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Tuesday, December 3, 2013

Mutual funds a good tool of Investment


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.

Mutual funds a good tool of Investment


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.