If you want to invest on long term and get rich, Mutual funds is the best option for you. Because instead if sitting idle your money I mean your investment will go and earn for you. If you are planning to capitalize your money on mutual funds, in the long run it will benefit you. Mutual Fund schemes actually deliver higher in returns as distinguished to your bank’s fixed deposits. That is, if you peek for the long run. To grow out your current money, the best option is to invest in the Mutual Funds, to get higher returns.
In simple terms “ A Mutual funds company accumulate money which we have invested from people like us” eg. 1000 rupees from my side and another same amount from your side ends up building a pool. Here the fund manager plays the main role as he uses this money pool to invest on bonds, stocks and assets over the period of time . No need to stress about money where it’s being invested because the fund manager takes the responsibility of that money. Although later on he collects out the commission of 3 or 4 percentages on behalf .
- So what is mutual funds and what types exist currently?
- How to pick up the best scheme according to you
- Simple Steps to open a Mutual fund
- Some risk factors and lastly my opinion as well.
But then how can I trust and be confident that the Mutual fund will not lose my money or I would say Lost .
If you choose inexperienced or not great fund manager, they might misplace all the money by investing on improper stocks. Mutual funds directly legislated by Securities and exchange board of India also known as SEBI says running away is highly unlikely. I’ll tell what to do in a proper and safe way , so it won’t happen at all.
Firstly let’s find out various categories of Mutual funds available.
Basic important categories which follows up.
- Equity funds, this type of Mutual fund invests on stocks and shares of the companies, but it’s also evaluated as high risk. The benefit is that it provides us with a high return.
- Debt funds, this type of Mutual fund invests in obligation tools like the Bonds and Debentures. These are furthermore recognized as a safe secure investment because the risk is low here. But the return you get is also Less.
- Hybrid funds, this invests on both debt fund and equity fund and may like 50 % or 70%. Their aim is to give you moderate returns and moderate risk. They are distantly categorized on the source of your capacity to invest in equity and debt funds.
- Sectors funds, this also known as gilt funds and tax-saving funds are actually exceptionally simple to understand .
But let’s go out to the basics and core of it .
- How to pick up the best according to you ?
People don’t prefer investing on Mutual funds, because so many sorts of risks exist in the market.
- Other risk factors
The risk can be correlated with the ownership duration, the money may have a fairly short holding period. As the equity fund really require to retain an ownership ( holding ) duration of more than 3 years. By holding up duration adequately, one can choose appropriate schemes with limited risk factors in the long term .
Make sure you remember these points
- If planning to invest in the short term for an year or 2-year utmost then don’t choose Equity funds. Better select Debt funds it’s best for you because it’s at low risk than an Equity fund. Added later on it gives out more returns than a fixed deposit.
- If planning to invest the money in the long run for a lump sum, it provides an enormous amount of 2 lakh rupees at one shot.
- A SIP ( Systematic investment plan) is a procedure utilized to invest like equity funds, not worrying about any market factors. Through SIP, where you choose to invest rupees 1000 or 2000 every month, an amount will directly move from your savings account to your Mutual funds. If you are new to Mutual funds then SIP ( Systematic investment plan ) is a great option for you.
Mutual fund schemes exist mentioned below.
Large cap schemes are been invested on huge companies that are well settled and organized, so even the risk rate is quite low here.
Mid cap companies come with the moderate risk , well as moderate returns
Small cap schemes,, are been invested on the start ups or slightly on smaller firms and but later on even the risk rate outcome is very elevated high risk ,but the returns are high.
For a beginner in Mutual funds it is highly suggested to pick up a Mutual funds that comes under Large cap schemes. Now before selecting out a Mutual fund these are the parameters , should and mandatory check up. Returns ,how much has that Mutual funds made out in the past , kindly checkout maximum 10 years of the track record .Expense ratio what’s the actual charge of the fund manager and which maintains, holding up the account becausemfund managers usually charges around 2 to 3 % maximum .
It also has an Entry fee and exit rates for entering up the scheme as well for exiting .
Final thing there’s something called index funds, in these you don’t need any sort of fund manager and the expense ratio is really low . There’s an investment manager called Varun Malhotra and he strongly suggests if you’re new to this field , better just buy Nifty50 and Sensex index funds.
Simple 3 Steps to open a mutual fund
- Choose a specific mutual fund account which you aim for ( Taking care of things I’ve covered up in this article ).
Figuring on how much money you are ready to invest on a systematic investment plan mutual fund use a systematic investment plan calculator. Imagine in the upcoming 10 or 15 years you really want to make 1 crore rupees maximum. The typical predicted ratio of the returns for any Mutual funds companies is around 13 or 16%. And later calculate it to get the value as 13 or 14 thousands every month. So its necessary to invest and make 1 crore rupees for next 10 or 15 years
- Better you can use out the value returns calculator which you can google out. We have to enter up how much money can be needed to invest in every month. Assume 3000 rupees and also assume for the next decade only as we already knew the standard expected rate invest in mutual funds of a return for Mutual fund is 13 to 16 % later you’ll get your final calculation. This means if you invest 240000 rupees and you’re expected accumulated wealth will be around rupees 6 lakhs and that will happen if you invest around 3000 rupees for the next decade.
- And the last step whenever need to open up a Mutual funds account you needed a pan card or proper KYC details . Lastly after finishing up these things next go to your nearest Mutual fund’s branch office .
- Simple you just have to enter up your details and your SIP amount , the duration and you’re account will be settled up and these all basic things needed to set up Mutual fund account.
Lately again Is mutual fund is safe to invest 2020?
Yes is a great investment method to grow and double out current your money. But like I’ve mentioned earlier several moments people get tense or stressing out from investing in Mutual Funds believing it’ll be lost or and to much of risky just because it’s directly linked to market so.
If you choose proper experience fund manager for this and then there’s is no way you’ll face issues or lost , risk by investing on mutual funds .