Why Invest In Mutual Funds?
Let’s glance at why should one consider investing in mutual funds over other options to achieve their financial goals:-
Professional Managers
Mutual funds are managed by professional people who have years of experience handling different types of assets. They are a group of dedicated team that handles all financial decisions based on the performance & prospects available in the market. -
Offers Convenience
If saving time & convenience is what you seek then mutual funds are an ideal choice for investment. Because of low investment amount options, multiple choices based on one’s life & financial goals, offering the ability to redeem them on any business day, mutual funds are much sought after. -
Diversification
Mutual funds help counter risks to a large extent by equally distributing your investments across diverse range of asset classes. Mutual funds work by the adage “Do Not Put All Your Eggs in One Basket”. -
Counter Inflation
Investing in mutual funds is a smart way of beating inflation as it helps investors to generate inflation-adjusted returns, without spending much time or energy on it. This choice of investing makes sure that the purchasing power of your money doesn’t go downhill over some years. -
Less Expensive
As compared to investing directly in capital market, mutual funds offer investors the advantage of low cost investment. Most stock options require a huge capital to begin with, on the other hand mutual funds can be started with as low as Rs.500 per month & investors can derive benefit from the long-term equity investment. -
Safe & Transparent
Since every mutual fund is managed & regulated by SEBI, you need not worry as your investments are safe. SEBI has several regulations & legal frameworks in place which ensure that your investments are managed in a disciplined manner. Now it’s true that every investment is subject to certain risks, however, prudent selection based on strong market knowledge & fundamentally sound securities with diversification can help hedge such risks and generate high returns on your investments.
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Equity Funds
These are type of funds that primarily invest in stocks and main investment objective of this class of funds is long term capital growth. Further, there are many types of equity funds which are categorized based on the size of the companies like large, medium or small. -
Debt Funds
These funds are known as safe investments and provide fixed returns. In these, funds are invested in debt instruments like company bonds, government bonds, fixed income assets. -
Balanced Funds
The strategy used by these funds are to maintain a certain percentage of mix of both fixed income & equities. Normally, a typical balanced fund will maintain a distribution of 60% equity & 40% fixed income. A similar type of fund known as “Asset Allocation Fund” follows on similar objectives that of Balanced Funds but then these kinds of funds do not hold any specified percentage of any asset class. -
Dividend Fund
This type of mutual fund invests in the stock of companies that pay dividends, which are profits that a company shares with its stakeholders. These are income-generating funds & tend to be less risky than other types of funds. It is a good choice of investment for those who seek regular payments over appreciation.
What Is SIP?
Systematic Investment Plan (SIP) is a very easy & convenient mode of making investments in mutual funds on a regular basis. SIP allows one to cultivate a habit of savings & creating wealth for the future by starting early. Offering ease & flexibility, through SIP one can create a planned approach towards investing right. SIP gets auto-debited from the investors account and the amount is invested into a mutual fund scheme that has been specified. The investor then gets a certain number of units which is based on the current ongoing market rate. Every-time a SIP is made, additional units keep getting added to the investor’s account. SIP has proved to be an ideal choice of investments for retail investors who lack resources to pursue active investments.Benefits Of SIP
CONVENIENCE
Offering a hassle-free mode for investing, one can directly get the SIP amount deducted from one’s bank account via a standing instruction to facilitate auto-debit function.DISCIPLINED SAVING
By investing through SIP, you commit to saving regularly. So, with SIP, one gets into a mode of disciplined savings along with creating a path of attaining one’s financial objectives & goals.FLEXIBILITY
With SIP, one can decide and increase/decrease the amount as they wish, although it is always recommended to continue SIP with a long-term perspective.LONG TERM GAINS
Investing with SIPs leads to long term gains because of the power of compounding & rupee cost averaging. Rupee cost averaging is an automated market timing technique that eliminates one’s need to time the market.WHY SIP?
Build Your Wealth Through SIP:
Many investors now take the SIP (Systematic Investment Plan) route to begin their savings and take advantage of compounding returns in the best way. As SIP is considered as the most convenient way of investing in the equity markets, Financial Advisors suggest investors opt for it. SIPs are generally advised to investors who look to invest a certain sum of money in mutual funds at regular intervals to build a corpus for meeting any long term financial goals.
- SIP allows the investor to choose the mode of investment as per their convenience- monthly, quarterly or annually, for investing in funds of their choice. Investors can choose from various investment vehicles to invest their money including stocks, mutual funds, ETFs, etc.SIP brings about a discipline in terms of investment habits. It helps the investor in maintaining a focused and dedicated approach towards investment. Starting with an amount as low as Rs.500-Rs.1000 per month, SIP offers a number benefits that make investment quite a comfortable and enjoyable experience.
Why Invest Via SIP?
As said above, SIPs are the best way to build a corpus, here let us glance as to why must one do so:-
It is light on your wallet. Since you can begin with an amount as low as Rs.500, you can easily manage your investments and other expenses efficiently -
There is no much effort. A certain amount gets auto-debited from your account and invested into a specific mutual fund scheme -
The investment remains the same only the number of units bought/sold fluctuates as per prevailing market conditions -
More number of units can be purchased in a declining market and less number of units in a rising market -
Once an investor opts for SIP option, he/she automatically participates in the market swings -
SIP has been proved to be the most ideal way of investing for retail investors who do not have the resources to pursue active investments
What Is ELSS?
ELSS OR Equity Linked Savings Scheme, as the name suggests, is an equity based mutual fund. Through ELSS, one can invest in tax saving mutual funds & avail tax deductions under Section 80C. There are many advantages to investing via ELSS like:
- Your principal amount gets multiplied due to the POWER OF COMPOUNDING
- The returns you earn within the lock-in period are TAX-FREE
- Substantially HIGHER RETURN
- The minimum lock-in period of 3 YEARS
ELSS is an equity diversified fund & investors enjoy both the benefits of capital appreciation as well as tax benefits. But for long term, ELSS generate better returns though with slightly higher risk.
Benefits of ELSS
Here’s some points of advantage one can derive by investing in ELSS:
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Equity’s Potential in Getting Return
Equities are known for giving potentially higher long-term gains compared to other tax saving instruments available in the market. So, with ELSS, one can more effectively & efficiently construct a portfolio keeping in mind the long-term perspective.
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Tax Saving Instruments
Under section 80C, investments in ELSS are exempt from tax. And the returns received from equity funds after the end of 1 year is also tax free. As ELSS funds come with a lock in period of 3 years, the returns, dividends, capital gains also become tax free.
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Outperforming Funds
If you want to save money & earn higher return of approximately 15 percent & more than ELSS funds are the way to go.
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Financial Goal Planning
With inflation beating returns, ELSS funds are the best when it comes to long term financial planning. Under the guidance of an expert financial advisor, one can easily achieve the set goals of buying their dream home, children’s education, wedding, car & much more.
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Less Lock in Duration
ELSS funds have a 3-year lock in period, which is less as compared to other investment avenues like PPF, FDs, NSC.
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Investment Option
One has an option of either investing in one go i.e. lumpsum amount or can opt for SIP. SIP or Systematic Investment Planning is where a certain amount gets deducted from your account on a monthly basis.