How mutual funds have become the star investment product in the North-East? 4 experts weigh in
Four financial planners share how people have accepted mutual funds and share investment tips.
A few years ago, few people in the north-eastern part of India were aware of mutual funds. The financial literacy in this part of the country was dismal. While we can’t say everyone is financially literate, we are at least trying to move the needle.
We talked to a few financial planners based in Guwahati to understand how the investment landscape has changed in the last few years and what investors should do.
Rahul Agarwal, Director, IntyGritty Moneytree
Earlier, a lot of people used to save only after carrying out their monthly expenses. They used to save or invest the amount that they had left at the end of the month. But now, thanks to SIP, people invest first and then spend later. As a result, they are now able to save more money.
Moreover, we have seen that a few business people had the potential to start monthly SIPs worth Rs. 1 lakh and above. But, they were not comfortable investing that amount in one day. However, it was convenient for them to set up weekly and daily SIPs in their current account and invest that amount over a month instead of investing in one day.
Also, we see that many investors are becoming interested in Portfolio Management Services, which has a minimum investment amount of ₹ 50 lakhs. People are now looking at newer investment options instead of traditional ones like real estate, as many have faced many complications when dealing with real estate as an asset class.
We can also note a difference in investment preferences between generations, with older generations leaning towards traditional investments like land and gold. In comparison, younger generations are more open to exploring a variety of investment instruments.
Rajesh Sarawgi, Proprietor, Sarawgi Finserves
Many people have the wrong notion that they can double their money overnight or in a short period. They believe in the YouTube story of doubling their money in the stock market within one year and fail to realise that if it were so easy, why would that person publish the story in the first place?
Additionally, the current bull run has also charged interest to many young investors in the Futures and Options (F&O) markets. It’s called futures and options, but I will put it the other way around - being overly invested here could ensure the option of your future is gone.
Another characteristic of investors, whether from the Northeast or anywhere in this country, is buying stocks when the prices are high, and they will always sell when the prices are low.
For those who have invested for the long term, it would be very rare for the person to have regretted their decision. While those who have not invested, in any case, will regret it at some point. Individuals interested in protecting their principal amount by keeping their funds in cash
do not generally understand the time value of money. Later on, to cover up for the lost opportunity using sophisticated financial products.
Our investors, who have seen a few market cycles, are now much more comfortable with upgrading the suite of financial products they operate in and are willing to take exposure towards AIFs and PMSs.
Shyam Singhania, Co-founder at Sapient Finserv Private Limited
In the past, people in the North-East mostly used cash for transactions, making it difficult to invest in organised financial instruments. Unfortunately, many fell for Ponzi schemes, losing a lot of money. But things are changing now. With demonetisation and GST, more money is going into mainstream financial channels. People are learning to set financial goals and are achieving them. The ‘Mutual Fund Sahi Hai’ campaign by SEBI has also helped them trust mutual funds as a preferred investment.
Guwahati’s investment landscape stands distinct from other parts of India, owing to the inherently conservative nature of Northeastern society. Traditionally averse to risks, the people in this region have witnessed a gradual transformation in their approach to financial investments. Mutual funds (MF) and equity, once unfamiliar territory, have emerged as favoured avenues for saving and growing wealth.
Historically, the residents of Guwahati leaned heavily towards investments in land, insurance policies, and fixed deposits due to their risk-averse tendencies. However, the evolving financial climate has prompted a shift towards more dynamic and growth-oriented investment instruments. While the equity market was not traditionally embraced as widely in Guwahati compared to other parts of the country, the changing times reflect a growing openness among the residents to explore diverse and potentially lucrative investment opportunities
Recently, we’ve observed a shift in investment preferences among our clients in the Northeast. Human behaviour often follows recency bias, and in the past decade, equity markets have performed exceptionally well. As a result, people are increasingly inclined to invest in the equity market alongside the traditional choice of industrial land.
The ‘Mutual Fund Sahi Hai’ campaign has played a significant role in popularising Systematic Investment Plans (SIPs) among investors. This method of regularly investing a fixed amount has gained favour due to its simplicity and potential for long-term wealth creation.
Simultaneously, there is a notable surge in interest towards all risk-on assets, including real estate. Investors are exploring diverse avenues to diversify their portfolios and capitalise on emerging opportunities. This evolving trend indicates a growing awareness and willingness among individuals in Guwahati and the Northeast to explore and embrace a mix of investment options beyond conventional choices.
Anticipating the financial landscape of the North-East in the coming years, a noticeable shift is expected as the younger generation takes charge of managing family finances. There’s a likelihood that they’ll be more interested in investing in equities and similar options rather than dealing with the complexities of real estate. This generational shift may also be influenced by the ease of investing in assets like Real Estate Investment Trusts (REITs), equities and bonds
marking a departure from traditional investment approaches like insurance and FDs. Additionally, advancements in financial technology and the growing accessibility of online investment platforms could play a pivotal role in shaping these evolving financial preferences.
Ram Shah, CEO, Trustner Asset Services
From a niche product, mutual funds have become a mainstream investment choice. Campaigns like “Mutual Funds Sahi Hai” have undoubtedly played a big role in creating awareness about mutual funds, their features, and other benefits.
Investors are opting for SIPs as their preferred route to invest in mutual funds. Investors who are investing through SIPs are witnessing the power of compounding first-hand.
We also see that investors are becoming mature. Investors are also aware that although the markets can be volatile in the short term, they can generate wealth over the long term.
Hence, more investors are looking at wealth creation from a long-term perspective rather than seeking immediate gratification.
However, a concerning trend is the rise of young investors venturing into direct equities trading without sufficient knowledge or experience. Influenced by social media, many believe they can quickly master the complexities of the stock market. It’s crucial to emphasise that trading and investing directly in stocks without professional guidance carries considerable risk.
Instead, I encourage investors to embrace goal-based investing that is aligned with their financial goals. Prioritising financial literacy is vital, as is seeking expert advice – particularly for long-term goals like retirement or higher education planning.
Padmaja Choudhury is a freelance financial content writer. You can reach out to her at padmaja@padmajachoudhury.com.
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Business NewsMutual FundsHow mutual funds have become the star investment product in the North-East? 4 experts weigh in
First Published:26 Mar 2024, 01:31 PM IST
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