Prof Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), yesterday advised general stock investors to put their money into mutual fund units, explaining that those have huge potential.
“If you have no accounting knowledge but are interested in investing into the market, then you can choose mutual funds,” said the chief of the stock market regulator.
Mutual funds pool money from many investors and channel it into securities such as stocks, bonds and other assets. Once profits are logged, the fund manager disburses it among the unit holders.
“We are trying to popularise mutual funds by ensuring discipline in the sector,” Islam said, adding that the mutual funds sector has the ability to provide dividends of up to 10 to 18 per cent.
His comments came during the launching of “Amar Taka”, a web portal providing features on savings, investment, banking sector, stock market and tax related issues, at the office of the Bangladesh Institute of Capital Market (BICM).
If people have savings, then they will need to plan how it will be invested so that they can earn a good return; so financial literacy is imperative, said the BSEC chairman.
Investors will have to realise that if they cannot earn enough money from the banking sector then they need to move to the stock market, said Islam.
When they cannot earn money from investing in shares, then they need to again move towards mutual funds or bonds, he said while addressing as the chief guest of the meeting.
Product diversification in investment is necessary, the BSEC chief said, adding that the regulator was working to create a vibrant bond market and to bring in sukuk bond.
Bangladesh’s stock market capitalisation to GDP ratio is still very low compared to what is in the neighbouring countries, said Md Mosharraf Hossain, chairman of the Insurance Development and Regulatory Authority.
“We need to enhance contributions and market capitalisation of the stock market,” he said.
About the insurance sector, he said disorder had been prevailing as an abnormal amount of commission was previously being paid to agents, reaching some 60 to 70 per cent for some companies.
Now, they are paying at best 15 per cent commission to agents, which has brought back discipline, he said.
As the commission has been reigned in, profits of the insurance companies increased.
“So why will they not pay higher dividends to investors? We will work on it so that they pay higher dividends,” added Hossain.
BICM Executive President Mahmuda Akhter also spoke at the event, presided over by Ziaur Rahman, editor of Amar Taka.