In the words of Benjamin franklin, “An investment in knowledge pays the best interest.” Quite an in-depth quote, meaningful in the times of rapid financial and economic changes. When it comes to future investment planning a common man’s mind swings between two words, “security” and “risk”. It is always recommended to have an analysis of your earnings and expenditure and risk bearing capacity before you go for securing your future financially and financial experts help with every important aspect of it such as flexibility in payments, diversification of funds, lower tax slabs and transparency in investments. The most important key factor in any investment plan is the “risk” and “return” part of it that any investor seeks for and mutual funds sounds like a best deal to go for. Mutual funds refer to investment schemes that invest money in financial securities like money market instruments such as bond certificates or share certificates.
The investments can be made for short term, medium term or long term depending upon the risk element involved in the asset invested in. Most of the investors prefer an investment plan up to five years of span that gives a valuable return and bears less risk. Based on that mutual fund have various schemes for short term and mid-term investment goals. Before opting out any investment plan, consider the following factors.
1. Be clear with your investment goals in terms of safety, growth or income. For example, do you seek to invest for retirement or your focus is on preserving the principal value. Investment depends upon the time frame and your requirement of funds.
2. The amount you are ready to invest should be calculated. There are many schemes that offer a minimum investment option and goes up to a higher limit. If you have larger sums to invest then it is better to go for a diversified portfolio plan.
3. Risk bearing capacity of the investors and yield by the available investment plans. A diversified investment plan always minimizes the risk and never invests all the funds in high yielding plans.rnMutual funds contain multiple investment options on the basis of their type and investor’s fund raising capacity. Mutual funds are close ended, open ended and with interval schemes. Let’s take a look at some of the possible investment plans suitable for different investors with their distinctive criteria about funds and risk.
SIP Plans: The Systematic investment plan (SIP) allows the investors to invest small amount of funds instead of large amounts for a shorter span of time such as weekly, monthly or quarterly. Since investors prefer equity plans to invest as they yield higher return for a longer period of time, SIP is a best option whether you are investing small or large funds and five year is a pretty long time to yield back the returns. What makes it a favorable approach is the ease in managing it. Select a
best SIP plan online and every month a fixed amount will be deducted from the bank account and added to your SIP plan. There are various schemes available under SIP plans. All an investor needs to do is work out over the following points before deciding upon a plan.
a. Have a clarity about the risk adjusted returns and probability of the expected returns from a mutual fund scheme.
b. Define your own financial goals and go for a SIP plan that matches, for example based on your financial objectives you would choose a liquid fund if going for a three month plan and an equity fund if going to fulfill a long term goal such as children’s higher studies.
SIP plans happen to be most rewarding investments to build your wealth wherein one can just start investing by mere Rs. 5000 for a monthly plan under an equity funds scheme and vision for a big corpus over a decade of years. One not only enjoys great returns while investing in equity funds also there are tax benefits as long term capital gains on investments are tax free. All you need is workout on various equity based portfolios and pick one according to your SIP amount one wants to invest.
Deciding upon a suitable SIP plans involves the following process:
1. A diversified portfolio is always recommended. Therefore, decide on the funds you want to invest and allocate the percentage of funds into large cap funds, mid cap funds and debt funds. Half of the funds decide should go in large cap funds and then in small cap or debt funds.
2. Since equity fund schemes are said to yield higher returns your investment portfolio should contain at least three investment schemes to carry on, a mix of more of equity based schemes and one debt fund scheme. Avoid taking hold of more than six plans.
3. Final step involves selecting best mutual fund plans from the multiple choices available in market according to the designed portfolio and reap the benefits. Selection refers to picking mutual funds scheme based on your asset allocation such as equity funds and debt funds.rnAn open mindset and a clear vision goes a long way in financial planning so think, research and understand the market and choose
best investment plan that gives you a stable future.