Navigating the world of equity mutual funds in India
Have you ever heard the phrase “Mutual funds sahi hai” while scrolling through your phone but never really found an answer? Do thoughts of money and investments leave you feeling overwhelmed, causing you to procrastinate on dealing with them?
If so, you’re not alone – this happens to many people.
However, it’s essential to take a step back and address these concerns. The longer you delay, the more challenging it can become to manage your finances effectively. So, don’t fret! Take a moment to relax and explore this straightforward guide, which will introduce you to the world of mutual funds and provide you with essential information to kickstart your investment journey.
What Are Mutual Funds?
A mutual fund is a financial instrument open to all investors. When you invest in a mutual fund, you entrust your capital to a mutual fund manager who, in turn, allocates these pooled funds from numerous individuals like yourself. These skilled fund managers curate a diversified portfolio of stocks, bonds, or other assets. This approach provides investors with a diverse range of investment opportunities and helps expand their investment portfolio, all without the need to individually purchase stocks or bonds.
When you invest in a mutual fund, you’re buying shares of that fund. The worth of these shares goes up or down based on how well the fund’s investments are doing. Professionals who are experts in managing funds make the investment decisions for you and other investors in the fund. They’re the ones in charge of making your money grow.
Types Of Mutual Funds?
There are approximately 8,000 mutual funds available, spanning around 35 different categories. Let’s focus on the most common ones, categorised by where fund managers allocate their investments.
Invests in stocks & offers potential for high returns, but comes with a higher risk. Equity funds appeal to investors aiming for long-term capital growth and are open to taking on a higher level of risk.
Invests in fixed-income securities, provide stability and regular income with lower risk. Bond funds attract those seeking consistent income while being comfortable with a lower level of risk.
Money market funds
Invests in short-term money market securities, suitable for lower-risk investments. Money market funds are favoured by investors seeking a safe and short-term place to keep their money secure.
Blend stocks and bonds for a balanced risk-return profile. Hybrid funds cater to well-balanced investors who desire a blend of growth and stability in their portfolio. These funds combine both equities and debt instruments, making them suitable for conservative investors seeking a more moderate risk profile compared to pure equity funds.
The primary goal of Index funds is to mirror the performance of a particular market index, like the Nifty 50 or Sensex. Index funds are a popular choice for novice investors looking for a straightforward investment option that offers broad exposure to the market. They are also favoured by those who have faith in the long-term growth of an index itself, rather than relying on a fund manager’s strategy.
Invest in mutual funds effortlessly with the FloatR app
Everyone is talking about creating an SIP (Systematic Investment Plan) and buying a mutual fund. But what is an SIP? Is it a mutual fund scheme or a method of investment?
SIP stands for “Systematic Investment Plan.” In the simplest terms, it’s a way for you to regularly invest a fixed amount of money at regular intervals, typically each month, into a mutual fund or investment scheme. It’s like setting up a savings plan where you contribute a fixed amount consistently over time to help grow your investments gradually.
FloatR streamlines your mutual fund investments. Here are the essential steps to kickstart your journey:
Step 1: Begin with risk profiling and budgeting
First and foremost, undergo risk profiling to understand your risk tolerance. Determine your monthly expenses and savings capacity based on your income. For instance, if you earn Rs. 50,000 per month, assess how much you can save. If you plan to save Rs. 20,000 monthly, allocate these funds to specific financial goals like retirement or building an emergency fund.
Step 2: Allocate your assets
After risk profiling, move on to asset allocation. Distribute your investment capital across various asset classes. The FloatR app offers a selection of mutual fund categories to assist you in this process.
Step 3: Identify and choose your mutual fund
In the third step, identify mutual funds that align with your chosen asset classes. Evaluate these funds by considering their historical performance and investment objectives, enabling you to make well-informed comparisons.
Select the particular mutual fund scheme that suits your goals and risk tolerance. Initiate the application process with a single click. Whether you prefer setting up a Systematic Investment Plan (SIP) or making a one-time investment, FloatR accommodates your preferences.
Step 4: Diversify and stay informed
To optimise your investment outcomes and potential returns, diversify your investments across various funds. Regularly monitor the performance of your investments using the FloatR app and track your achievements.
So basically, by understanding the basics of mutual funds and the various types available, you can access a diversified portfolio without needing to purchase individual stocks or bonds. The benefits of mutual fund investments include diversification, professional management, accessibility, and the ability to align your investments with your individual goals and risk tolerance.
Remember, when you evaluate mutual funds, you must consider key factors such as fund performance and the track record of the fund manager. While past performance is important, it should not be the sole factor in your decision-making process. You should also evaluate risk-adjusted returns, the fund manager’s experience and investment philosophy, and understand how fees can impact long-term returns.
We trust that you have acquired valuable insights into mutual funds, and the exciting news is that you now have the ideal platform to embark on your financial journey, namely FloatR. With user-friendly tools like goal setting, you can effectively oversee your finances, invest in appropriate funds, and maintain a clear track record of your investments over time.
Ultimately, by carefully evaluating these factors and aligning your investment choices with your personal goals and risk tolerance, you can build a well-rounded mutual fund portfolio that contributes to your financial well-being.