Table of Contents
Introduction:
Over the last 2 years, we have witnessed and understood that tomorrow is not certain. Financial crises and distress can happen at any time. The world is currently reeling back to normalcy in a very gradual manner and these Mutual funds can save you from financial distress time the need to be prepared for any such future occurrences and to address our financial insecurities is of dire importance. When the topic of Financial Insecurities is raised, there always is a question that comes across. Let me give a rough guess of what it is.
“How can I handle my financial crises?”
The answer to this question is – INVESTING (NOT SAVING). Investing has always been an avenue not traveled by most and often ignored by many too. “Investments are subject to market risks” is a phrase that has been haunting people from investing. But what if I say to you that investing does need to be scary. Here’s when Mutual Funds come in.
The above is a chart of what your investment would have looked like if invested for the past 32 years in the Nifty50 Index fund. We hear you out loud and clear – “32 years?” “Whats Nifty50 Index Funds?”, “What’s CAGR and why is it just 13.4?”. To get to know the basics of what these are, one must know what a Mutual Fund is?
In this article, we will look into what and how mutual funds can save you from financial distress.
What are mutual funds?
Mutual fund investment is a financial tool that collects money from various investors and invests them in securities like equities, bonds, money market instruments, and other assets. Mutual funds are managed by professional fund managers, who diversify the assets and try to build gains for the investors. A portfolio is designed and maintained to match the investment objectives stated in its brochures.
One feature that makes mutual funds simple for every investor is that you can start your investment at a low cost through SIP. All you have to do is to contribute a small amount regularly to build a good amount of corpses.
How Mutual funds can save you from financial distress?
Mutual funds are the most convenient way to start building your investment portfolio. It has many advantages and features that can save you from financial insecurities and make your hard-earned money work for you. Let’s look into a few features of mutual fund investing that can give you a clear picture of it.
In mutual fund investment, there are two modes of investment. They are SIP & Lumpsum. Through SIP, you can build your wealth by contributing an amount of money regularly. On the other hand, through the lump sum, you can invest a whole amount of money at once.
For a newbie investor, SIP investment will be more helpful. As said it will require only a low amount of regular contributions for your desired period. It will help you to develop a discipline to invest and save your hard-earned money. Also, except for a few mutual fund types, most of the mutual fund types are open-ended funds. This allows you to utilize the corpse at the required time.
Another feature of mutual fund investing is that it reduces the risk by diversifying your investments across various asset classes such as equities, Government bonds, and many other securities. This diversification can be made based on your risk appetite and choices.
Also, by investing in mutual funds you can save on tax. ELSS – Equity Linked Savings Scheme is a type of mutual fund that helps investors by building wealth and saving tax at the same time. It is a low-cost tax-saving instrument under section 80C with a short lock-in period of 3 years. You can save up to Rs. 1,50,000/- by investing in ELSS funds.
There are different types of mutual funds with different risk appetites and features. Let’s give a look at them:
- Equity Funds
- Debt Funds
- Hybrid Funds
- Liquid Funds
- Income Funds
- Tax-Saving Funds
- Balanced Funds
- Gilt Funds
- Fixed Maturity Funds
- Pension Funds
These funds can be chosen based on your requirements and goals. To minimize risk, it is recommended to invest in debt funds as it invests your money in various instruments like Government securities, corporate bonds, and other similar instruments.
To conclude, with these features of mutual funds, you can build your wealth by investing in it, and also, it will help you in your financial distress. Seek guidance from a financial expert and decide on the mutual fund scheme based on your requirements and goals. Add mutual funds to your financial planning and put an end to your financial insecurities.
If you want to calculate the desired amount, and period for your mutual fund investing, use an online mutual fund calculator to get an approximate number for your mutual fund investments.
