The Government wants to remove the fear of EPFO investing in equity, from the minds of citizens. EPFO has started investing subscribers money in exchange traded funds popularly called ETFs. The Government has said that the performance of EPFO investments in ETF, must be viewed over the long term. EPFO investments in ETFs, have given about 12% return, in under a year. This is higher than the return of around 7% to 8% given by Government Securities.
It is very difficult to evaluate the performance of equity for 2 to 3 months. You require a much longer time frame. The EPFO can invest about 15% of its investible deposits in equity or equity related schemes such as ETFs. However the EPFO has chosen to invest 5% of its available funds in ETFs. Citizens of our country fear equity, as it is deemed to be risky. If you come out of your home, you can meet with an accident. Does this mean you never leave your home? EPFO does not invest subscribers money in stocks. It invests subscribers money in ETFs. So what is this exchange traded fund called ETF? ETF is a fund which holds assets such as stocks, commodities or bonds. ETF tracks an index such as a stock index say Nifty or a bond index.
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