The Employee Provident Fund Organization popularly called the EPFO, will invest 8% to 10% of its incremental corpus in equity, in this financial year. This is nearly INR 14,000 crores. This move will boost the stock market. Last year the EPFO invested nearly INR 7,000 in stocks.
Why is EPFO investing in the stock market? A very simple reason, Economics. EPFO got about 13% returns on its investments in equity, last year. EPFO got only 8.6% returns on its investments in debt, last year. No guessing who is the winner. EPFO has more than 4 Crore subscribers.
EPFO makes its investments through two exchange traded funds (ETFs). An ETF basically comprises of a collection of stocks which reflect the composition of Nifty or Sensex. These are basically stock market indices. The EPFO has chosen two ETFs. They are the SBI ETF Nifty and SBI Sensex ETF. The proportions are as follows. While 75% of the ETF went to SBI Nifty ETF, 25% was invested in the SBI Sensex ETF.
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