WHO AM I?
You invest in markets or mutual funds to make money, but conventional wisdom says that you need to keep me in mind before you invest. I am not just some fancy term that financial planners throw at you; I am what you want your money to do by the time you decide to take it out. So if you want to save for your kid’s education or marriage or for your retirement, this will determine the type of schemes you should invest in.
WHY AM I IMPORTANT?
I am an important part of your decision-making process because I determine which funds you should invest in. However, along with me, you also need to keep your risk appetite and age in mind; a combination of all of these gives you a direction. For instance, if you feel that you need to invest for your retirement and you are, say, in your 30s, a diversified equity fund or a large-cap fund is best suited for you. Though thematic or sectoral funds are also equity schemes, these are ruled out once you say you are investing for retirement.
Take another example: you’ve booked profits in the stock market and want to temporarily park your gains somewhere till markets cool down and you can redeploy your gains. Liquid schemes and ultra short-term funds are best suited in this case, though if you’re planning to take some additional risk, short-term funds can also work for you.
Increasingly, fund houses are selling their schemes based on objectives, instead of categorizing their products by their underlying asset allocation, such as a monthly income plan (MIP) or a large-cap fund. Fund houses such as Franklin Templeton and Peerless Funds Management Co. Ltd are working in this direction. For instance, Peerless MF Child Plan is structured like a typical MIP and aims to invest significantly in debt instruments with a marginal exposure to equities and gold. Franklin Templeton recently launched “Family Solutions”, a pre-packaged investment solution that the fund house offers to its distributors and financial planners. Investors have to complete a profiling form using their goals and expectations. Based on the responses, the fund house suggests different types of portfolios consisting of its schemes.
—Kayezad E. Adajania