Personal Finance

An Overview Of FMCG Mutual Funds

June 3, 2020

An Overview Of FMCG Mutual Funds

Capital markets tend to be volatile and bring surprises every other day. In the midst of all this, we do look for mutual funds that are dependable in the long run and might give us reasonable returns as well. Within the broad umbrella of equity fund, FMCG Mutual Funds is one such avenue that you may consider to build wealth for your long term goals.

Given the ongoing product innovation, improved distribution, and door-to-door delivery, these funds are well-positioned to tap the growth in consumer demand that you may notice in the future.

What Are FMCG Mutual Funds?

FMCG Mutual Funds are sectoral schemes that invest in stocks of companies that are directly related to consumer spending. Here the word ‘FMCG’ means Fast Moving Consumer Goods. A majority of these goods come in packaged form and you make use of them on a daily basis. These goods have a high turnover rate. This allows them to be produced, marketed, and consumed in a very short period.

Some of the popular FMCG products are detergents, tooth cleaning products, cosmetics, and packed food items among others. When you invest in FMCG Mutual Funds, the fund house would buy the stocks FMCG companies and assign you units of the scheme as per the size of your investment. When the prices of FMCG stocks grow in the market, your fund NAV rises to create long term wealth.

Features Of FMCG Mutual Funds

FMCG, being the fourth largest sector of the Indian economy, makes FMCG Mutual Funds a great investment haven to harness the growth prospects in a structured way. Let’s get to know the important aspects of these funds.

Objective of investment

The fund aims to benefit from the rising consumer demand, changing demographics, consumer aspirations and lifestyle patterns in India to generate wealth over the long term. Most of your invested capital goes into the equity and equity-related options of FMCG sector. Some of the corpus might also get invested in debt and money market instruments.

The Upside

On the whole, the fund manager attempts to achieve consistency of performance through the selection of high-quality stocks. Being a defensive sector, the demand for FMCG remains stable throughout the financial year. Even at the time of a crisis, the consumption of essential commodities stays intact. As a result, the FMCG Mutual Fund tends to be at an advantage to generate higher returns during a market downturn. Thus, when all other sectors tend to head southwards, you might still rely on these funds to keep your portfolio in green.

The Downside

The fund returns might fluctuate due to changes in the prices of stocks that the fund has invested in. Also, you need to remember that the fund returns are not guaranteed and the fund performance may vary from one period to another. Even though the overall expectation remains to perform better than the market, but at times you may notice underperformance in the fund. There have been instances when some of them might even miss the bus during a rising market.

Relevance

Compared to other well-diversified equity funds, you might find these funds to be concentrated in the FMCG sector. This makes them riskier than other equity funds and before investing in them, you need to keep your risk profile in mind. If you have a relatively higher risk appetite and want to explore an equity sector that offers relatively more stability and consistent returns, then you might find these funds suitable.

Asset Allocation

Being sectoral funds, these funds tend to be high-risk investment options. If you are interested in them, exercise caution and try to allocate a minimal part of your portfolio, say no more than 10% to this sub-category. Also, it becomes important that you understand how these funds and the entire sector works before making a move.

How To Invest In FMCG Mutual Funds?

Investing in FMCG Mutual Funds is a smart way to earn low-volatility returns in a consistent manner. At Paytm Money, you get to invest in the fund in a few simple steps.

Step 1: Download the Paytm Money app to complete your KYC & become investment-ready within minutes

Step 2: On the home screen of the App, scroll down and tap on the ‘Equity Funds’ icon.

Step 3: On the Equity Mutual Funds page, scroll category bar to the left and tap on the ‘Themed’ category.

Step 4: Select the FMCG Mutual Fund of your choice and ‘Invest Now’ via SIP or the Lump-sum mode and enter the amount of investment. Tap on ‘Proceed to Payment’.

Step 5: Make payment using UPI, Netbanking, or by setting an Auto Pay with your bank for automatic deduction of your payments. Tap again on ‘Proceed to Payment’ to complete the transaction.