The key to financial freedom and security is investing money at the right time and the right time is “NOW”. An early start to investment often leads to the sizeable corpus as the money starts working for us at good interest rates. Good financial habits are very important for a healthy financial life. One must be able to manage his or her finances well, irrespective of what and how much he/she earns. Often people think investment as a complicated and complex subject and they don’t dare to put money in other options apart from bank fixed deposits, recurring deposits, postal savings, LIC, etc. Here other options include stocks, shares, and mutual funds. Getting over the initial inertia is necessary to take the first step in investing in mutual funds. Also one must understand thoroughly what mutual funds are before jumping into it blindly.
⦁ Mutual funds are not as complicated as it sounds and is not similar to stocks. Stocks are riskier ones. Mutual funds pool many stocks in their fund. Thus the money is not at risk in case of mutual funds which normally happens in stock investment.
⦁ Thus a person investing in a mutual fund is an owner of the share of a mutual fund. He gets a portfolio of assets where his or her money is invested when he buys a mutual fund scheme. A fund manager or portfolio manager manages this money with his expert knowledge and vision.
⦁ Simply put up, many investors have a common investment objective from whom a trust/fund pulls money. This money is invested in stocks of various companies, money market instruments, and other securities i.e. investor benefits by investing in many securities at a lower cost. The investor owns a unit of the mutual fund and the income generated from this is distributed amongst the investors in proportion.
⦁ Mutual fund investors get a tax benefit as they can claim tax deduction up to 1.50 lacs in each financial year.
⦁ The income and gain are not generated immediately but happens over a while. One can start with as low as 500 per month investment in mutual funds through an SIP (systematic investment plan).
⦁ There are various types of mutual funds such as equity – large-cap, equity- small and mid-caps, equity- diversified, balanced funds, gilt funds, fixed maturity plans, etc. each has a certain risk factor and expected return. The funds are divided into types based on the asset class, structure, investment objective, etc.
⦁ To open a mutual fund account one has to submit his KYC details, required documents and select the fund where the money is to be invested. This can be done directly online or through financial advisors.
⦁ According to an individual’s goals money must be invested in the fund and not by going with the
⦁ There is no capital protection in mutual funds and it all depends on the performance of the market. Hence a thorough study and consultation of a good financial advisor are important before taking the step.