Investing in Mutual Funds isn’t as difficult as it seems. Read more.
If you haven’t invested in Mutual Funds so far, you need to understand the advantages of doing so. Obviously, like every other thing, it has its set of disadvantages as well but if done right, they can be really great. Without confusing you even further, let’s start telling you why you need to invest in Mutual Funds. Don’t worry, we’ll cover the disadvantages later too. That will help you evaluate your profile and decide whether or not you want to invest.
Additional Reading: How Mutual Funds Work
Here are some of the major advantages of Mutual Funds:
They Are An Easy Investment Option
You might take some time to actually figure things out, but once that’s done, investing in Mutual Funds is super easy. That said, you will surely need some research to put together a portfolio that’s right for you. What suits your friend might not suit your needs. There are different types of Mutual Funds available. Before deciding which one is best for you, you must understand your requirements and risk appetite well.
Additional Reading: Portfolio Management Services Vs Mutual Funds
You Can Get Professional Help
Hate crunching numbers or research? Don’t worry! Mutual Funds come with this great option where you can get professional help and ask them to manage your portfolio. You’ll have to pay them, of course, but that will sort everything out for you. An expert can help diversify your portfolio to make it as risk-free as possible.
You Have The Option Of Diversification
Like we mentioned before, portfolio diversification is crucial. What that actually means is that instead of buying shares of a particular industry in bulk, you buy small portions from diverse industries. For instance, instead of buying all shares from an oil company, you distribute and buy shares from oil company and a pharma company maybe. That way, in case the oil industry sees a loss, all your money won’t get affected as a good share will be invested in a pharma company.
Additional Reading: Equity Mutual Funds Investor? Here’s How You Can Download LTCG Statement
You Can Buy Different Types Of Mutual Funds
To suit the requirements of everyone, there are different types of Mutual Funds for you to invest in. Based on your investment objective you can invest in either of the following:
- Growth Funds: You basically invest primarily in equity stocks. The main aim here is to provide capital appreciation. If you’re looking for something long-term, these could be ideal for you. If you’re willing to take the risk, stay invested for long and want a high return on investments, these are the right choice for you.
- Liquid funds: You can invest in these schemes for a short duration. The sole purpose of investing in these is to provide liquidity. They give you moderate returns and are low-risk too. These characteristics make them ideal for you if you have short-term investment timelines.
- Income funds: When you invest in these funds, you basically invest primarily in fixed-income instruments. For instance, bonds, debentures etc. The whole purpose of doing so is to provide capital protection and regular income.
- ELSS (Equity Linked Savings Schemes): The best part about investing in these is that you get a tax deduction. These can be slightly risky, but can also yield high returns in case they perform well.
Additional Reading: 5 Tips To Select The Best ELSS Product
- Pension Funds: As the name suggests, if you are looking for a very long term investment option, Pension Funds are the way to go. You get the options of taking these funds in lump sum, opting for a pension or a combination of both.
Things You Need To Ask Before Investing In Mutual Funds
Now that you have a better idea about Mutual Funds, here are some important questions you need to ask before actually investing in them.
How Much Risk Can I Take?
Analysing your risk appetite before investing in Mutual Funds is quite important. It helps you choose the type of fund you can invest in. Risk appetite generally decreases with age. It’s important to keep that in mind.
How Much Do I Need To Invest?
Nobody can answer this for you. This is something you need to think about. We can tell you this much that your investment amount should depend on two things—your financial goals and the amount of risk you’re willing to take. Once you have a clear idea of both, it’s easy to decide the investment amount.
How Consistent Should My Investments Be?
This directly depends on your financial goal. Analysing it carefully can help you get a clear idea of how consistently you need to invest.
Got everything you need? What are you waiting for? Start investing today.