Understanding Mutual Funds:-
If you don't know
about stock market and even you know stock market but unable to track day to
day market trends then everyone think that there is no way of investment in
stock market. Mutual fund Market is what established for the same those who
unable to keep track of stocks daily.
In Mutual funds Portfolio
Managers invest funds collected from investors in Stock market on our behalf
and reshuffle them as per stock market performance. This doesn't mean that
Mutual funds always give good returns as mutual funds NAV (Net Asset value)
Very with stock market as per Fund manager Stocks selection.
But Mutual funds
gives you good returns only if you keep passions and kept on investing in them
at regular intervals. There is thumb rule to Investment in Stock Market and
Mutual fund market is that keep Passions and thorough research. People who doesn’t
do their research at its own can take help of Financial Managers.
There are lot of
companies that offer Mutual funds. You can do investment in these either by
doing one time investment or by Systematic Investment Plan.
In One time
investment People Investment in Mutual funds at once and never invest in them
again. In that case some people may get very returns as if Stock market
performs well after Investment but that sometimes people may lose their money
if market falls that time then they had to wait to recover their investment.
Systematic
Investment is Best way of Investment in Mutual Funds:-
Systematic
Investment Plan is a simple process of investing a fixed amount in mutual funds
at a regular interval. SIP enables you to build a portfolio over a longer time
horizon with small investments at regular intervals reducing the risk of market
volatility.
SIP is considered
to be the safest way to invest into equity/debt/treasury markets as the
investor does not try to capture the highs and lows of the market, but averages
the cost by investing at regular intervals.
There are few good
reasons to invest in SIPs as given below:-
1. Tax Saving:
Goverenment has given Special scheme of
Inevstors in ELSS i.e. Equity Linked Saving Scheme) Tax benefit under section
80C can be availed through SIP into ELSS is limited to a maximum investment of
Rs. 1 lakh per year.
2.
Averaging of NAV:
In SIP by Regular Investment at regular
Intervals will help to end up buying more number of units when the markets are
down and NAV is low and less number of units when the markets are up and the
NAV is high. SIP will provide a good discipline for investment as Investors
generally reluctant to buy when market is going down and buy only when Market
is going up. This will help to average out the NAV.
3.
Help in investing in Multiple sectors with
small amount:
Through SIP we can enjoy diversification
as we can invest in multiple sectors with small amount. Otherwise huge amounts
would be required for an individual to achieve the desired diversification. Diversification reduces the overall impact on
the returns from a portfolio, on account of a loss in a particular
company/sector
4. SIP can be started at even at Minimum
Investment of 1000 Rs. only which will not affect you a lot that will not put
burden on you but if you look at them after 4-5 years then you will find huge
sum has been collected in your portfolio. That will help to fulfill your dreams
at right time whenever required.
But in SIP you
should give time to your investments, One should not keep over-expectations
from Mutual funds after 1 or 2 years.
Every investor should give at least 4-5 years of investment in Mutual funds as
there is tradition in the Market that in 4-5 years market will one or rises and
falls during that Interval.
Also you can’t
expect 50-70% return from Mutual funds every year. You should get returns in
between 12-15% yearly on Mutual funds.