The very first Question is what is the Mutual Fund? And, how an investment in Mutual Funds offers profitable results to investors? Here you find that Mutual Funds means the investors have to spend money in various asset classes such as debt, liquid, equity and more according to their requirement.
Mutual funds are registered by SEBI (Securities and Exchange Board of India) and it fully controls the market of mutual funds. Gain and reward that investor earns over the period of investment depends on the types of a mutual fund the investor has to invest money.
By investing in equity funds, the investor has return expectation of around 9 to 12 % over the period of investment of mutual funds. If the investor has invested money in debt funds then in long terms he or she can expect around 7 % return expectation. If the person invests the money in mutual funds with proper survey, then the investor surely gets the good return in long term.
Selection of Right Mutual Funds by investors offers huge profits
Before jumping to invest money in mutual funds, it’s recommended that investors must read the guidelines of different mutual funds.
The investor should not invest the whole amount of money in one mutual fund, equal distribution of money in diversified mutual funds by investors will reduce the risks of loss involved in funds.
There are diverse kinds of mutual schemes plans are available in the market, the investor has to invest money in mutual funds plans according to his requirement. Before purchasing any mutual fund plan the investor must need to know what the correct length of the plan is and what the expected return from the scheme is.
Financial goals of your investment must match with the maturity date of products
Before investing money in any funds you must identify your financial goals and according to your goals you must identify the mutual fund scheme. Usually one must invest in equity mutual fund scheme when his goal is of 3 or more years otherwise debt funds are the best to invest. In short term the performance of the scheme can vary drastically, so it is always recommended to invest in any scheme via SIP which lowers the risk of losing the money.
Selection of Right Types of Mutual Funds Creates Wealth to investor
Systematic Investment Plan:
In Systematic Investment plan, the investor has to invest fixed amount regularly in a mutual fund scheme according to their plan monthly, quarterly or yearly. An investor has to pay the fixed amount as long as a plan goes on.
Equity funds are called higher risk funds and offer a higher return to the investor. So it is good for those investors only who wants to invest money in equity stocks and shares of companies to earn the huge profit in long terms.
Debt funds offer the investors lower amount of return with higher amount of safety. Debt funds invest money in government bonds, company debentures, and fixed income asset. These funds offer fixed returns to investors.
Hybrid or Balanced Funds:
Balanced funds have the money invested in different asset classes. Investment in these funds means investment in less of equity and more in debt. So investment in these funds offers return between debt and equity funds. Risk factors strike a perfect balance in balanced funds.
Investment in growth funds may be risky but it generates higher returns to an investor. Growth funds have to invest money in equity stocks with the purpose of offering capital appreciation.
Money Market Funds:
Money market funds offer moderate returns to investors. Money market funds mean to invest money in liquid instruments such as T-bills, CPs. And so on. An investor has to invest money in liquid funds with the purpose of providing liquidity.
Entry and Exit Mutual Funds offers high profit on long terms:
The investor has to invest money in these funds throughout the year after reviewing the level of share market globally. Purchases and redemption can be depended on the NAV of market is expensive or cheap. A smart investor can take benefit of these situation to earn good profit in long term.
Close Ended Funds
In these funds during the initial offer period, units can be purchased only. At the specific maturity date units can be redeemed only.
Interval funds have the peculiarities of open-ended and close-ended funds. During the fund tenure, these funds are opened for a repurchase of shares at different intervals.
If the investor’s financial goal period is of 5 to 10 years then they may allocate their money in debt: equity funds in the ratio of 40:60, which is a good option. If the goal is more than 10 years then the money should be allocated as such money debt: equity in the ratio of 30:70 to get huge profits. It is not defined via any study, but it is recommended because equity usually gives good return in long term period.