance and invested Rs. 2 million. After the money was paid to the bank, I was told that the fund would be managed by an insurance company rather than by the bank.
After one year, the fund grew to Rs. 2.2068 million which was approximately a 10% gain. At the end of the second year, I was shocked when I received a statement showing a balance of only Rs. 1.678 million in the fund, much less than even the capital. When I inquired, I was told that the stock exchange did not perform well and as a result the unit value had dropped and hence the lower balance. I was then told that if I wished I could freeze the fund and unfreeze it when the unit price went up.So I followed the advice given.Initially, I was never told that such a thing could happen.
Subsequently, I inquired several times about the stock market performance and asked them to let me know when to unfreeze the fund. I never received any advice on it. Finally, at the end of the third year when I could withdraw the money, I was told that I could withdraw only Rs. 1.762 million which was the outstanding balance. This is a loss of Rs. 238,000 on the capital. In addition, I had lost three years interest which even at 10% would have brought me a revenue of at least Rs. 660,000 had I deposited my capital in a bank! Altogether it was a loss of nearly Rs. 900,000 that I had to suffer investing in SM funds.
When I withdrew the balance, I appealed that I be given at least my capital back, but the company was not prepared to consider it saying that it was my mistake for not monitoring the movement of the stock exchange and taking precautions. Later, I learned that there were many others who were in my predicament.
Retirees are compelled to go for supposedly high interest paying schemes simply because they are unable to survive with the very low interest paid on deposits by banks under current government regulations. The additional 1% interest paid to senior citizens does not make any significant difference towards making ends meet.
The question now is who gains from our losses – is it the company who handled our funds or anyone else? Perhaps the SEC Chairman could find that out before he advises the public where to invest. Further, the media should give publicity to the fact that there is a possibility that investments in SE funds could rob investors even their capital.
Actually, the government should not allow this kind of funds to operate that erode depositors’ capital whenever the SM performs poorly which is beyond the control of depositors. The depositors should not be penalised for no fault of theirs’.
Robbed retiree
