Investment Options for vigilant Investors : Investors who believe in India’s growth story but are cautious about increasing their exposure in the current market conditions have several options to consider. Here are three alternatives for those looking to invest with a long-term horizon while managing risk.
Here are, Some Investment Options for vigilant Investors in the Current Market Scenario
1. Balanced Advantage Funds (BAFs)
- These funds maintain an apparent equity exposure of over 65% to qualify for equity taxation.
- Fund managers utilize a long-short strategy, taking a short position in equities to offset part of the long exposure.
- The net equity exposure is determined by the fund manager based on in-house models tracking various economic and market indicators.
- Investors can entrust the fund manager to adjust the effective equity exposure dynamically, providing flexibility based on market outlook.
- Equity exposure decisions are regularly reviewed and adjusted by the fund manager.
2. Market Linked Debentures (MLDs)
- MLDs are debentures with no coupon payouts; returns are linked to a predefined variable, such as an equity index, gold, or government bonds.
- For equity-linked MLDs, the payoff depends on the terms and the movement of the chosen variable (e.g., Nifty).
- Many MLDs are structured as principle protected (PP), ensuring the return of the initial investment amount regardless of market movement.
- While positive market movements yield returns as per terms, the principle protection feature mitigates the risk of losing capital.
- Taxation on MLDs has changed; since April 2023, they are taxed as short-term capital gains, impacting the effective returns.
3. Alternative Investment Fund (AIF) Category III Long Short Fund
- AIF regulations permit derivative exposure up to two times the corpus, offering flexibility in taking long or short positions.
- Fund managers decide on the effective equity exposure based on the fund’s mandate and market views.
- AIFs require a minimum investment size, catering to investors with a larger risk appetite.
- The fund manager’s expertise is leveraged to navigate market conditions and adjust equity exposure accordingly.
Investors (Investment Options for vigilant Investors) can explore these alternatives to navigate market uncertainties while maintaining a strategic and long-term investment approach. Each option provides a unique way to manage risk and capitalize on potential market opportunities.
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