Investment Guide for Beginners

Investing in the RIGHT investment channels seems like the wisest thing to do for millennials today! A right investment can sometimes double or triple the fruits of your financial freedom. So, if you are looking to start your journey in the realm of financial investments, it is time to start with a solid mutual fund investment. Mutual funds have emerged as the most sought-after investment routine for young investors especially. So, what are mutual funds, and how should you progress further? Let us understand.

What are Mutual Funds?

Mutual Fund is a type of financial instrument which pools in money from different people and invests them into stocks, bonds, etc. Every investor in a mutual fund scheme owns a unit of fund which represents the portion of holdings of the scheme. Apart from helping investors with a small capital outlay, mutual funds also trigger risk diversification – one of the most supreme advantages of investing in mutual funds. Investors can invest in a diversified portfolio of stocks across different sectors and earn good returns on their investment over a span of time.

Things to Keep in Mind before investing in Mutual Funds

Have a goal ahead

Unless you identify your financial goals, you may not be able to start off or move in the right direction. The key to having a mutual fund investment is to understand what you want your investment end result to be like, for e.g. are you investing for a home? Or, are you planning beforehand for your days after retirement? If you have a goal set in front of you, impute a monetary value to it – start with the current cost of the goal and inflation the same to a future date. Based on that, analyse your risk taking capabilities and start investing. If you have long term goals, you can consider investing in equity funds. For medium term goals, you may go for debt funds or balanced funds. For very short term goals, liquid funds or liquid plus funds would be an ideal choice.

Have a systematic approach

Having a systematic approach is imperative when investing in mutual funds. Go for an SIP investment. Say you have 3 goals and create 3 different SIPs for that, not only would you benefit from rupee cost averaging (RCA) and better returns but also inculcate a habit of maintaining discipline in your SIP routine. They are synchronized with your monthly income flow and therefore the burden of allocating money shall never seem too pressurizing!

Start a Mutual Fund Investment with an ELSS

Equity funds play a crucial role in your long-term goals. So, it is best of you start a mutual fund investment via an ELSS route. ELSS is a tax saving fund which is used for equity investment. Not only do you get an exemption of Rs 1.50 lakhs under Section 80C of The Income Tax Act but also create more value since you are locked in for 3 years!

The idea is start a mutual fund investment in the best possible way, of course as per your comfortability and risk-taking capabilities. But it is best to go for stable fund management companies who have a reputation to protect. Check their delivered results for the last 3 years at least, and only then trust them with your money.

 

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