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Designing equity funds to meet life goals

May 23, 2022

Designing equity funds to meet life goals
Asset Management Companies (AMCs) are planning to introduce funds that intend to take exposure ranging from the Internet of things to sustainable healthcare and cloud computing.

However, retail investors need investment products that can assist them with meeting their life goals like buying a house and taking an exotic vacation. In this article, we take a look at how an equity fund can be structured to enable investors to meet their life objectives.

The risk-regret trade-off, Suppose you invest in a growth option of an equity fund because it is tax-efficient compared with the income distribution cum-capital withdrawal option (previously called dividend option).

Rule-based profit-taking, The required return from your goal-based investment is a function of your savings, your asset allocation, the expected return on profit from every one of those asset classes, the time horizon for your goal, and the amount required to achieve the goal.

Enhanced Index Fund, AMCs could offer an enhanced index fund a fund that will initially carry all the stocks in, say, the Nifty Index but takes profits based on the above-mentioned rule.

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