Kotak AMC's Nilesh Shah believes mutual fund is the right option to choose

As per Nilesh Shah, Managing Director (MD) at Kotak Mahindra AMC, mutual fund (MF) is the right option to choose as the dice is equally in favour of the distributor, manufacturer and investor. While a mutual fund distributor facilitates buying and selling for investors, a manufacturer pools money from investors and invests it in securities such as stocks, bonds, and short-term debt. Consequently, investors benefit when the returns are decent.

Also, in the case of mutual funds, the Securities and Exchange Board of India (Sebi) is already coming out with several provisions for the benefit of the overall industry.

Shah believes that the regulator will do everything further to expand the mutual fund industry and support its growth so that MF houses can continue to provide financial freedom to every Indian.

While comparing MFs to National Pension System (NPS) model, Shah said the dice is loaded in favour of investors with very low operating expenses and the manufacturer or the distributor does not get rewarded for their efforts.

"Despite giving tax incentives, the total asset under management (AUM) in NPS is less than Rs 60,000 crore from non-committed subscribers like government employees," Shah said while talking exclusively with CNBC-TV18.

Currently, a charge equal to 0.10 percent of the contribution amount is levied on all NPS contributions with Rs 10 as the minimum charge and Rs 10,000 as the maximum charge per transaction. This is charged over and above the payment gateway charges to make online NPS contributions.

On insurance, Shah said the dice is loaded in favour of the distributor and manufacturer only. As a result, investors have to bear higher costs.

On the total expense ratio (TER) changes, Shah said that as an industry they have shared the feedback with Sebi.

Sebi allows mutual funds to charge investors certain operating expenses for managing mutual fund schemes. These expenses are collectively referred to as TER.

Sebi is now reportedly considering bringing in changes and standardising a uniform TER across mutual fund schemes in a bid to prevent agents from misleading investors.

"We are trying our best to optimise our costs and share the burden with our partners. There will be cost sharing between distributors and manufacturers of products," Shah told CNBC-TV18.