Over the next few days, you may be approached by the person who sells mutual fund schemes in your locality, with a new pitch. The advise will be to invest the cash you have kept for emergency purposes in mutual funds' short-term debt product.
After all, you are going through a harrowing time after figuring out that the money that you have kept at home in Rs 500 and Rs 1,000 denominations are worthless unless not exchanged at banks. While the advise might be perceived as opportunistic, there is some merit in the recommendation.
“Investors will now believe cash is not the safest asset and there is little point in hoarding it. This will shift them from physical assets to financial assets, where returns are also higher,“ says Vikaas Sachdeva, MD, Edelweiss Mutual Fund.
Distributors are all geared to pitch in mutual funds products to these investors many of whom will be first timers. They believe that the minimum amount of investments being as low as Rs 500, redemption in a time frame of 1-5 days, transparency of portfolios and ease of transactions would influence new investors into mutual funds.
Investors have the option of investing in mutual funds by depositing Rs 50,000 cash within a limit of every financial year.
“Once cash comes into the system, it will need to be deployed productively,“ said A Balasubramanian, CEO, Birla Sunlife Mutual Fund.
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Investors could park it in a low risk debt fund, where they could earn 7-8% and based on their risk profile could invest into other mutual fund products at a later date.
“Given the low deposit rates and awareness created by the mutual fund industry, at some point investors will look at alternatives like mutual funds,“ says Amol Joshi, Founder, Plan Rupee.
