Page 36 - Seniors Today - Oct 2019
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Money
The feeling is mutual
Mutual funds can play a vital role in investment planning, at any stage,
writes Deepak Gagrani
Thanks to the efforts of market players (Asset benchmarks in short term.
Managers, AMFI & Advisors), there is an Wealth Creation is a long-term activity, where
increase in awareness amongst investors that one invests in growth assets and continues to
Mutual Funds (MFs) can play a vital role to stay put till the time the investment thesis is
help them plan their investments at any stage broken. It ignores short-term volatilities; in
of the life cycle. The tagline of ‘Mutual Funds fact promotes increasing exposure at times of
Sahi Hain’ has been able to bring in the right fear, assuming original rationale of investments
connect with investors. MFs play an even more remains good.
important role for elderly investors, as they An investor’s time horizon and intended end
offer professional management of funds at use of money will decide on the approach to be
lower costs, thereby allowing them to passively adopted. If the time horizon is long typically
manage their investments. in excess of 5-7 years and money is not needed
However, a common investor still continues in intermediate period, one can look at wealth
to struggle on how to effectively use MFs for creating strategies as against focusing on wealth
their financial planning. While SEBI has been managing tools.
working tirelessly to simplify the nature of
Mutual Funds, there is still some distance to Choose the Right Mutual Fund
be covered for a common investor to be able to Selecting a right MF is of utmost importance.
comprehend ‘Kaunsa Mutual Fund Sahi Hai’. Selection lapses can derail the entire financial
Presented below are some important factors journey. With more than 2000 MF schemes
which should help set the right recipe for offered by 42 AMCs, selecting a mutual fund
building an appropriate Mutual Fund portfolio may seem like a daunting task. A typical
according to their goals and objectives. shopping of MFs is based on the most obvious
factors such as higher past returns, popular
Wealth Creation v/s Wealth Management brand and higher star rating. Typically MF
While both the terms are interchangeably used, rankings focus on past performance for few
there is a material difference between both the quarters, hence keeps changing frequently.
concepts. Understanding the core difference can One should remember that one cannot control
help achieve the desired objectives in a seamless returns. However, one can control the process
manner. adopted to select the right MF. Choosing
Wealth Management is essentially an activity an appropriate MF requires focusing on a
that focuses on preservation of capital and combination of multiple parameters jointly,
generating returns to exceed the relevant summarised as follows.
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