Apples versus oranges: Investors must not mix up basic concepts

Asset classes are distinct from investment vehicles and crafting a strategy demands utmost clarity

- DEVINA MEHRA

I am often surprised by the investment questions I get, even from otherwise knowledgeable individuals. Here is a sample: Is it better to invest in a PMS (portfolio management service) that invests in equity or an AIF (alternate investment fund) with a great derivatives strategy? My advisor says equity mutual fund SIPs (systematic investment plans) are outdated and recommends a global gold ETF (exchange-traded fund)—what do you think? Most of my investments are in an insurance policy—is that okay? Should I invest a lump sum in a fixed-income mutual fund or SIP into an equity PMS?

There's a common misunderstanding inherent in these questions: confusing asset classes with investment vehicles. Investors often don't realize that equity, fixed income, and gold are distinct asset types, while mutual funds, ETFs, PMS, or AIFs are ways to invest in those assets. Remember the order: choose the asset class, then the structure.