We often hear this advice from our parents or other elders, to plan for our future needs and old age. However, not all individuals have complete knowledge on how to invest and where to invest. It can become very complicated for a person, who has never invested in their life or planning to invest their hard-earned income for the first time. Currently, there are hundreds of money investment schemes in the market such as Mutual Fund, FD, Share market equity, etc on offer that choosing the right one seems almost impossible with an expert guide. Some promise safe returns that are completely risk-free, some promise to provide returns faster than other, etc. each investment scheme or policy has different terms and conditions and needs to be properly understood before investing.
Before one starts to invest, there are a few points that need to be kept in mind and decided beforehand. First, is the total amount one wants to invest. The total investment amount will depend on the amount of savings you have that can be spared and remains untouched for some time. Secondly, the period for which you want to invest. It entirely depends on your needs. If you have money in your bank account, you can invest it for a small period, like a year and earn some great return. For long term goals such as retirement, you would need to invest for a longer period. The third is the interest rate or sum assured that you will get over the principal amount. This will vary from company to company and policy to policy. Apart from these make sure that you read all the terms and conditions very carefully as they also contain many risk factors. Once you are familiar with all the terms and conditions, and necessary risk, you can go ahead and look at the features the Mutual Fund policy is providing.
With so many options, people always look for a safe investment option that can provide assured return at a good rate. One such investment type is Mutual Fund. You must have heard the term Mutual Fund in newspapers, TV ads, radio, etc. Mutual Fund is one of the most popular investment types in the current market which offers safe and low-risk returns. The best part about Mutual Fund is that you can divide the total amount you want to invest in smaller parts. These smaller amounts are then invested in different companies or commodities. They can be invested in forms of bonds, market securities, equity, etc. This provides a risk-free return guarantee since the amount has been invested in multiple commodities, recession in one commodity will not affect the amount invested in others. Mutual Fund may sound a bit complicated and confusing to some, however, it is very simple and easy to understand and track. Let’s have a look at some of the features and options that it provides.
- SIP(Systematic Investment Plan): Mutual fund normally requires a person to invest a lump sum amount for a few months or years, depending on the needs. After the period, the investor will get the full principal with the extra amount. However, investing a large amount is not easy for everyone. Therefore, SIP in Mutual Fund, allows a user to invest a small amount regularly, which can be monthly, quarterly, half-yearly or yearly. This way one can easily invest in Mutual Fund, without having to spare a large amount at one time.
- Diversification: Diversification is one of the most important features of Mutual Fund, that makes it risk-free for investors. When you invest in a Mutual Fund, a portfolio is made for you, which includes investment made in different companies. If one company in the portfolio goes in loss or is closed, it will not affect the other companies in the portfolio and the loss you have sustained will be very limited. Such investment loss can be compensated with the profits made by other companies in your profile. Due to this, the Mutual Fund investment becomes almost risk-free and the best option to invest in a volatile market.
- Different types of investment under Mutual Fund: Once a portfolio is created for an investor, different types of investments are made in different companies. Different types of investment in Mutual Fund can be Equity fund, Bonds, Money Market fund, Balance funds, etc. Every type of investment provides a different type of return. For example equity fund under Mutual Fund includes more risk, however, they also provide you the maximum return and regular dividends on company profits. Balance funds are less risky but the return rate is less than equity funds. Similarly, Bonds and Money market also includes risk factors but can provide excellent returns. You either get returns in the form of dividends or by selling a security at higher prices in Mutual Fund.
- Self-managed and professional help: If you are one of those people who like to manage their Mutual Fund themselves then you can go for Direct Investment plan or you can also take help from many professional investment companies that will help you in investing for Mutual Fund. The direct investment plan, you can create your portfolio and invest in the companies you want. This also save your cost on the commission fee. You can make changes to the portfolio whenever you want and buy or sell securities. In case of professional help for Mutual Fund, the expert advisors will select the companies on your behalf and will create a portfolio for you. They will charge you a fee for the same and manage your portfolio. It will be their responsibility to invest, sell any security or commodity from your portfolio.
There are many more benefits of investing in Mutual Fund. However, it is suggested to the discussion and take suggestions from an experienced professional to invest properly. Investing in Mutual Fund can provide you a secure future and regular income at different stages of life, depending on your needs. Therefore, when looking for safe investment options in the market, consider investing in Mutual Fund for a better return.