By Irshad Mushtaq
Investing globally in mutual funds and ETFs (Exchange Traded Funds) is often viewed as a smart long-term strategy. However, many people hesitate to invest in these options, preferring assured income products with guaranteed returns, which usually offer around 8%. While these provide a sense of security, they limit long-term growth potential. For example, a ₹5 lakh investment today with an 8% return will grow to about ₹23 lakh in 20 years. In contrast, investments in mutual funds or ETFs with an Annualized Compound Growth Rate (CAGR) of 12% to 20% can grow the same initial amount to anywhere between ₹40 lakh and ₹1.38 crore. The allure of assured returns can be misleading. An assured income product offering 6% to 8% likely invests your money at double those rates elsewhere. This demonstrates that those opting for fixed returns are missing out on lucrative growth opportunities.
Here’s a simple breakdown: when banks lend at 12% interest and offer only 8% on fixed deposits, saving accounts 3% , they’re capitalizing on the difference. By becoming more informed investors, individuals can harness the power and benefits of mutual funds and ETFs managed by seasoned professionals, diversifying risk and enhancing returns. Mutual funds and ETFs offer diversified portfolios managed by expert fund managers. Backed by SEBI regulation, they ensure that your investments are secure, transparent, and well-managed. They’re also a great option for new investors due to their diversified nature, spreading risk across different asset classes. Digitally accessible platforms and local advisors further ease the process of creating robust portfolios tailored to individual financial goals. These investments not only provide exposure to equity markets but also offer potential returns exceeding other asset classes over time.
Investing in mutual funds and ETFs should be viewed as an opportunity to benefit from equity markets without needing comprehensive stock market expertise. They provide a strategic path to grow wealth with the right balance of risk and return, all while remaining in control of your financial journey.
- Learn from the insights of @Irshad Mushtaq, Writer, Investor, Entrepreneur & Founder of M I Securities! Connect for valuable financial advice at [email protected]
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