Is this even a tough choice?
A big chunk of Indians has been largely indulged with chit funds, registered or not. While some of the chit funds actually prove to be helpful for some folks, it can’t be said for most.
Despite being of high-risk-yet-low-returns nature, various chit funds are still thriving around the country. Yes, high-risk and low returns, that’s what chit funds are made of.
- Numerous scams related to chit funds have been exposed regularly over the last decades.
- The high 5% intermediation charges are too high, and eventually, the savers have to bear this.
- The person who wins the bid/lottery does not even get the total amount he pays over the months and years in most of the cases, leave alone any extra credit.
- There have even been instances of chit fund managers escaping with the money collected.
- No regulation whatsoever from government’s end over these chit funds make them even more undesirable for the common people. Although, there is Chit Fund Act, 1982, many of the chit funds are not registered.
Now, a question needs to be answered here:
Why do people still for these chit funds?
No other Option.
One of the most suitable answers is lack of options for a common man. Partly because of the poor and slow rate of financial inclusion, and partly because of the low or no credit score at all, most of the unaware folks tend to fall for these chit funds as a savings-cum-borrowing scheme. This further exposes them to the liabilities associated with chit funds.
Although the unorganized and unregulated nature of the chit fund industry makes it difficult to estimate the size of it, The All India Chit Fund Association estimates it to be Rs.35,000 crores. The calculations also suggest that the unregistered part of chit fund industry is almost a 100 times bigger than the registered one. This lack of clarity even in the estimation of the industry size seems problematic.
As to why and who opts for chit funds, 72.1 percent of the consumers were to found to be in as they find it a motivation to save.
An interesting here to notice is that 95% of these consumers do have bank accounts but still believe that it’s a good saving scheme since it’s more convenient and has high returns. This false perception among the masses has led to scams like that of Saradha and Odisha Seashore scam.
Also, the semi-literate people find the options other than chit funds too complex and tedious to use. And that’s only fair, no sane man would ever want to put their money into a closet which they don’t know how to open.
But, there has to be some way. At least for people who can afford it.
Enter Mutual Funds
What Mutual Funds do is, essentially, is the pooling of investors and their funds and investing in securities (real companies and stocks, unlike the chit funds where the funds are lent to people with less or no compliance to any standards or compliance.)
Another plus point regarding these mutual funds is that the fund managers charge way less (2 % P.A) than the chit fund managers (5% P.A). Moreover, the mutual funds are regulated by SEBI in a very stringent manner which makes their risk quotient even lower.
Thought the performance of mutual funds is subject to market risks, the historical returns have been great in comparison to most asset classes or investment avenues. The size of the mutual fund industry is estimated to be worth Rs. 17.5 lakh crore as of March 2017.
Savart to the Rescue.
However, the team at savart has made saving and investing in mutual funds as easy as it gets.
As a matter of fact, investing in mutual funds with savart can be conveniently compared with “grabbing a cup of coffee”.
Don’t believe it? Try for yourself.
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