This story is from July 16, 2007

Lifestyle funds: Will they be the next big story?

Madhu T / TNN / Jul 16, 2007, 04:32 IST

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Lifestyle is a popular word these days. Your doctor associates it with certain ailments.

Lifestyle funds: Will they be the next big story?

Lifestyle is a popular word these days. Your doctor associates it with certain ailments. Your insurance and investment advisors throw the word at you to persuade you to sign on the dotted line. No wonder mutual funds are hopping on the bandwagon: Kotak Lifestyle fund and Birla GenNext fund have been around for a while, and UTI's Lifestyle fund is currently open for subscription.
As the name suggests, these funds will invest in firms that will benefit from changing consumption patterns in the growing Indian economy. Since many argue that consumerism is a key driver of Indian economy, this must be a great opportunity, right? Well, sort of.
"The MF industry is really short of ideas," says Amar Pandit, director, My Financial Advisor. "They want to launch a new scheme every six months to raise the assets under management." However, he adds that unlike some recent schemes "which lacked a relevant theme, the lifestyle theme is quite nicely packaged." One mutual fund manager says, "Lifestyle is a very relevant theme these days. I think the sector would do really well as the economy accelerates."
Simply put, such a scheme is somewhat like a diversified fund, except that it would refrain from investing in certain sectors, such as capital goods and information technology (IT). "Except for these exclusions, the portfolio of these schemes would look more like a diversified scheme," notes Pandit.

So, should one invest in a lifestyle fund?
Pandit argues that although the theme is appealing, you would be better off investing in a diversified scheme. Many financial advisors concur. They feel there is no point to investing in an almost-diversified scheme. "Excluding IT and capital goods is not a great idea. In fact, you will benefit from these sectors in a well diversified scheme," said a financial advisor who did not want to be quoted.
So, if you are planning to invest additional money in a MF scheme, it makes more sense to choose an existing diversified scheme from a reputed fund house, which has performed well in the last five years. That would be a better and safer way to create wealth.

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