the pf funds r mismanaged right now but same due to govt guarantee yes sensibly speaking govt should invest funds in the market if the pf ac holder allows or better still the govt shd build a 401k type system like in usa. but not with this market which is at an all time high and probably overvalued and how do you guarantee that there will be no political intervention, or lobby for their business croonies, remember pronab mukharjee and the reliance scam in uti and then the historical mismanagement of uti 64, which was a trust fund and the managers were never held accountible to the investors but to ministers.
RE:Should 5% PF be invested in stocks
by v nadkarni on Feb 22, 2007 05:03 PM Permalink
the pf funds r mismanaged right now thanks to the left pressure of fixing higher rate of returns bu using reserves They are safe bcause of govt guarantee yes sensibly speaking govt should invest funds in the market if the pf ac holder allows but not with this market which is at an all time high and probably overvalued or better still the govt shd build a 401k type system like in usa where the holder has a broad framework to invest their pention funds.
and how do you guarantee that there will be no political intervention, or lobby for their business croonies, remember pronab mukharjee and the reliance scam in uti and then the historical mismanagement of uti 64, which was a trust fund and the managers were never held accountible to the investors but to ministers, who invariably used it as a tool to safeguard their interests
RE:Should 5% PF be invested in stocks
by Pranab Gupta on Feb 28, 2007 03:42 PM Permalink
I agree with you.The govt, should take necessary stpes to iron-guide the interest of the ground level investor-we the salried employees.Will you through some more light on the 401k type system of USA.
It is necessary to improve returns to the subscriber. If the equities are properly rated and services of reputed dealers are taken, it is safe and returns will be more.
though investing in stock is risky but the gains are more in a long term.the government should allow the pension funds to invest in stock through mutual fund route only. And that too only in balanced funds.this can be experimented in about two years.subsequently the govt.should take a proper direction to continue or not
The Govt. has made a delayed move to invest 5% of PF amount in Stock market to fetch more higher retufrns than what the present PF amount is providing i.e. annually 8%. The Money managaement speaks that No risk - No gain, so as per risk-return analysis the step of the Govt. is welcome. It will bring good fortunes for the employees who are under New Pension Scheme i.e. from 2004.
yes but i want to also say that now the sbi,icici, panjab, tmbl and also other bank given 9% interest against fixed deposite for three years so pf money invest in bank deposit.
India seems to be on a fast track growth for next 10 years at least. So stock markets will keep booming. It is the right time may be we are already a bit late in entering stock market. Lets not delay it any longer. Over and above this, Mutual Fund Managers are very experienced in maximizing returns and minimizing risks. I think Govt should start investing 5% of PF corpus in to stocks through some good Fund managers like UTI, Fidelity, SBI Magnum and Reliance Mutual Fund. This percentage can be increated to 25% over next 5 years based on the experience in initial years and then kept constant. This seems to be the only way to beat inflation. Also when such a large corpus will be there in stock market, it will automatically reduce dependence of our markets on FII. Automatically this will serve as balanced fund as 75% of corpus will stay safe in debt instruments, govt securities etc while 25% will be in a bit risky but high return earning market.
Given the increasing cost of living, particularly the cost of private medicare, even the returns from the New Pension Scheme (NPS) will be unlike to provide subscribers with a decent living 30 years from now. It is necessary therefore to explore all possibilities of maximizing the returns under the NPS.
I think therefore that not just 5% but at least 25% of the contribution should be invested in equities. However this should be done under the condition that a return of minimum 8% annually be guaranteed by the Govt and that half of the earnings above this amount be paid as bonus to the employees while the remaining half be held by the Govt as a buffer against future losses if any. This would not only help the employees but also reduce the strain on the Govt's resources.
It is also necessary that this measure be made applicable to all employees and not just to those who opt for this since most employees, particularly at the lower end of the scale, do not have the knowledge to make an informed decision in this regard.
I think that such a system would meet with approval from all sections of the polity because of the minimum return being guaranteed by the Govt.
