How to Plan Your Investment for Decent Returns?
Ever think of why we should invest in mutual funds? Why are mutual funds better than any other investment? Looking at various research it's obvious that mutual funds investment is growing immensely. To know more about market behaviour and planning aspects, please continue to read further.
Recognizing the Reason to Invest
Markets are not always in the same direction as investing in mutual funds is quite safe to avoid individual stock swings. However, mutual funds are a risky investment in the short run. You may get negative returns due to their volatility. But many of still invest in mutual funds because of its enormous potential returns given in the past.
Stocks Are Not in Every Mutual Fund
It's simply that not every mutual fund includes equity stock in their portfolio. There are mutual funds who have equity. There are debt funds who invest in secured debt and income securities. There are certain gold schemes who invest solely in gold and thematic products. Thematic schemes invest in a particular theme or sector in their concerned industry.
Major Cap Market Growth
I always prefer a large-cap scheme in comparison to the multi-cap or small-cap scheme because it is less risky. Conservative investors should prefer large-cap schemes. Although pushy investors should choose multi-cap or small-cap schemes to Invest. It is always advisable to do some research on how much minimum time you are willing to invest and what will be your risk appetite on investment.
Learn Basics or Hire an Advisor
If you know the basics of mutual funds and securities markets then you are good to go by yourself. But in case you are not confident then it is advisable to take services from an advisor. He will formulate the proper strategy of whether buy, sell or hold on your existing investment. Do not panic while facing any adverse market setting and carry your work with a pre-planned strategy in such situations. Sometimes when the market gives a tough time then our emotions limit our thoughts to decide the next step. Hence, work out in such situations with proper market analysis.
Choosing Scheme For Investment
Do not rely on the rating or any past returns solely. Also, make some scrutiny to spot your investment goal and choose a scheme which will help you to meet the desired goal. If you want to invest a small amount for a shorter period then choose a secured scheme such as fixed deposits or debt instruments. They offer a fixed return on their maturity and also safeguard the invested principal amount.
Equity investment is a little risky and this kind of investment is preferred only for the long term period. Sometimes, when the market falls down then one should change their equity mix. It means that redeems your scheme if it starts giving a negative return for a longer time. Don't wait for losing all money in it.
Exploring Some Schemes
Large-cap funds: In the context of market capitalization, the large-cap funds invest around 75% of their funds in large companies. The risk is fairly lower and they offer a modest return on the investment.
Multi cap funds: Investors with moderate risk appetite can invest in this section. Fund managers are advised to invest their 65% of the corpus into stocks.
Large and mid-cap funds: Under this scheme, it is required to invest 65% of funds into the large-cap and mid-cap equity stocks. Their exposure risk lists them in a high-risk category which is very well suited for high-risk investors.
Mid-cap funds: Mainly these funds invest in middle size companies. Mid-cap funds place their investment 65% in mid-cap equity. These are very volatile and risky stocks which are proper for pushy investors.
Small-cap funds: Small-cap funds mainly invest in smaller companies. Around 65% of the amount of the total assets is invested in smaller companies by them. They seem to be risky but they also provide higher returns because some smaller stocks turn out to be multi-bagger over the years.
Hence, the investment in mutual funds are risky but offer decent returns. If the investment is done by proper doing market study and considering your risk appetite then it's a fantastic deal to invest in mutual funds. They are considered to be safe as compared to investment in individual stocks. Invest in mutual funds with proper advice from an expert or learn the basics before investing by yourself.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Prateek Jain