Introduction
Do you ever imagine a world where every buy that you make, from your daily coffee to your new smartphone contributes to your investments' growth? That is what consumption mutual funds are all about. The funds are invested in the increasingly expanding consumer market by investing in companies that manufacture products or offer services that people use daily. Consumption funds are going to increase only as the increase of all daily basis things are increasing.
This article will be a deep dive into its benefits, how this fund works and the best Consumption mutual funds.
What are Consumption Mutual Funds?
These mutual funds are thematic or industry based funds that mainly invest in industry based consumer oriented companies. The funds are invested in companies that make goods or products that people use daily, ranging from retail, foods, beverages and home products. The idea behind investing in these funds is to invest in consumer spending which will grow over time as economies expand and the population increases.
After understanding the meaning of consumption funds let's move forward to understanding how it works.
How Do Consumption Mutual Funds Work?
Here are some points that will make you understand the working of this mutual fund:
1. Identifying Consumer Patterns
Fund Managers track the changes in consumer trends, shopping habits and financial conditions to determine where there is likely to be growth and where people should invest.
2. Stock Selection
The fund invests in multinational consumer goods companies, retail giants and e-tailing giants that have good brand value, sustainable demand, and consistently increasing historical revenues. This mutual fund provides SIP options to their investors so that they do not need big capital to invest in their favorite sector.
3. Portfolio Diversification
This fund invests in different consumer groups such as food and beverage, apparel, electronics and automobiles. This strategy helps investors to reduce the risk and increase the profits for the investors.
4. Active and Passive Management
Some of the funds are actively managed by professionals making adjustments to holdings on market conditions, while others follow a passive investing strategy by mimicking consumption based indices.
What are the benefits of using Consumption Funds?
There are several benefits of using consumption mutual funds, which can help your portfolio to grow more and some of them are:
1. Growth Potential
Consumer demand tends to rise with economic growth, which helps in increasing economies, people have more disposable income to spend on goods & services meaning that consumer-based businesses generate more income.
2. Inflation Hedge
The demand remains strong, including through recession periods. Consumer products like grocery items and housekeeping products are generally good performers through periods of inflation, stabilizing portfolios.
3. Diversification
Investing in a range of consumer-based businesses reduces risk. With funds that have suppliers of necessity goods and suppliers of discretionary goods, there is balanced coverage of market areas, restraining potential loss through industry-specific decline.
4. Resilience During Volatile Markets
Consumer needs to remain constant during low or high times. Though there can be some time fluctuations in the market. But consumer-oriented businesses will generally withstand market fluctuations better, making funds a safe bet for every investor.
Let's see which are the best funds present in India.
Top Consumption Mutual Fund in India
In the market full of competition here are the best top best consumption funds for you:
1. ICICI Prudential Bharat Consumption Fund
This fund is investing in high quality consumer driven companies that offer high returns. This fund was launched on 12th April 2019 and has an AUM of
2. Mirae Asset Great Consumer Fund
This fund is a thematic fund that invests in multi cap active management companies. This fund was launched on 29 March 2011. This fund has a total AUM of Rs. 3751 Cr.
3. Canara Robeco Consumer Trends Fund
This fund was launched on 14 September 2009 and since then it has aimed for long term capital growth. This fund has total assets of Rs. 1598 Cr.
After knowing the best mutual funds lets see how to invest in these funds.
How to Invest in Consumption Mutual Funds?
The process of investing in consumption mutual funds is simple and contains the following steps:
1. Research and Compare Funds
Evaluate various investment options focusing on historical performance, such as performance over the years, expense ratio and asset allocation details.
2. Choose a Good Fund House
Select a fund from a popular mutual fund company where the fund house has a history of positive returns.
3. Select Your Investment Mode
Select an investment option whether a lump sum investment, SIP or any other investment option that is suitable to your financial goals and risk appetite.
4. Open An Investment Account
While investing in a mutual fund house, brokerage platform, or another financial institution, make sure that you do the relevant KYC formalities.
5. Monitor Your Investment
Track fund performance regularly and change them depending on market and financial conditions.
Who should invest in Consumption Mutual Funds?
As you learn how to invest in consumption mutual funds now lets understand who should invest in this fund:
1. Investors Who Want to Follow Economic Changes
These mutual funds increase in value with the growth of an economy because spending increases during these times. These funds may also give good returns for you if you expect consumer spending to increase in the future.
2. Investors Who Can Endure More Risk
While ordinary consumption funds can be useful to investors looking for growth, they can be extremely sensitive to changes in consumer spending and overall economic activity. As such, they may appeal to people with a higher risk appetite.
3. Investors Looking to Grow Their Portfolio
Funds of this type usually invest in a range of companies and are not limited to the retail or even healthcare sectors. If you already own assets such as bonds or real estate, multiplying your investments with funds would add great value to your portfolio.
4. Millennial Or Younger Generations
Younger investors stand to gain the most from these funds because their longer-term investment horizon allows them to benefit from rising population levels, increased urbanization, and digitalization in the next few decades.
Conclusion
In short, this fund offers an exciting investment opportunity for those looking to capitalize on consumer-driven economic growth. This fund helps the investor to invest in their daily basic things, such as coffee or some beverage brand. You can start SIP in these funds also, so that you do not have to invest high capital income. This feature also allows investors to have systematic investments periodically. Hence, increasing population would increase the consumption of daily uses, so investing in this could make your portfolio profitable.
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