There is no doubt that mutual funds are still the safest way to invest in the stock market, but there is panic among mutual fund investors due to Franklin Templeton closing 6 debt funds. However, experts say that investing in mutual funds gives benefits in the long term and hence you should keep your investment in them
- Franklin Templeton case raises investor concern
- Investors in other mutual funds are also nervous
- Experts say investment should be maintained
- Mutual funds are still a safe investment option
There is panic among mutual fund investors as Franklin Templeton closes 6 debt funds. Realizing the situation, the Reserve Bank of India took immediate steps and made a cash arrangement of Rs 50,000 crore. What should investors do in such a situation? What should investors do via SIP? The giants of mutual funds know from experts.
Mutual funds are a safe way to invest in the stock market
There is no doubt that mutual fund investment is still the safest way to invest in the stock market. It is not possible for the common investor to continuously research the companies of the stock market and neither does he have enough time. Therefore, he invests in mutual funds. There are expert managers in mutual funds, who try to provide good benefits to all such investors by putting money in good companies, good investment options.
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There are mainly three types of mutual funds – equity funds, debt funds and hybrid funds.
Equity fund
These are funds in which investors invest money in the stock market. There is more benefit in this, but the risk is also high due to the money being invested in stocks.
Debt fund
Debt funds have so far been considered a safe means of investment. But Franklin Templeton’s case has raised concerns. On investing in these mutual funds, your money is invested in debt instruments ie bonds etc. People who invest in debt funds want safe returns. There is less risk and less returns.
Hybrid fund
Hybrid funds are also called balanced funds. The company invests you in a variety of mixed instruments like shares, bonds, etc. People who invest in it want a balance of little risk and little security.
What happened in Franklin Templeton
Many experts believe that this fund house had invested money in some corporate bonds which were not very safe. Which had high credit risk. Due to the poor state of the economy, many corporates have started defaulting in recent years.
Actually mutual fund houses invest public money in bonds of some companies. Putting money in them means that companies are given loans and they have to return them with interest in a given time. But when the financial condition of many companies did not improve and they failed to return the money of mutual fund house in time, rumors started spreading, investors suddenly broke to withdraw their money.
Due to all this, the mutual fund house started to breathe, and in order to avoid losses, it closed many such debt funds. Around Rs 30,000 crore of investors are stranded in these funds, however if compared to the asset under management (AUM) of the entire mutual fund, the amount will be less than 1.5 per cent.
Says Dhirendra Kumar, a well-known expert in mutual funds, “The reason for the crisis is actually that many investors started withdrawing money from these schemes in the midst of the worsening economy. Suddenly if so many investors start withdrawing their money at once, then there can be a problem with any institution, whether it is a bank or any other financial institution.
Now what will happen to investors of these funds
Investors of these funds will have to wait longer, but they can get their money back. The Reserve Bank has also started efforts in this direction. Dhirendra Kumar says, ‘Investor’s full money can be got. But now there is a long process, so they will have to wait.
So what to do investors of other mutual funds
Dhirendra Kumar says that investors of other funds should not panic. Those who invest in equity or any other long-term fund with SIP, do not panic. Mutual funds offer good returns over a long period of three years, five years or even more. Therefore, you should run SIP of such funds. Now after three years, or after five years, the same situation is not going to happen.
Should SIP run
SIP is a good option for investing in mutual funds. Most people invest 500 or 1 thousand -2 thousand rupees every month, especially in equity mutual funds, through SIP. The advantage of SIP is that you get the benefit of investing in the stock market for less money. Even if there is a decline in the stock market, you should keep investing in SIP and if you want, you can start investing in a new plan with SIP. The reason for this is that when the stock market declines, the units of a mutual fund also become cheaper, that is, you will get more units of a mutual fund for the same monthly amount.
