Sachin Bansal-invested Navi Mutual Fund (MF) launched its US Total Stock Market Fund of Fund on 4 February. Significantly, all mutual funds have come under the USD 7 billion limit imposed by SEBI on overseas investment in stocks and mutual fund units. In such a situation, they have stopped taking such investments in their schemes. But overseas listed exchange-traded funds with a limit of $1 billion are still open, as the Navi Mutual Fund US Total Stock Market Fund of Fund will invest in the Vanguard Total Stock Market Index Fund ETF (VTI ETF), an ETF. Therefore, till the limit of investment of $ 1 billion in foreign ETFs is not exhausted, then money can be invested in this scheme of Navi Mutual Fund.
In this overall limit of $ 1 billion, according to SEBI rules, $ 300 million can be invested in overseas ETFs at the rate of per fund house. Let us also tell you that apart from this fund of Sachin Bansal, there are some other funds which can invest in foreign markets. This is because they are investing in global ETFs rather than investing in equity or mutual fund units. However, the number of such funds is very small.
Now the question is, should you invest in this newest fund of Navi MF? Let’s see what is the opinion of experts
Currently, US Total Stock Market Fund of Fund is the only fund in India that allows investors to invest in any fund operated by Vanguard. Vanguard is the world leader in passive fund management. The VTI ETF tracks the CRSP US Total Market Index which is a broader US index and covers almost all equity markets. It includes more than 4000 stocks across sectors. The VTI ETF is the largest ETF in the world. It has assets of $1.3 trillion.
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Financial planners say that this fund is overdiversified. Rupesh Nagda of Family First Capital says that America is the world’s largest economy but it is not the world’s fastest growing economy. However, technology is one such sector in which rapid growth is being seen in America. In such a situation, investors are not likely to benefit from diversification in almost all sectors.
Similarly, Deepak Chhabria of Axiom Financial Services is also seen supporting this. He says that in many sectors, diversification does not make much sense in itself.
What is Moneycontrol’s opinion?
The Moneycontrol team says that there are currently very few options for investors looking to invest in the global market. This is because the funds that invest in foreign stocks and global mutuals have met the limits set for themselves. However, it is expected that SEBI will increase this limit soon. So, you can wait to invest in US funds based on S&P500. It should be noted that US funds based on the S&P500 index tend to be more diversified than funds based on the Nasdaq 100. Also note that the Nasdaq 100 is heavily dependent on technology stocks. The weightage of technology in this is up to 45 percent. It should also be noted that this new fund offer of Navi MF will remain open till February 18.
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