Do Mutual Fund Investments Suit General Investors?

Actual Question:

1. AMFI started the campaign ‘ Sahi Hai ‘ recently and I am wondering why there is a need for sudden awareness ?
2. For people who want to invest their hard earned money for a tenure of 5 years , Is this a right option or suggest other options if any.

Answer:

Dear Friend!

Thank you for asking a very pertinent question.

Yes, indeed there is a big need for awareness regarding equity ownership. As per Axis Securities’ report, equity ownership of Indians constitutes fewer than 6% of the household financial health compared to the 45% for the US. Most of Indians’ investments are in fixed deposits with banks, insurance policies, precious metals and real estate.

Equities are the real wealth creators in the long term and a solid hedge against inflation.

Coming back to your second question, yes indeed equities are the right investment option. Equity investments fall under three categories as follows:

1. Direct, self investments in equities
2. Through ‘Mutual Funds (MFs)’
3. Through ‘Exchange Traded Funds (ETFs)’

When it comes to mutual funds and exchange traded funds, please choose well diversified, low cost, index equity funds for wealth generation. Do not opt for debt (income) and liquid funds.

You may find the following related articles useful:

• Miracle of Compounding
• Can One Get Rich From The Stock Market?
• How to Choose the Right Mutual Fund to Invest?
• What is an Exchange Traded Fund?
• Which Mutual Fund to Invest When Market is High?

In conclusion, do mutual fund investments suit the general investors? The answer is a big and strong yes.

Thank you,

With Best Regards

Anand