Very often finan cial planners and advisors face a situation where an investor or a prospective client says that heshe wants to invest in insurance, stocks, bonds, gold, real estate and mutual funds. It then becomes a challenging task for the financial planner/advisor to explain that firstly, not all these are investments, and secondly mutual funds are not an asset class like stocks, bonds, gold and real estate but they are a vehicle to invest in these asset classes.
For example, if you want to invest in the stock market, you can do it through the mutual fund route.The same holds good for bonds and gold. And very soon, with Sebi working to allow real estate investment trusts (REITs) in India, you would be able to invest in real estate through this route also.Globally REITs are a popular way to invest in the real estate sector through the mutual fund route. Although not yet available in India, investors in several countries can also in vest in the commodity sector through the mutual fund route.
There are several advantages to investing in these assets through the mutual fund route which include lower cost of investing, higher safety and higher tax benefits. In addition, you also enjoy the services of experienced fund managers to manage your money .So in essence you can enjoy a better investing experience if you invest through the mutual fund route, more so if you are not experienced enough about investing.
And this holds good for individual investors as well as corporates, trusts etc, financial planners and top company officials said.
The company has recently got all the approvals to invest up to 5% of its incremental money coming into its provident fund trust into the stock market through the mutual fund route. The company is also planning to get similar approvals for its medical trusts. Mutual fund industry sources said as of now the company mostly invests in fixed income assets through the mutual fund route.
We have the requisite approvals for investing up to 5% incremental inflows into the PF in four types of equity mutual funds. We would invest part of the corpus into two blue chip funds, with low risks. Part of the corpus would go into a diversified equity fund and the balance into sensex-nifty ETFs (exchange traded funds). All these would be through the monthly SIP (systematic investment plan) route. The company has already set up the requisite guidelines on the types of mutual fund schemes of the fund houses it will invest through, which includes its track record, amount of money the fund house man ages, fund management fees etc.
According to Sandeep Sunder, director, Niblick Capital, very of Capital, very often he meets would be investors who don’t know any thing about investing and need handholding. They need to be aware of risks associated with investing, depending on their age and risk profile how much time they have to remain invested etc.
One of the factors that Sunder insists on is the time factor. For example, according to him, in equity, if one has time on hisher side, risks become lower. According to him, one should follow the thumb rule of investing that says the percentage of investment in equities should be 100 minus your age. If someone is investing for a child, heshe should be invested 100% in equity . On the other hand, if the investment is for a 50 year old, percent age of equity should be low but allocation in debt should be higher. Financial planners, advisors and investment profession alssay that fol lowing these rules be comes easier if one in v e s t s through the mutual fund route.
Source: TOI 01 Dect’2015