Tourism
Mutual Fund Schemes to Help Build a Corpus for Your Dream Vacation!
World
Tourism Day Special Article
A.G.V.
Srinath Vijay, Co-Founder.
https://gbvmfservices.in/, ARN-148604
Phone -
9080705714
“Dad... Can
we go to Kashmir during the summer vacation?” asked 12-year-old Arun.
“Of course,
we can. But we need to start setting aside some money for it now,” his father
replied.
That simple
question from a child turned into a financial planning exercise for the family.
They started investing ₹5,000 every month separately for the trip. A few years
later, they had built a sufficient corpus to travel with the family without
depending on loans.
September
27 – World Tourism Day
Tourism is
not merely an expense. It is an experience that creates happy memories with
family. However, if money is not set aside in advance for such experiences, one
may end up borrowing money or breaking existing savings.
World
Tourism Day is observed every year on September 27. On this occasion, let us
look at how you can plan and build a corpus for your travel goals.
What
Is the Connection Between Tourism and Investment?
Suppose a
family needs ₹2 lakh for a vacation. Instead of arranging the entire amount at
the last minute, they can start investing a fixed amount every month well in
advance of the travel date.
If the goal
is several years away, investing through mutual funds can be one option.
Equity-oriented mutual funds may be suitable for long-term goals. However,
since the stock market can be volatile, putting the entire amount meant for a
short-term travel goal into equity-oriented schemes may not be appropriate.
What
Is a Tourism Mutual Fund?
In India,
there are index-oriented investment schemes that focus on the tourism theme.
Such funds may track an index representing India's tourism sector. The index
can include companies from hotels, travel and tourism services, restaurants,
airlines, airport services, travel-related products and other connected
businesses.
Therefore,
when we invest in such a fund, the money does not directly become a “travel
savings fund.” Instead, it is indirectly invested in shares of companies that
may benefit from the growth of the tourism sector.
Investors
need to understand one important distinction.
Saving
for a vacation is different from investing in the tourism sector.
Will
Tourism Growth Automatically Increase Your Investment?
The growth
of domestic tourism, air travel, hotels, restaurants and online travel bookings
can create opportunities for companies operating in the tourism ecosystem.
However,
even if the tourism sector grows, it does not mean that the value of a
tourism-focused mutual fund will continuously rise.
The value of
the fund can be influenced by several factors, including the profitability and
valuation of the underlying companies, economic conditions, fuel prices,
interest rates, travel demand and the performance of individual businesses.
There are
also tourism-oriented exchange-traded funds, or ETFs, which may invest in
companies associated with hotels, airlines, airports, restaurants, railways and
travel bookings.
Tourism-Related
Investment Options
|
Investment
Type |
Where
Does It Invest? |
What
Is It Suitable For? |
|
Tourism-themed mutual fund |
Companies associated with tourism |
Long-term thematic investment |
|
Tourism ETF |
Shares included in a tourism-related index |
Market-linked investment |
|
Diversified equity mutual fund |
Companies across several sectors |
Core long-term investment |
|
Bank deposits/debt-oriented investments |
Fixed-income instruments |
Short-term goals |
How
Much Should You Invest for a Vacation?
Suppose you
want to take your family on an international vacation five years from now and
estimate that you will need ₹5 lakh.
If you
invest ₹5,000 every month for five years, your total investment will be ₹3
lakh. If the market performs well, the value of the investment may increase.
However, future returns cannot be guaranteed.
Therefore,
instead of keeping the entire amount required for a travel goal in a single
tourism-themed fund, investors can consider spreading their investments across
different asset classes depending on their time horizon and risk tolerance.
What
If the Vacation Is Only a Year Away?
If you are
planning to travel a year from now, relying on an equity-oriented tourism fund
to build the required corpus could involve considerable market risk.
If the stock
market declines just when you need the money for your trip, you may have to
withdraw the investment at a loss.
For goals
with a longer time horizon, such as three to five years or more,
equity-oriented investments may be considered depending on the investor's risk
tolerance. As the goal approaches, gradually reducing market exposure can also
help manage risk.
Is
a Tourism Fund Enough?
No.
A tourism
fund is a thematic
investment. Under mutual fund regulations, thematic funds
invest a substantial portion of their assets in securities related to the
specific theme. Therefore, compared with diversified equity funds, they can
carry higher sector- or theme-specific risk.
So, putting
the entire mutual fund portfolio into a tourism fund may not be an appropriate
approach. Investors can consider having diversified equity funds as their core
investments and allocating only a smaller portion to thematic investments
according to their risk tolerance.
Create
a Separate Investment Plan for Your Travel Goal
Although a
vacation is generally a discretionary expense, it also deserves financial
planning.
First,
decide when you want to travel. Next, estimate how much the trip is likely to
cost. Then determine how much you need to save or invest every month.
You should
consider five important factors together: travel goal, time horizon, required amount, monthly
investment and risk level.
Most
importantly, basic financial protections such as an emergency fund, health
insurance and adequate life insurance should be put in place before increasing
investments for discretionary goals such as vacations.
Plan
Today for a Happy Vacation Tomorrow!
Instead of
thinking, “We can travel
if we have enough money,” it can be more useful to adopt the
approach, “Since we want
to travel, let us start planning for it today.”
A tourism
mutual fund is not a dedicated savings product for your vacation. It is a
market-linked investment focused on sectors such as tourism, travel, hotels,
restaurants and airlines.
Therefore,
when investing for a travel goal, the first considerations should be the time
horizon and the level of market risk involved. Investors should also remember
that returns from thematic funds are not guaranteed.
A
Small Investment Today... A Wonderful Journey Tomorrow!
On World
Tourism Day, don't just plan your next trip. Start planning the money required
for that trip as well.
For More details and Investing
A.G.V.
Srinath Vijay, Co-Founder.
https://gbvmfservices.in/, ARN-148604
He is a
Qualified Personal Finance Professional (QPFP). His father is also a mutual
fund distributor. Hailing from Pollachi, he currently provides financial
services to approximately 2,500 individuals.
Read articles written by Mr. A.G.V.
Srinath Vijay in Nanayam Vikatan, a leading personal
financial management magazine https://bit.ly/4uj1I1Y
Phone -
9080705714
Email - srivj.sv@gmail.com
Address: 33, SV Towers, New Scheme Road,
Pollachi
- 642 001
Tamil
Nadu
Office
Time: Monday – Saturday: 10:00 AM – 06:30 PM
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme
related documents carefully. The past performance of the mutual funds is not
necessarily indicative of future performance of the schemes.
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