ATM :: MFs, advisors persuade investors to link equity investments to goals

Prashant Mahesh | ET Bureau Apr 20, 2016, 05.10AM IST | Economic Times


MUMBAI: Mutual funds and wealth managers have figured a way out to reduce shuffling of equity scheme portfolios by investors in response to short-term swings in the stock market. Financial advisors are asking their clients to link every investment in equity schemes to a goal such as holidays or child’s college education, while mutual funds are pushing products labelled as retirement or children’s fund. Such investment strategies are aimed at encouraging investors to stay put for a longer period.

“When you have defined goals, ability to choose which asset class to invest in and handle volatility in that asset class is better,” says Vishal Dhawan, chief financial planner at Plan Ahead Wealth Managers. Advisors recommend diversified equity or balanced funds with a consistent track record for long-term investments.

To strike a chord with investors, mutual funds have gone one step ahead with some smart branding like children’s education and retirement funds. Axis Children’s Gift Fund, HDFC Children’s Fund and Tata Young Citizens Fund are among the popular schemes in the child savings category, while HDFC Retirement Fund, Reliance Retirement Fund and Franklin India Pension Fund are popular among retirement planners.

“These funds invoke a sense of emotion. When you mark it for a goal, you are mentally prepared to hold it and not withdraw it,” says Harshvardhan Roongta, a Mumbai based financial planner.

Advisors usually suggest investors use the systematic investment plan ( SIP) route to meet their long-term goals. “It is very tough for investors to time the markets and hence systematic investments to help them meet their long-term goals is an option they should consider,” says Sridevi Ganesh, a Chennai-based financial planner.

For instance, for short-term goals like paying school fees for your child which is two months away, investors are asked to invest in debt as an asset class. Similarly, someone aged 35 year old who plans to retire 25 years hence, is recommended an equity fund.

Mutual funds and wealth managers also benefit when an investor stays invested for a longer period.

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