Are you tired of the usual investment avenues? Fixed Deposits (FDs), gold, and real estate are not cutting it for you. People move away from conventional investment avenues because of a lack of transparency, complex documentation, and long waiting times.
Mutual funds offer some of the best alternatives to enter the stock market and grow your assets without the hassles of traditional investment options. But how do you decide which one is right for you? Well, look no further, this comprehensive guide will help you find the top mutual funds that align with your financial goals for 2024.
Let’s start with the basics. A mutual fund is an investment fund that is professionally managed. These work by pooling funds from different investors to buy securities such as stocks, bonds, or short-term debt.
● Types of Funds: There are mainly three types – best equity mutual funds, debt mutual funds, and hybrid funds.
● Risk Factor: The risk is higher for equity funds, moderate for hybrid funds, and lower for debt mutual funds.
SIP stands for Systematic Investment Plan. It’s a way that allows you to invest a fixed amount in a mutual fund scheme periodically.
Key features:
● Convenience: The automatic deductions mean you don’t have to worry about missing an investment.
● Rupee Cost Averaging: With SIPs, you can benefit from market volatility.
Now that you know the basics and SIP full form, let’s dive deeper. Several factors can make or break your decision when considering which mutual fund to invest in.
● Past Performance: Although past performance is not an indicator of future returns, it provides a snapshot of the fund’s capabilities.
● Fund Manager’s Expertise: It’s essential to check the experience and track record of the fund manager.
● Expense Ratio: The lower the expense ratio, the better the net returns. For instance, if two funds offer 10% returns, but one has a 1% expense ratio and the other 1.5%, the former is better.
Risk tolerance and investment horizon are critical in selecting the best mutual fund for your goals.
● Risk Tolerance: Are you risk-averse, moderate, or aggressive in your investment strategy? This will determine which is the best investment path for you.
● Investment Horizon: Is your investment horizon short-term or long-term? If you are looking for short-term investments, debt funds should be your pick, while equity funds suit long-term goals.
While investing in any mutual fund, there are certain pitfalls you must steer clear of.
● Ignoring the Exit Load: Some mutual funds charge a fee when you redeem your investment within a certain period.
● Focusing Solely on Returns: High returns might come with high risks. Always align your investment with your risk tolerance.
Investing in a equity mutual fund also has tax implications, you must know.
● Long-Term Capital Gains: The tax rate of 15%, the applicable surcharge, and an additional 4% for Health and education Cess comprise the total tax liability for the specified scenario.
● Short-Term Capital Gains: The tax rate of 10%, excluding indexation benefits and foreign currency conversion advantages, is subject to the applicable surcharge, along with an additional 4% for Health & Education Cess.
Diversification is key to managing risk in your investment portfolio.
● Spread Your Investments: Don’t put all your eggs in one basket. Invest in a mix of equity, debt, and hybrid funds.
● Asset Allocation: Align your asset allocation with your financial goals and risk tolerance.
Mutual fund investments don’t have to be a daunting task. Understanding the basics, knowing the full form of SIP and its benefits, and considering multiple factors can help you select the best mutual fund that aligns with your financial goals for 2024. You can confidently grow your assets with meticulous planning and a disciplined approach.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully.
