Mutual funds has seen a considerable growth with a surging interest in the asset class. What is behind the sudden rise in this investment product, how are big Asset Management Companies (AMCs) trying to disrupt the mutual fund industry by luring the young and why should young people still bank on insurance in a volatile market?
According to the Association of Mutual Funds in India (AMFI), mutual fund folios are at a record high of over 15 crore.
A mutual fund folio can simply be explained as a unique bank account number or a client code given to individuals who have invested in mutual funds. If an individual has invested in more than one mutual fund scheme then he can easily track all his investments in one place with the help of the given folio number. This also means that while the folios are at a record high of 15 crore, it does not represent the total number of investors. Analysts and fund managers believe the actual number of investors could be much lower but it is slowly picking up traction especially among the young.
Why SIPs in open-ended mutual funds are popular?
Systematic Investment Plan (SIP) through mutual funds has become quite popular in the last five years. They can easily start investing with a very small amount of even Rs. 2500 per month for years in open-ended mutual fund schemes. This takes away the stress of making lump sum payments at a go and they are favourable for young first-time employees who prefer liquidity to stability in the short run. The best part about these open-ended funds is that there is no lock-in period and can be bought and sold. You can also stop your SIP at any time and then resume when cash is available without facing any penalty.
But here is the downside to MFs – they do not offer guaranteed returns. You should be even more careful if you are investing in equity mutual funds that invest in stocks. The price of a mutual fund is calculated by dividing the Net Asset Value (NAV) by the total number of shares. In a volatile market or when stocks are not performing their best, this can prove to be risky in the short term.
In volatile markets, a life insurance policy will still give guaranteed returns
If you are only starting out with building your portfolio then a life insurance policy is your best first bet and provides a strong foundation. The HDFC Life Sampoorna Jeevan is a Life Insurance cum savings plan which helps you with everything from building a passive income to protecting your family in your absence.
It allows you to:
Pay premium for a limited term, and enjoy Life Insurance cover for age up to 75 or 100 years.
Choose guaranteed income benefits once you have paid all your premiums in a timely manner.
Flexible options to avail income payouts again ideal for the young people.
Flexible options to avail potential upside of benefits through bonuses (if declared).
If you are someone who likes to play it safe, take lesser risks and are willing to wait for bigger returns in the long run than be lured by short-term profits, then investing in a life insurance policy like HDFC Life Sampoorna Jeevan will give you a good start to building your portfolio as opposed to investing in a mutual fund scheme.
Visit here to know more about HDFC Life Sampoorna Jeevan.
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