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    Wondering where to invest this Diwali? Consider mutual fund SIPs

    Published on October 31, 2019

    Diwali is a day when we worship the Goddess of wealth. It is also considered an auspicious day to make investments with a positive belief that they can help grow our money.

    Productive investments are those that are well-thought-of, based on our risk appetite, investment horizon and financial goals. While gold and silver remain popular options to invest in during Diwali, an increasing number of investors are realising the potential of mutual fund investments to diversify their portfolio.

    Why invest in mutual funds?

    Mutual funds offer market-linked returns that have proved to be higher than other traditional forms of investment in the past. They provide an excellent investment opportunity to earn profits that can beat inflation and help you reach your investment objectives sooner.

    Mutual funds are managed by highly-knowledgeable, experienced and qualified fund managers who handle multiple investor profiles to maximise their returns. Another benefit of investing in mutual funds is the in-built diversification it offers. While some portion of the investment could offer equity exposure to earn decent returns, the remaining could be balanced with fixed income products to spread the risk.

    Investing in mutual funds offer many tax benefits as well. For example, Equity Linked Savings Scheme, a type of diversified equity fund provides an exemption on investments up to Rs.1.5 lakh under Section 80C.

    How to invest in mutual funds?

    Systematic Investment Plans (SIPs) are an excellent way to start investing in mutual funds. SIP investments allow you to invest small amounts at regular intervals. For instance, you can begin with a SIP amount as low as Rs.500 that can help you adopt a disciplined approach to investing.

    By using the SIP approach, you benefit from investing through various phases of the market cycle. So, when the markets are low, you can buy more units and vice versa. This helps average out the price and can earn you higher returns in the long run. This concept is also known as Rupee Cost Averaging as you pay an average price over a long period.

    Which mutual funds to invest in?

    Before selecting a mutual fund scheme, it is vital to identify the goal you wish to achieve. For example, if you have a short-term goal of buying a car, you can consider liquid mutual funds. For medium-term goals such as building a college fund for your child, you can consider investing in hybrid funds that have a moderate degree of risk. For long-term goals like retirement or buying a house, you can consider investing in equity funds for five to ten years.

    Conclusion

    If you are a novice investor, you can read about what is a mutual fund, SIPs in mutual fund and how to invest in SIPs. Once you feel you have acquired sufficient knowledge, you can invest in mutual funds that suit your investment profile. You can also consider taking the professional services of a fund manager to help you choose funds that offer optimal returns with low risk.

     

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