Skip to main content

Before buying the first MF, know what is right for you

Experts say diversified funds are best way to start the journey International funds in particular haven't performed that well so far, so avoid them

ROOKIE investors often end up buying their first fund without knowing whether its the right fund for their portfolio. Often, agents sell them the flavour-of-the-month fund and investors realise only later that their investment decision was wrong. What should be the first type of mutual fund product that a novice should buy?


With options like gold funds, capital-protection oriented funds, plain vanilla diversified equity funds or low-cost index funds in the market, Financial Chronicle talks with experts to find out the pros and cons of the different options to help first time investors arrive at a reasonable solution.


Know yourself: Investing is a way of making your money work harder for you. Before, we get into discussing about investing; first, you need to know yourself. For you as an investor, your job is much easier as you need to ask only three fundamental questions.

So, the three fundamental questions are: How much money do you need?
By when do you want this money? How much downside are you willing to take to earn the money you need?


The first two questions talk about your gain and we know in this world there can be no gain without some pain. So, the third question is about your ability to take some heartburn.


The wrong funds: Be it equity, debt, gold or a mix of these three main asset classes, unnecessary risk never pays off. As a first time investor, one should avoid sector funds.

Dependence on one single sector makes the risk double even if the sector could be the month's favourite. Also one should look at the expenses for buying a particular fund.

Another important point to consider is the geography of the funds. International funds in particular haven't performed that well so avoid taking themes which have not worked. While for an experienced investor, a theme which has not worked could signal an opportunity, it's not same for the first time investor.

The right decision: Even if you are a first-time investor, if the strategy of the fund confuses you its better to stay away, feel experts.

They advise that diversified funds or index funds are the best way to start the equity MF journey or select a debt mutual fund as this will assure minimum volatility in returns.

It's important to start off on the right note. Passively managed funds try to resemble a portfolio which is already there. Here, the fund manager cannot make huge mistakes. One can try debt options also as the debut investment because debt fund returns do not vary hugely like the stock funds. Its advisable to consult your financial advisor before the final call.

 

Popular posts from this blog

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...

Income tax Section 80CCF - A Tax saving Scheme that has Buyback Option IDFC Infra Bonds

IDFC has come out with a public issue of long-term infrastructure bonds in the form of secured redeemable non-convertible debentures. Investments of up to . 20,000 in these infrastructure bonds are eligible for tax exemption under section 80CCF. This is in addition to the . 1 lakh limit available under Section 80C, 80CCC and section 80CCD of the Income-Tax Act. The issue is currently open and will close for subscription on December 16. The bonds on offer have two investment options. While series 1 carries a 9% coupon, payable annually, series 2 is a cumulative option where 9% will be paid compounded annually. The face value of each bond is . 5,000 and one can apply for a minimum of two bonds. The bonds have a lock-in period of five years. At the end of five years, you can sell the bonds on NSE. Also, there is a buyback facility available. Investors can subscribe to these bonds in either the physical form or in demat form. An investment of . 20,000 would fetch a tax exemption of . 2,...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now