Check out mutual fund investment guide for women:
If you are a new investor, then mutual funds are one of the best ways to build wealth. They are a great way to save for the future and a smart choice of investment for women. They don’t require a considerable amount of investment and carry only a moderate risk.
Elss Mutual Funds offer tax-free returns and are a great option if you want to invest. If the idea of investing in mutual funds seems confusing then it’s because you are not clear on what they are and how they work. So here are benefits of investing in mutual funds.
What is a mutual fund?
A Mutual Fund is a trust which clubs the savings of a number of investors who share a common financial goal. The money collected is invested in different types of securities by the ‘fund managers’ depending on the scheme of the mutual fund. The income earned by the Mutual Fund is then distributed back to its investors in the proportion of their investment.
Let’s say you are a group of four friends and one of your friend’s aunt has a share-trading business. And your friend comes up with a plan and asks your portion of savings, that she will include into a pool of savings and give it to her aunt. Then this money will be invested and the profit share will be distributed among the investors. So, in this case, your friend’s aunt is the Mutual Fund with whom you’ve entrusted the money.
Why you should invest?
Mutual Funds harvest returns greater than conventional forms of investment like the average fixed deposit gives you interest at the rate of 7.5% a year, while there are various Mutual Funds out there that give you more than double in terms of annual returns.
The reason why mutual funds draw such returns is that they invest in a large number of companies in different sectors. This diversity increases the return and decreases the risk.
There is no doubt that investing in the stock market directly will draw maximum returns. But still for the first time you should do it through someone. Every mutual fund is required to disclose its portfolio. So you will also get the information about where your money is being invested.
How to invest in mutual fund investment?
Buying units of a Mutual Fund is a lot simpler than it was earlier. Decide on what kind of funds you want to invest in. The proportion can be 30 percent equity, 50 percent pure equity, plus some debt.
Some basic things that you need to keep in mind while investing:
To start with, identify your various financial goals. Next, put an investment plan to achieve them. For example, you have to create a modest fund in three years for a foreign holiday. For this you should start investing frequently in a dynamic debt scheme to achieve that goal. Next, you will have to pick equity schemes that match your risk profile to achieve your goals. Do not add more than four to five mutual fund schemes to your portfolio.
Are you ready to invest, yet?