For individuals who are planning to grow their investment in the long run investments seem to be a popular and reliable option. The main reason why it has soared in popularity is because of flexibility. With mutual funds tax saving you can start with Rs 500 and this you can stretch to maximum sum possible. Even though because of perceived risk, investing in mutual fund can pose to be a problem.
Novices are of the opinion that all mutual funds are the same, but it does not work that ways always. Mutual funds are divided into 3 main categories and there are sub categories below them. Because of the diversity that mutual fund offers you might be overwhelmed with other choices. Let us now explore the main reasons on why to invest in mutual funds for beginners
Clearly analyse the risks involved
Based on your investment opportunities you need to analyse the risks involved. Each and every mutual fund carries a certain degree of risk due to investment methodology. The mid – sized caps have the highest potential to earn income. On the other side debt sized funds have low risk and for this returns are lower. It is necessary to understand the risk with each type of fund that needs to align with your risk taking capacity.
Keep the investment objectives crystal clear
Once the risks are analysed, there are a couple of questions you need to seek answers. What is the amount you are planning to invest and for how long you want the funds to be intact. Mutual funds seem to be flexible and you can start with as low as Rs 500. Apart from ELSS and a few other schemes you can redeem the funds anytime. So you need to choose a specific type of mutual fund based on your time horizon. For example if tax saving is an ultimate objective then you need to opt for ELSS. If you are looking to achieve a higher level of liquidity and planning to invest for a short period, then a debt fund would suffice.
NAV has no bearing
The NAV value has no bearing on how a mutual fund is performing and how it is going to keep evolving in the future. For this reason the mutual funds are presented with low percentage figures. Irrespective of the fact whether you have gone on to purchase a mutual fund with high or low NAV the growth of your investments is dependent upon the performance of the fund.
It is better to diversify your investments over a period of time
Based on the type of investments you make ,direct mutual fund app provides you with an opportunity to diversify your investment needs. In case if you feel that the market appears to be bullish and you are looking to grow money very fast invest in mid – size cap fund that is going to provide fast returns.
By following the above mentioned tips beginners can make some decent amount of money in mutual funds.