Are You A Salaried Class … Try ETFs

Are You A Salaried Class … Try ETFs

 

Five Reasons Why ETFs are the Perfect Investment for You

For a salaried person who looks for an investment option which provides an alternate source of income to counter the negative effects of inflation, ETFs provide the easiest answer. For starters, one instrument comprise of India’s best companies. Then, you can buy and sell whenever you need to. Next, charges are lower for such instruments. Most important, historically, they have given better returns than most other asset classes so that your wealth multiplies over time. This instrument also counters the effect of inflation the best.

Inflation has the habit of making money buy much less than it should. In fact, it sort of, corrodes our savings and leaves us with less. In the last few years, inflation has ranged between 6% to10%, at different periods in time. Now imagine the impact of this on your savings. If your money is lying in a savings bank account which earns 4% and inflation is 8%, you are actually making a negative return. Even if the money is in fixed deposit earning 9%, you are effectively only making around 1%. Isn’t that too less? Over a longer time frame this can have a significant impact on your wealth and accumulated savings.

ETFs the ideal way to beat inflation

You need an investment option that helps you beat inflation. Shouldn’t your investment returns also keep growing with economy?

Exchange Traded Funds (ETFs) offer this opportunity to ordinary investors.

ETFs comprise of a basket of securities almost like a portfolio. So, for example, Nifty ETF contains 50 of the finest companies in India. Bank nifty is a portfolio of leading banks and CPSE-ETF is a portfolio which comprises of Maharatna & Navratna public sector companies.

Annualized Returns ( 10 Years)

Bank FD – 9%

PO Deposits – 9%

Nifty Index – 15%

Junior Nifty Index – 15%

CNX 100 Index – 15%

Bank Nifty Index – 18%

CPSE Index – 13%

Inflation – 7.17%

Note : Bank deposit returns may vary for different tenures. The returns on Indices are computed as CAGR over 10 years starting Jan-05 through Dec-14.

 

ETFs are Like Mutual Funds, Only better

ETFs are therefore like mutual funds which combine several securities to provide a portfolio that helps minimize the inherent risk of equity investments. However, ETFs are better as they charge a much lower expense ratio of 1-1.5%. Nearly 40% cheaper.

ETFs provide Anytime Liquidity

An emergency situation can derail your finances. Can you encash your FDs at short notice? Not without incurring a penalty or a loss of interest income. Similarly, real estate takes time to sell and a distress sale invariably erodes your return. Unlike other investments like Bank FDs, gold or Property you can easily sell ETF in the market and raise cash because ETFs have no lock-in periods. You need the money urgently? Just contact your broker and sell it at the best price quoted, antime.

ETFs provide Hassle free entry and Tax free returns

Unlike most asset classes, like Fds or property, Income from dividends in equity ETFs are Tax- free. Yes, you heard it right, higher returns and tax-free.

ETFs provide Real Returns that are Higher returns

The only way to know the Real Returns on your investment is when you calculate returns after taxes, expenses and the impact of inflation. With tax-free returns, an effortless, easy entry into the stock market, higher returns, anytime liquidity, ETFs are known to deliver higher Real returns than any other investment. No wonder ETFs are amongst the most popular investment products in more mature financial markets like US and UK.

The Indian Investors are now picking up this investment option.

Happy Investing