Mutual Fund Investment Tips on Diwali 2024:Diwali is called the festival of lights, which is celebrated by the largest number of Indians. The center of Diwali celebrations is Lakshmi Puja, where we worship Goddess Lakshmi to bring wealth and prosperity to the house. When we worship Goddess Lakshmi, we understand the importance of karma. Similarly, to become rich we should work hard and also invest wisely. Here we have quoted Suresh Soni, CEO, Baroda BNP Paribas AMC, as telling how you can prepare for your investments this Diwali.
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Multi asset fund is like a puja plate
Whenever we plan our investment portfolio, we can take inspiration from the puja thali of Goddess Lakshmi. There are many types of items in the puja thali, each of which plays an important role in the entire process of puja. Just as each item in a puja thali serves a different purpose in fulfilling the puja rituals, in the same way, in a multi-asset fund, different asset classes come together to form a strong portfolio for investment. Like different items in the puja thali, multi-asset funds also include different asset classes like equity, debt, gold along with cash.
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Diya (Deepak): Equity is like Deepak in the portfolio
The first and most important component of the puja thali is the lamp. A lamp symbolizes dispelling darkness and it brings hopes in one’s life. It is the guiding light that illuminates the entire ritual. In the context of multi-asset funds, equities also play their role like Deepak. Equity is generally the growth engine of a portfolio, which is known to deliver high returns in the long term.
Just as a lamp illuminates a room, equity helps illuminate the path to growth by offering high returns over the long term. Although they carry a certain level of risk due to market volatility, their potential for wealth creation makes them essential for a well-balanced portfolio. Many researches have shown that equities have always given investors a better experience with positive returns over the long term. Equity is the asset class with the highest long term returns.
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Flowers: Debt asset class is like fragrance
Flowers are another important component of the puja thali of Goddess Lakshmi, which adds to its beauty and symbolizes purity. They add fragrance and color to the puja. At the same time, the process of worship increases peace of mind and helps in making it spiritual. In multi-asset funds, debt alternatives – such as bonds, debentures and government securities, play a similar role.
Debt options in multi-asset funds provide regular income along with stability, just like the role of a flower is to add beauty and peace to a puja. While equities fluctuate, debt options act as a buffer. Debt funds or such alternatives ensure that the portfolio is balanced and protected from extreme market fluctuations. They provide security to the portfolio, giving investors the confidence to deal with market vagaries along with regular income, which also helps in taking care of cash flow needs.
Roli/Tilak: Gold, protective cover
Roli or Tilak is applied on the forehead during puja as a symbol of auspiciousness and protection. This holy symbol protects the devotees from negative energy. In multi-asset funds, gold thus acts as a safety shield.
Gold is often considered as a security or hedge against inflation and market downturns. Like Tilak, which protects as well as blesses, gold also safeguards your portfolio by acting as a safe asset class during times of economic turmoil. Its ability to preserve value makes it a must-have asset class for investors looking to protect their investments.
In recent times it has been seen that gold has given high returns. One reason for the rise in gold prices is that this precious metal has many uses and with rising per capita income in India and China, the world’s largest consumers of gold, its demand is also increasing.
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Coins/Money: Cash Equivalents
Finally, coins or money are placed in the puja thali as a symbol of wealth, prosperity and having adequate resources financially. They are meant to seek blessings from Goddess Lakshmi for financial growth and stability. In the investment world, cash or cash equivalents, such as TREPS (Treasury Bill Repurchase Agreements) and Treasury bills, are similar to these coins. Cash creates a safety net within the portfolio, providing stability and flexibility to the portfolio during market volatility.
Result: Better balance of portfolio
Just as a puja thali is incomplete without all these items, a mix of asset classes is needed to balance a portfolio and achieve high returns in the long run. Multi-asset funds provide investors a diversification for wealth creation with a combination of equity, debt, gold and cash, thereby strengthening your mutual fund portfolio.