Banking & PSU Funds

Banking & PSU Funds- Who should Invest and How to Invest


The best part about long term investing is that you are able to build a corpus that can help you achieve your life’s financial goals. Investment planning when clubbed with financial planning usually works in favor of investors. When you exactly know how much you must invest and where you should diversify your assets, income generation doesn’t seem that difficult. The problem with most individuals is that they do not have the habit of saving. To ensure that you save and invest a fixed amount at periodic intervals you can opt for an investment tool like SIP. However, SIPs are only applicable on mutual fund investments. To invest in mutual funds, investors need to first determine their appetite for risk.

What are banking and PSU funds?

Although equity schemes are one of the most sought-after mutual funds products for those seeking higher returns, there are some who do not wish to invest in schemes that have a high risk returns trade-off. Not everyone wishes to risk their money my investing market linked schemes. Investors can also invest in debt schemes like banking and PSU funds to earn stable returns with minimum investment risk. As per the guidelines set out by market regulator SEBI, banking and PSU funds must invest a minimum of 80 percent in debt instruments of banks, Public Sector Undertakings, Public Financial Institutions.

Who should consider investing in banking and PSU funds?

Every mutual fund scheme carries a different investment objective which it aims at achieving by taking risks of certain degrees. For example, small cap funds have the potential to offer high returns, but they are high volatile schemes where one can even lose out on their investment amount. Hence, before investing investors are expected to determine their risk appetite.  Mutual funds like banking and PSU funds usually require investors to possess at least moderate risk appetite. Also, these aren’t equity schemes you cannot expect banking and PSU fund to offer you guaranteed returns. If you are someone who wishes to park their money for a short duration and earn some capital appreciation in the process, you can consider adding banking and PSU funds to your investment portfolio.

Investors seeking stable returns with minimum investment risk can consider investing. Those seeking higher returns may have to depend on equity oriented mutual fund schemes.

How to invest in banking and PSU funds?

There are two ways to invest in banking and PSU funds. Investors can either make a one-time lumpsum investment or they can opt for a monthly SIP. However, to start investing, investors must become KYC complaint. Know Your Customer (KYC) is a mandate which every individual must comply with. A KYC form requires investors to fill in some basic details like their name, age, gender, etc. and submit the from to the AMC along with their passport size photograph and photocopies of their address proof (e.g. AADHAR card, passport) and identity proof (PAN card). After this, the AMC assure that in-person verification takes place where someone from the AMC visits the investor to confirm their identity.

Once you are a KYC compliant individual, you can start investing in banking and PSU fund via SIP or lumpsum. Lumpsum investing is preferred by those who have surplus capital sitting ideal. SIP fits those who wish to save and invest a small fixed amount at regular intervals. Systematic Investment Plan is where investors get to decide how much they want to invest and every month the predetermined SIP sum is deducted from the investor’s savings account. This ensures that every month your banking and PSU fund is allotted units in quantum with the investment amount and depending on the fund’s existing NAV.

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