MUTUAL FUND,
Mutual Funds are recognized as valid and dependable sources of investment. They have become house hold names, still there remain important questions like, how should one go about investing in mutual funds and which ones are best suited for you and why.
There are several diversifications in mutual funds, way to go about investing in mutual funds is based on your age, income, liabilities, time horizon and expected percentage gain and risk appetite. Thus, we will go through the various categories, their characteristics and the best ones therein.
Equity Fund: 80-90% of the cash is put in stocks thus, market linked risk remain very high but at the same time return is lucrative. Best way to invest is through SIP and for 3-5 years span. Good for people till the age of 45 years. Invest maximum up to 30% of your monthly savings, do not exceed.
Below mentioned time spans are applied for every suggested mutual fund and in the same sequence herein:
1month 3months 6months 1year 3years
-(1.91) -(4.83) 7.22 16.29 32.36
-(1.30) -(6.41) -(1.40) -(5.10) 23.27
1.74 9.17 3.45 5.81 12.74
Balanced Fund: The investment by the fund is done almost equally in equity and debt, thus risk seems to be diversified. It carries high risk of equity and low return due to debt. Both the negative qualities come into play rather than positives giving support. Thus, better be avoided.
-(3.88) -(9.60) -(8.42) -(5.65) 25.95
-(1.50) -(6.74) -(5.67) -(8.03) 19.58
-(0.18) -(1.27) 1.33 5.78 13.28
Debt Fund: Most of the fund cash is invested in debt, thus has low risk and low return. It is best suited for people above 50 years of age. Gives decent return in long term i.e. more than 3 years. Over here one can go with a lump sum one time investment. For people who are 45 years, at least 20% of the monthly savings should be put in such funds for stability.
-(0.23) 0.19 2.18 6.49 12.41
-(0.31) 0.28 2.13 5.76 12.30
0.16 0.04 1.57 3.99 12.94
MIP Fund: Large cash pool is into debt instruments. Monthly Income Plan is best suited for retired investors. As the fund provides you with fixed monthly income, the growth is considerably lesser.
0.16 0.04 1.57 3.99 12.94
0.93 1.92 4.32 7.40 5.64
1.23 2.16 4.02 7.16 4.32
Gilt Fund: Major amount is invested in Government Securities and Treasury Bonds hence, very stable returns. Good for Senior Citizens to invest for long term.
3.66 3.29 5.44 8.05 13.27
3.58 6.14 8.75 12.55 10.15
0.66 1.90 3.66 7.00 5.65
Liquid Fund: A debt fund wherein money can be parked for days, the redemption can be done overnight. Suited for people having high liquidity, like businessmen, for a very short period of time. It’s a non risky short term investment.
0.80 2.44 5.02 10.20 7.92
0.73 2.21 4.50 9.16 7.16
0.76 2.30 4.61 8.91 6.70
FMP Fund: Fixed Maturity Plan is basically debt fund with fixed tenure. It is not worth going for as your money being blocked unnecessarily without any great reward in terms of returns.
0.81 2.13 4.48 12.80 7.87
0.80 2.29 4.75 9.83 7.17
0.84 2.33 4.68 9.79 7.27
Tax Planning Fund: The fund is meant for saving tax. Thus, if your goal is to simply save tax without giving much heed to returns then it’s the best.
-(3.52) -(8.68) -(8.42) -(13.54) 22.52
-(4.01) -(12.47) -(11.86) -(17.41) 21.67
-(3.30) -(8.84) -(9.65) -(19.87) 24.37
Sector Fund: This is a variable of equity fund where the cash is invested in a particular sector. Therefore, risk and return ratio is similar to the equity.
-(1.91) -(4.83) 7.22 16.29 32.36
0.35 -(2.20) -(4.33) -(3.05) 31.22
4.18 9.93 -(0.18) -(13.38) 36.02
Index Fund: Cash is invested in all of stocks listed on a particular index. The risk involved is similar to equity fund. It moves in tandem with the concerned index.
-(1.68) -(8.16) -(10.17) -(20.68) 15.89
-(1.87) -(8.62) -(10.77) -(21.35) 14.43
-(1.78) -(8.28) -(10.76) -(22.35) 14.28
Fund of Funds: The fund invests into various other funds thus, fund of funds. Since it reflects collective risk and return of funds, stability is higher.
2.16 5.70 -(1.82) -(5.23) 21.20
-(1.61) 4.15 -(3.84) -(3.54) 19.91
4.44 7.03 3.64 9.41 14.55
ETF Fund: Exchange Traded Fund is directly traded on the bourses just like stocks. Its true value is ascertained by the market, thus volatile in nature, but returns are decent. In order to get the best return, SIP route shall be taken.
-(2.18) -(0.73) 23.53 35.58 28.53
-(2.18) -(0.75) 23.52 35.56 28.49
-(2.20) -(0.76) 23.49 35.54 28.43
Pertinent Points for Investing in Mutual Funds:
· Always take SIP route for investing, especially for equity linked mutual funds.
· Weigh the risk-return ratio and the time frame with the liabilities to be fulfilled, if any.
· Please read the Terms and Conditions very carefully.
Happy Investing.........
