InvITs vs Mutual Funds: Which Investment Option is Better for You? Expert Insights

When it comes to building wealth, Mutual Funds and InvITs (Infrastructure Investment Trusts) are two popular investment avenues. While both allow you to grow your money, their strategies, risk factors, and returns work very differently. Let’s explore which option might suit you better based on expert opinions.

What Do Mutual Funds Offer?

Mutual Funds collect money from numerous investors and invest it in equity markets (stocks), debt instruments (bonds), or a mix of both. They are ideal for investors aiming for market-linked returns over the short to medium term.

• Pros: Potential for high returns if markets perform well.

• Cons: Risk of capital loss during market downturns.

• Suitable for those who can tolerate short-term volatility and seek liquidity.

Example: If you invest in an Equity Mutual Fund, your returns depend on how the stock market performs. Gains can be substantial, but losses are equally possible during bearish phases.

NS Venkatesh, CEO of Bharat InvITs Association, explains, “Mutual Funds are ideal for investors seeking liquidity and willing to stay invested for a few years to achieve medium-term goals.”

How Do InvITs Work?

InvITs follow a different model. They invest in income-generating infrastructure assets like highways (toll collection), power transmission lines, mobile towers, and solar power plants. These assets generate steady revenue through long-term contracts.

• InvITs distribute up to 90% of their income to investors at regular intervals (monthly or quarterly).

• They provide stable returns with lower risk, unaffected by daily stock market volatility.

• Additionally, InvITs offer tax benefits on distributions.

Venkatesh mentions, “InvITs are suitable for investors seeking consistent cash flow, offering reliable income streams with minimal market-linked risk.”

Which is Better for You?

• Mutual Funds: Best for those aiming for long-term capital appreciation, willing to understand and bear market risks.

• InvITs: Ideal for conservative investors seeking fixed, periodic income with lower exposure to market fluctuations.

Can You Invest in Both?

Absolutely. Experts suggest a diversified approach, combining both Mutual Funds and InvITs in your portfolio to balance risk and returns.

• Mutual Funds bring growth potential.

• InvITs add stability and regular income.

• Together, they create a well-rounded portfolio catering to different financial goals.

Venkatesh states, “InvITs and Mutual Funds are not competitors but complements. Combining both can help investors achieve a balanced financial strategy.”

How to Choose Between InvITs and Mutual Funds?

Your choice depends on:

• Investment Horizon: Short-term liquidity or long-term growth.

• Risk Appetite: Can you handle market volatility or prefer stable income?

• Financial Goals: Do you want higher returns or predictable cash flows?

If you enjoy the thrill of market movements and are prepared for ups and downs, Mutual Funds might be your go-to. But if consistent income with lower risk is your priority, InvITs could be the right fit.

Disclaimer: The views expressed here are by financial experts and brokerage firms. Readers are advised to consult certified financial advisors before making any investment decisions.