5 Things to Know Before Investing in Bajaj Finserv Mutual Funds

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Bajaj Asset Management Company (AMC) is a wholly-owned subsidiary of Bajaj Finserv Ltd. It was launched on June 6, 2023. Since this is the company’s first year of operation, it is currently focused on the Indian market. Bajaj AMC has a total of 8 schemes in its product lineup.

The company’s investment philosophy is centered around a three-stage process called InQuBe. This stands for informational, quantitative, and behavioral edge.

Here is what you need to know before investing in Bajaj Finserv Mutual Funds.

Considerations Before Investing in Bajaj Mutual Funds

Here is what you should consider for investing in this mutual fund.

1. Diverse Options

Bajaj AMC offers multiple schemes designed to meet the diverse investment needs of individuals. These schemes are categorized into equity, hybrid, and debt.

In the equity category, you can invest in a Bajaj Finserv Large and Mid-Cap Fund and Bajaj Finserv FlexiCap Fund. In the hybrid category, you will find Bajaj Finserv Balanced Advantage Funds and Bajaj Finserv Arbitrage Funds. In the debt category, there are Bajaj Finserv Money Market Funds, Bajaj Finserv Overnight Funds, and Bajaj Finserv Liquid Funds.

The minimum investment requirement, either through SIP or lump sum, in the equity and hybrid category is Rs 500. On the other hand, you will need Rs 1000 to start investing in debt funds.

2. Expense Ratio

When you invest in a mutual fund online, check the scheme’s expense ratio. This ratio is a crucial metric that reflects the annual costs associated with managing and administering a scheme. It is expressed as a percentage of the scheme’s average net assets and includes management fees, administrative costs, and other operational expenses. For example, the expense ratio of Bajaj Finserv Liquid Plan- Direct is 0.10.

A lower expense ratio is preferred as it indicates cost efficiency and can lead to higher net returns for investors.

3. Check Risk-O-Metre

The risk-o-meter is a tool mandated by the Securities and Exchange Board of India (SEBI). It helps investors gauge the potential risk level of a mutual fund investment. Based on the asset categories included in the fund’s portfolio, it is designed to reflect the risk profile of the scheme, ranging from low to high risk.

For example, Bajaj Large and Mid Cap have a ‘Very High’ risk type. That means the scheme portfolio comprises highly volatile stocks that work on a high-risk, high-reward mechanism.

4. Calculate Projected Returns

Since its inception, Bajaj mutual funds have generated decent returns. For example, their FlexiCap fund has generated an absolute return of 20.79%. On the other hand, their balanced advantage fund has garnered an absolute return of 3.73%.

The difference between the returns of the two funds can be significant. Therefore, if you aim to achieve some financial goals by investing in Bajaj mutual funds, it is important to know about the projected returns using a SIP calculator.

You may also use a SIP top-up calculator, which allows investors to factor in periodic increases in their SIP amount. This feature benefits those who anticipate a rise in their income and wish to increase their investments incrementally to achieve their financial objectives.

5. Check the Benchmark

A benchmark serves as a standard point of reference for evaluating the performance of a mutual fund scheme. Consistent outperformance of the benchmark indicates that the fund manager is making wise investment choices that add value to the investors’ money.

The Bajaj Money Market fund uses the NIFTY Money Market Index A-I (one-year return: 7.46%) as its benchmark, while the Bajaj Finserv Flexi Cap Fund tracks the performance of the S&P BSE 500 TRI (one-year return: 31.00%).

Conclusion

Investing in Bajaj Mutual Funds requires careful consideration of several factors. With diverse options spanning equity, hybrid, and debt categories, you can fit your portfolios to your specific needs. It is recommended to understand the expense ratio, risk level, projected returns, and benchmark performance before investing to avoid any surprises in the future.

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