“I was very excited when I came across this contest as I have brought many of my retail clients into the mutual fund universe through this category,” said MFD Dipesh Sethia from Agra, UP.
Dipesh has won the first contest of Impactful Storyteller wherein MFDs share their unique pitching style that has helped them grow business and diversify clients' portfolios.The topic for this month’s contest was the balanced advantage fund.
Let us look at his winning pitch for clients explaining about balanced advantage funds in his own words.
In today’s complex financial market, where there are so many products with different risk- reward ratio it is difficult for investors to stay focused and invested.
I believe each investor has different risk appetite, different goals and different approach towards investment. One thing common among every investor is that everyone wants to see their portfolio in green and facing volatility. They may settle with less returns but cannot see deep red or even light red colour in the portfolio. Most Indians still only rely on traditional savings products like FD, insurance, post office deposits, kisan vikas patra, national savings certificate, gold, public provident fund etc.
So here is how I initiate conversation about financial products with clients.
Dipesh: Thank you sir for keeping faith upon me and giving me an opportunity to help you out in constructing the right portfolio. It would be a great help, if you can complete your risk profiling.
Investor: Yes, Mr. Dipesh go ahead.
After risk profiling is done.
Dipesh : Sir, thank you for coordinating me in completing you risk profiling. Your risk profiling shows you have a conservative approach towards investment
Investor: Yes, I take very calculated risk. I cannot see erosion of my hard earned money
Dipesh: I can understand sir and even I don’t want you to have a bad experience in investment. Also, if you don't mind can you share yout asset allocation of funds till the date.
Investor: It is basically into traditional products.
Dipesh: Sir, may I know the basic reason of keeping your entire corpus into traditional products.
Investor: Safety and fixed returns.
Dipesh: Do you think that these are the only two criteria to be considered before investing.
Investor: What do you mean?
Dipesh: Sir, have heard about reinvestment risk, inflation, pre tax and post tax returns, diversification, debt funds, equity funds and arbitrage funds?
Investor: Yes, inflation is too high and traditional products are not able to beat inflation. FD rates are continuously moving towards south. Post tax returns are meager. But equity is risky asset class; here you always lose your invested capital.
Dipesh: Very well said sir. You are aware of many things. But I would like to remove one myth from your mind that equity is risky and you will always lose money. Equity is volatile but it helps generate return for investors in the long run. Time mitigates the risk of losing money if invested in right equity or equity related product.
Investor: Could you please elaborate?
Dipesh: Sir, there is a concept of buy low and sell high. I am confident that you must also apply in your business. In your business term, it is known as market rate fluctuations and in financial market, it is known as volatility.
Investor: So, how can we take advantage of this volatility without taking much of the risk?
Dipesh: Sir there are two ways to invest in the market, either purchasing shares directly from stock market (if you have knowledge and time to track) at lower rate and sell it at higher rate or mutual funds, where your funds will be managed by professional fund managers and they will do same thing on your behalf by lowering down your risk.
Investor: How?
Dipesh: Sir, if I ask you to choose between ordinary car with manual windows and voice enabled automated car. What will you choose?
Investor: Of course the latter one.
Dipesh: Wise choice sir. Similarly, if I ask you to subscribe into a scheme with:
1. Less volatility.
2. Buy low - sell high concept.
3. Have no reinvestment risk.
4. Have diversification.
5. Gives inflation beaten returns.
6. Post tax efficient returns.
7. Moderate risk on your capital.
8. Scheme that target returns better than FD.
9. Scheme that have proven track record of 14 years plus.
10. Brand name of the company that created this category and successfully added lakhs of FD customers.
11. One can start investing with as low as Rs 500/-
Most importantly, a concept where human intervention is restricted to the choice of filtering the stocks from pre pre-defined stocks universe and a conceptual formulated model known as equity valuation model index, it is back tested that will indicate fund manager about how much exposure to keep in equity, debt and arbitrage.
You will be surprised to know that this scheme can have equity exposure as low as 30% (naked equity) and 65% gross equity through exposure in arbitrage and as high as 80% (naked equity). In March - April 2020 after covid 19 crash, this scheme was having a maximum equity and as per the latest factsheet it has naked equity exposure to ~38% as on 28th Feb 2021. Without your efforts your profits are booked by fund manager, lowering your risk. Most importantly, mutual fund schemes carry equity taxation, upto Rs.1 lakh profit you don’t have to pay any tax, 10% thereafter.
I am talking about ICICI PRUDENTIAL BALANCED ADVANTAGE FUND,
ICICI PRU is the originator of the concept.
It is managed by 5 experienced fund managers, backed by a solid research team.
They do rebalancing of securities in their portfolio on day to day basis if required.
It is the dream scheme of respected MD of the company Mr. Nimesh Shah. His team came out with a unique concept for those who are not willing to take much of the risk and still want to make post tax returns better than FD. Now SEBI (Regulatory Body) has approved BAF as a category after a huge success. As on Feb 28, 2021 scheme has corpus of around Rs.30,000 crore and Mr. Shah has vision to see corpus at Rs.1 lakh crore. He wants this scheme to be held by each bank account holder.
Investor: Thank you Dipesh, I very well understood the concept of BALANCED ADVANTAGE FUND and feel if one has 3 years plus horizon and wants to stay invested for long without taking higher risk, this is most suitable category to invest money.
