07 May, 2021

Do You Play Hardball?

Equity is the new game, mutual funds the way to win. So what's a little risk?

Sandeep Adhwaryu
Do You Play Hardball?
At first glance, it appeared that Budget 2005 did not give away much for middle-class India. And that in all that politically correct attention showered on the aam aadmi, the uncommon man, so to speak, had again been overlooked. But slowly realisation did dawn that tucked away in the FM's two-hour speech are many provisions and proposals that could bring about huge changes in the way we have been thinking of money management. And there's plenty in it for mutual fund (MF) investors as well.

First, there is a clear orientation in favour of defined contribution plans. In both the UK and the US, people build up large investments in equity over a period using such plans. In India, however, our retirement benefits are locked away in government securities. Developed economies encourage people to stockpile mutual funds over their career so that some savings are allocated in avenues that give a shot at higher returns, even if at a moderately higher risk.

A defined contribution plan is a bit like a Systematic Investment Plan (SIP), except that the employer provides for a...
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