You want to create a portfolio of listed equity stocks but are not sure whether you would have the money? A look at the stock prices of giants such as Reliance Industries (Reliance ₹1899 as of 20/11) or Tata Consultancy (TCS ₹2659 as of 20/11) or Hindustan Unilever (HUL ₹2119 as of 20/11) or Kotak Bank ( KOTAKBANK ₹1889 as of 20/11) or Glaxo Pharm (GSKPHARMA ₹1525 as of 20/11) and it appears all too obvious that it is only for the very rich. But is it?
A key part of investing is that you should be able to create your portfolio as you deem fit, without diluting your objectives. Say you want to start building your portfolio with ₹10,000 and you want to invest across these 5 stocks. You will probably land up with holding not more than 1 Equity Share of 4 of them & the fifth one you may not be able to invest as you will fall short of money to buy the minimum lot of 1 equity share. You wish there was an option to buy fractional shares (not permitted in India yet). But, do you know that you do have an option of investing the ₹10,000 into a basket of stocks which could include the above stocks as well as other similar “blue chip” stocks, akin to fractional investing. How, you may ask? Mutual Funds is the answer.
Here is a look at the top 10 stocks in the portfolio of a well performing Large Cap Mutual Fund Scheme as on 31-Oct-2020 and the allocation of your ₹10,000 investment if you had invested in this scheme:
You will notice that besides achieving your objective of holding the 5 stocks that you had identified, you have added other “blue chips” to your portfolio and in the process you have diversified your risk as well – fractional investing in a different & convenient way.
Further, you can systematically invest a small amount — as low as say ₹100 in some Schemes — and not wait for cash windfalls like tax refunds or bonuses. You can always invest a large chunk, if and when available but that may not always make up for the lost time if the money doesn’t arrive in time or if you have other expenses. The investment is across a basket of favourite/preferred securities without needing to worry if you will be able to purchase full shares. This would be almost impossible in any other scenario as you will need to monitor the price of the individual securities.
ACRU is an investment platform which facilitates investment in Mutual Fund Schemes in India. A mobile only platform with unique features and an innovative approach to investing.
Disclaimer: The views above are those of the author and do not purport to be advice or recommendation by the author or www.acru.in. Readers are advised to consult their financial advisors and act accordingly. Further, as investments in Mutual Funds are subject to market risk, readers are advised to read the scheme documents carefully before investing.