With the Franklin Templeton crisis coming to the forefront, many investors, especially those who have invested in mutual funds are worried.
Franklin Templeton Mutual fund recently decided to wind up six of its debt schemes in India with effect from April 23, 2020, amid the ongoing COVID-19 crisis. Capital up to Rs 308 billion is locked in and now the company hopes to sell its assets and pay its investors.
Here is a preliminary guide for protecting your investments:
Get 300% returns on your investments! This appears to be convenient and anyone may want to invest in such schemes. But it is here that one needs to be extra cautious. Any offer that is too good to believe is generally a fund that will fail. It is the greed factor that prompts people to pump in money.
Other precautions that need to be taken are:
1. Stick to certain low-risk categories and diversify your investments in them. Some of the options include short term fund, PSU debts fund and ultra short term fund.
2. Compare the expense ratio and yield maturity period. This will give an idea regarding the period involved in terms of permitted closing down of account and withdrawal.
3. Compare the credit quality of the fund. Look at the rating before investing.
4. It is imperative to track all developments in the field to make informed decisions.
Since the IL&FS crisis in September 2018, there have been events leading to a trust deficit and risk-aversion for investors in debt mutual funds.
During these times, it is necessary to question the way debt funds are sold and the basis on which funds are selected.
Investors also need to ensure that they don’t panic and focus on their asset-allocation goals. It is hard to earn one’s money but easy to lose it if people are careless. It is always better to develop a sense of financial knowledge and work accordingly.