With mutual funds, you can take exposure to equity markets (both domestic and foreign), debt investments, gold and now even real estate and at the same time have your money managed by professional managers.
You do not need big upfront amount to start investments. You can start small with even as low as Rs 500 per month. You do not need any special investment expertise. You can leave everything to the fund manager.
Many of us are concerned about volatility with equity mutual fund investments. However, empirical evidence suggests that the longer you hold your investments, the less likely are you to incur losses with equity investments.
It is important to start early even if you can invest just Rs. 500-1000 a month. With mutual funds, you can also invest through SIPs (Systematic Investment Plan). A SIP saves you the effort of trying to time the market. And the good part is that you can start SIP with as low as Rs. 500-1,000 per month.
You need to follow the simple advice.
- Set your goals.
- Pick up equity funds for long term goals (equity heavy portfolio) and debt funds for short term goals.
- Focus on asset allocation. Review and re-balance at regular intervals.
You just need to select the right kind of funds for you. You can do it yourself or do it with the help of a MF distributor or a SEBI RIA.
That’s it.
Sounds simple, right?
What has the problem been?
Unfortunately, the penetration of mutual funds in India is low, at least as compared to other economies. Indians have tended to keep disproportionately large amounts of money in fixed deposits.
A fixed deposit can be a good debt product for the short term. However, keeping money in bank fixed deposits for 30 years (by rolling over) may not be the wisest thing to do.
For many of us, mutual funds mean equity mutual funds. And equity markets are volatile. If you invest in equity funds for the short term, there are chances that you will leave disappointed (and may not come back).
Many are not aware that you can even make less volatile (and better tax-efficient) debt investments too through mutual funds.
It is good to have so many options in mutual funds. But these options or variants are no use until investors are aware.
Awareness is extremely important.
Focus has to be on investor education
Recently, AMFI started with its Mutual Fund Sahi Hai campaign.
Many AMCs have also started working actively in this direction. Reliance AMC has started with its Mutual Fund Day and Fund for a Friend campaign.
The idea behind Mutual Fund Day (celebrated on 7th of every month) is that investors should give as importance to their MF investments as they give to their utility bills, EMIs, child education fees and other expenses. We don’t miss out on paying such bills, do we?
Fund For A Friend
In Fund for a Friend campaign, you don’t really fund for a friend. So, don’t worry about parting with your hard-earned money. Third party investments are not allowed in mutual funds. However, you can help him/her start in mutual funds.
If you want any of your friends/family member to start investing in mutual funds, you need to answer a few questions on his/her behalf and you will get an idea about his risk profile and the type of investments he should start with.
Many such initiatives from both industry bodies such as AMFI and individual AMCs are needed to increase the penetration of mutual funds in India.
