Increase your wealth to invest in Mutual Funds

Every person wants to secure his future by investing his small earnings or savings. Investment of small amount regularly does not affect your monthly budget. However, these regular small savings can make us wealthy in long run. There are lots of plans in the market, but major question is where to invest small savings to get maximum returns.

Before Investing, first thing to keep in mind is:

Start early with a small amount of investment and continue for long term.

Investments basically depend on risk bearing capacity of a person.

Higher risk: high profit and lower risk: low profit

Mutual Funds are financial instrument which pools the money of different people and invest them in stocks, bonds, shares etc. There are three types of Mutual funds and mutual fund returns are market linked:

Mutual funds are managed by professional experts. You have to choose the right mutual funds. You can invest in mutual funds by two ways-

• Lumpsum amount- Under this scheme, you have to invest once a time, for a fixed period, a lumpsum amount say Rs. 1.00 lakh, 2 lakh, 5 lakh or more. For example, you have an amount of Rs. 5.00 lakh and interested to invest in mutual funds, in this case you have to pay once a time of Rs. 5.00 lakh for a fixed duration say period of 5 years,10 years or more as you decided, whether in equity or in debts or both. You can also invest your amount in different types of mutual funds as compared to invest in single fund.

• Monthly installment- Under this scheme, you have to pay regularly, a fixed amount, for a fixed duration as you desire, this type of payments is called monthly installments or SIP (Systematic Investment Plan). For example, you are interested to start sip of Rs. 500, 1000 or more for a fixed duration, the amount will be deducted from your bank account on monthly basis. SIP’s give best returns for a long period of time. You can also invest your amount in more than one SIP.

• Set Practical financial Goals- Before thinking to investment in mutual funds, you have to set practical financial goals, which you want to achieve through investment in mutual funds.

• Take help of Professional experts- Before thinking to investment in mutual funds, you have to take help of professional experts, which give ideas about suitable investment funds or market conditions. After their help you can decide which fund gives higher return.

• Market Analysis- Before thinking to investment in mutual funds, you have independently analysis the funds which you have suggested by professional experts or market conditions.

• Stay invested for long periods- Before thinking to investment in mutual funds, you have to keep in mind that mutual funds for a longer duration gives higher returns. So, always invest your funds in long term plans.

• Select funds that fit your financial goals- At last after setting of financial goals, help of professionals and market analysis, you have to select funds which gives you higher returns as you think in your financial goals without consideration for long period of time.

After that, you can invest your amount in mutual funds through an agent or by self through Online Portal.

• Start with small amount of Investments- Under SIP, you can start investing in mutual funds with a minimum amount of Rs. 500/- or more. Even a small earner can think about to invest mutual funds from their small savings for long term.

• Higher Return- Investment in mutual funds, can give you higher returns if you have invested the amount for long durations. Investment in mutual funds have much better option to invest in compare to other schemes in the market.

• Expert Advice- Investment in mutual funds are regulated by professional experts, they invest the amount in different securities to create a higher return. They decide which company share, sectors/stocks or debt papers to invest the money or whether to hold on to the capital.

• Lock in period- Lock-in periods differ for every mutual fund. It can be start from one month to more. For instance, ELSS is a tax-saving mutual fund scheme with the shortest lock-in period of 3 years. The longer the holding period (beyond the mandatory lock-in), the better returns you earn and vice versa. Open-ended mutual funds generally do not have lock-in periods and you can close/withdraw them anytime.

• Liquidity- Mutual funds are completely liquid investments. You can redeem your invested money any time you want. There is no need to justify your decision or hunt for a buyer. Simply place a request with your fund house, and get the money credited to your account in 2-3 working days.

• Tax Efficiency- Mutual fund (ELSS) are best option for investment under tax benefits as compared to other than plans covered under section 80C, However, due to the higher returns, capital gains on ELSS will still be more. Equity and equity-oriented schemes are covered under income tax on long-term capital gains exceeding Rs. 1 lakh w.e.f. 01.04.2018. 

All Mutual Funds in India are regulated by the Securities and Exchange Board of India (SEBI). Mutual Fund regulations clearly define the roles and responsibilities of Asset Management Companies (AMC) and Custodians. It’s vital to remember that every investor has to complete an effective KYC process before investing. Therefore, only bonafide investors with a valid PAN card can invest in Mutual Fund schemes. Such investors also provide bank details so that all redemption proceeds are directly credited to an investors own account.