Kotak Mutual Fund CEO Sandesh Kirkire
For long, Indian saving habits
have been predisposed in favour of largely non-financial assets, viz gold and real estate. Within the ambit of financial savings, the preference has largely been towards deposits, insurance, currency holdings, pension and provident funds, government claims and share/debentures. This is in significant contrast with the trend countries like US or China where the preponderance is largely towards shares, mutual funds, bonds etc.
Much of the Indian retail investments still tend to be arbitrary, inadequately researched and/or, unappreciative of the actual investment horizon and expectations. It is therefore essential for Indian investors
and financial professionals alike that they come to appreciate the necessity of methodical approach to investments.
Mutual funds, a pass-through vehicle through which an investor can invest in professionally managed portfolio of disparate asset classes
, play a significant role in addressing these requirements. Among its key benefits is the potential of risk-adjusted return, objective driven investment, professional portfolio management service, competitive investment costs, and potential tax benefits.MUST READ:How to gain from asset class correlations
More crucially, through mutual funds, an investor can invest in asset class portfolios comprising domestic equities, gilt, corporate bonds, money market instruments, gold, overseas equities, etc. These asset classes may be constituents in a mutual fund portfolio in varying ratios and combinations; and are managed within the broad framework of legally regulated investment objectives and investment strategies.
Thus, the investor's allocation between varying asset classes (by means of these funds), can be dependent on investors own unique circumstances and requirements.
The idea behind employing asset allocation as an investment strategy through mutual funds, evolves from the fact that, various asset classes behave differently, and have disparate influencing factors at any given point of time.
The asset allocation reduces the overall risk of the portfolio of the investor, since the volatility and returns impact of the underlying asset is limited to the extent of its exposure. Thus, it becomes statistically possible to estimate, and to strive, to reduce the portfolio volatility. This, while also maintaining the potential for relatively high return.SANDESH KIRKIRE
CEO, Kotak Mutual Fund
(This is a sponsored article)