It is a fact beyond doubt that everyone wants to be secured against future unforeseen events and financial security is considered to be the most important factor in any individuals life. The dilemma for the retail investor is to decide where to invest with whatever little he has. The investment options available to a retail investor range from simple instruments like National Savings Certificates, Provident Fund, Insurance Plans, Fixed Deposits, and Recurring Deposits in banks to most advanced Unit Linked Insurance Plans, Debentures and Shares, etc. These instruments have different objectives as tax saving, better returns, providing security, and diversifying the risk. It depends upon the individual investor's needs, funds available and risk-taking capacity where he would like to invest. If the amount available is meager, risk-taking capacity is moderate and the objective is good return and growth, then the best solution available to him is mutual funds and that too diversified equity/growth fund.
Indian
investors who are known to prefer safe and secure investments are gradually developing
risk appetite. According to the Reserve Bank of India's latest annual report,
the share of mutual funds in household savings has shot up close to 4% from less
than 0.5% a year ago (Table 1). Bank
deposits also continue to rise with rising interest rates to now command a share
of 46% as against 36% the previous year. Share of insurance too has come down
from over 15% to a little over 13% now. In sharp contrast, the share of small
saving schemes of the government has fallen to 12% as against 20% the previous
year. Contribution to pension and provident funds is also going down from 13-10%. |
