Wealthy Investors Opt for Mutual Funds to Achieve Better Returns in a Simpler Manner
HNIs and UHNIs have started actively investing in mutual funds as part of their investment strategies. The earlier choices for such wealthy investors were complicated hedge funds and private equity. However, they now realize how mutual funds diversify the portfolio and minimize risks to achieve better returns.
Experts explain that HNIs and UHNIs usually have more complex and customized portfolios. Their investments often include hedge funds, private equity, and international assets. These portfolios are designed to handle market ups and downs, as these investors can take higher risks.
On the other hand, retail investors concentrate on more basic investments like stocks, bonds, and mutual funds. In general, their goals are wealth preservation, tax savings, and slow growth with low risk.
Even with these variations, mutual funds have benefits that suit both types of groups. Professionals mention diversification, easy access to money, and management through mutual funds. In contrast, for HNIs and UHNIs, the combination of mutual funds is better integrated with other investments that consist of direct stock investment, PMS, or even AIFs. Highly affluent investors find high-performing mutual funds on equities, debts, and hybrids as effective investments.
In recent years, there has been a noticeable change in how HNIs and UHNIs invest. Earlier, they mainly chose PMS and AIFs, which required large investments. Now, mutual funds are becoming a bigger part of their portfolios. This shift is because mutual funds are well-regulated, easy to understand, cost-effective, and allow quick access to money.
Typically, HNIs and UHNIs invest 30% to 60% of their wealth in mutual funds, depending on their financial goals. Mutual funds are regarded as less complicated and efficient compared to direct stock investments or complex assets.
Experts further say that mutual funds are transparent, low-priced, and save taxes. According to experts, this makes mutual funds the favourite choice for rich investors and it is recommended that 25 to 40% of the wealth be invested in mutual funds after considering the need for cash at hand and the market conditions prevailing.
Since these investments keep gaining their significance, mutual funds are slowly becoming a more prominent investment avenue for HNIs and UHNIs. Mutual funds create a fine balance between the concept of ease and great returns.
