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Assured Returns schemes ensure that the investors get minimum return to their investments. The scheme sponsor includes that in the written document and it is important part of the mutual fund ecosystem. But as an investor you should read the offer document carefully and pay attention to scheme period. Some schemes get reviewed annually so the investor has to track the returns each year. If you carefully study the Assured return products for long term investment, you will notice that there are many options and sub options included in the offer. The unit holder is at advantage when the scheme is sold directly by the mutual fund company.
Always ensure the status of ‘put’ option in the document. Some funds keep it to themselves and some allow the unit holder to retain it. One can avoid the risk and use mutual fund selling put options through the assured returns schemes. NSE’s much awaited options market is also planning to design similar schemes. Those investors who do not wish to engage in day to day market dynamics but want fixed amount of returns annually, should opt for assured return scheme option. But the amount of returns depends on the market dynamics and annual rates of inflation. These schemes are not totally risk free just like any transaction related to markets.
The diversified investment portfolio is a must as you cannot concentrate your all assets in the guaranteed return schemes. Fix income funds are another way to get stable returns. Both of these investments give interest rates similar to the markets. The credit rating agencies are also recommending return schemes as the global markets are constantly changing. A diverse portfolio also distributes the risks across the assets. With assured return schemes, you give up lot of liquidities in your hand. The mutual funds have started offering assured returns schemes on a commercial project. These schemes are giving away 12 percent return on investments. The construction projects such as apartments, IT parks, business plazas and malls offer such high returns in the real estate. Builders even give the fixed monthly return to each investor in this arrangement.
The scheme begins with the signing of memorandum of understanding between the buyer and the seller. Under this document for the project under construction, a seller is bound to give buy particular sum each month for designated period of time. The scheme may last 3 years after possession or till first lease. The builders across the world are opting for this option because they cannot depend on private equity or banks anymore. The assurance of getting monthly returns is what drives such schemes. A simple Google search will give you an idea about risks involved in these transactions.
The most common risk is that the seller fails to credit payment on time. You have to constantly check for the credited balance each month. The builders are now offering assured return scheme with bank guarantee to release payment on time. Remember that the money earned through these investment is totally taxable and all standard tax deductions apply.