ICICI Securities launches ETF Intelligent Portfolios; should you go for it?

Index-based exchange traded funds (ETFs) that are known for passive investments and cost efficiency are gaining traction of late because many categories of funds have been unable to beat respective benchmark indices mainly due to restriction imposed by recent categorisation exercise by the market regulator Sebi. This has led to many brokerage houses coming up with new products to cater to this new demand segment.

ICICI Securities has launched ETF- Intelligent Portfolios (EIP), a new investment product that invests in a multi-asset basket of low-cost ETFs based on risk profile of investors. The investments in this portfolio are monitored daily and the allocations are adjusted based on market conditions so that the investor remains within his or her risk tolerance limit at all times.

"There is rising interest about ETFs in India as they are known for their returns, simplicity, low cost, and efficiency the world over. Because of their objective to track broad market indices, they almost ensure that the returns are no less than what the markets have to offer," said Abhishake Mathur, Head Investment Advisory Services, ICICI Securities Ltd.

"This has prompted us to offer ETF Intelligent Portfolios, which is an important addition to our bouquet of fee-based digital advisory services. Because of the universal appeal of such investment strategy, we are confident that EIP will appeal to both the new and the sophisticated investors for meeting their long-term core investing needs," he added.

How do ETF Intelligent Portfolios work? ICICI securities claims that its EIP service is based on well-founded investing rules of diversification, regular investing, low cost and re-balancing to a target asset allocation. Through this product, investors can get exposure in a group of four ETFs with exposure to Nifty50, Nifty Mid-Cap, G Sec and Gold called as investment baskets. Each basket is customisable by the investor based on his/her risk profile and market expectations for which the investor fills up a simple online profiler. Once the target allocation is chosen, ICICI Securities Advisory team monitors the portfolio daily for any deviation and based on the market movement, rebalances to the original target.

How to make investment Investments can be done through SIPs or lumpsum with amount as low as Rs 1,000. Besides offering the flexibility to change the target allocation, EIP also comes with no brokerage on transaction. ICICI Securities allows non customers to invest in EIP by opening an account digitally or customers can directly contact the brokerage house. Existing customers are allowed to logon to www.icicidirect.com and find the EIP option under the Research and Advisory tab.

Should you go for it? When it comes to investment, diversification assumes great significance. As a prudent investor, you should not put all your eggs in one basket, that is, one asset class. The asset mix decides in which proportion you should invest in various asset classes such as equity, debt, gold, real estate and so on.

Since each individual investor has different risk appetite and goals, the asset mix should meet his individual investment requirements. This is a unique product that offers the mix of three assets - equity, debt and gold - in a single window and that too through ETFs that are cost effective. Therefore, people having less time to plan their investments can consider investing in this product. However, as the product and its strategy are still untested for performance, it makes sense to keep your exposure limited until you gain more confidence on the strength of the product.