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

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

REC Tax Free Bond Issue

Tax Saving Mutual Funds Online Current open Infra Bond Application form   Download REC Tax Free Bond Application Forms REC (Rural Electrification Corporation) is going to issue tax free bonds and the issue will open on March 6 2012 and will close on the 12th of March 2012 When you buy 80CCF infrastructure bonds, the amount you invest in those bonds get reduced from your taxable income but in these bonds that's not going to be the case. The interest on these bonds will be tax free and they are similar to the other tax free bonds like the HUDCO, NHAI and PFC issues. For the two of you interested in knowing this – these bonds are tax free under Section 10(15)(iv)(h) of the Income Tax Act. Now on to the issue itself and let's start with the high credit rating that the issue has got. The REC tax free bond issue has been given the highest rating by all issuers since the government owns the majority stake (66.8%) in REC, it has been consistently profit making,  this is a se...

Reliance Health Total

  Reliance Life Insurance has launched Reliance Health Total, a non-linked, non-participating and non-variable health insurance plan . It provides a fixed benefit cover for hospitalisation, critical illnesses and surgeries. The customer can also make a claim for over-the-counter health-related expenses. This is a regular-pay, five-year plan that can be renewed till the age of 99. The plan comes with two options: customers can choose a higher medical reimbursement benefit or a higher sum insured. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - I...

Right Size your SIPs in terms of tenure and amount

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)    Systematic investment plans ( SIPs ) are here to stay. Going by the growing number of SIPs, it does look like investors have taken to them in a big way. Today as much as . 1,000 crore flow into SIPs every month. A SIP, as the name denotes, is a method to invest a fixed amount in a mutual fund at regular intervals --generally monthly or quarterly. It is easy to do and the minimum amount with most mutual funds is a mere . 1,000 per month. You can write post-dated cheques for your investment, or give an auto-debit facility from your bank account. In fact, most investors today prefer setting up an auto debit for their SIPs, since writing cheques is cumbersome. Also, you can choose any tenure that you want for your SIP — six months, one year, five years, 10 years or even opt for a perpetual SIP which will continue forever till you stop it....

Some tips for individual investors for investment planning

These days, the stock markets are quite volatile in nature with a bearish bias. Rallies do not last long in the markets and peaks of market rallies are reducing. The markets are hitting fresh lows in every fall. Many blue chip stocks are trading 50 percent lower than their high levels. Many stocks are currently trading at their year's low prices or all-time low prices. Many investors have lost their hard-earned money and many others are stuck with stocks that have corrected heavily in the last few weeks. Here are some tips for investors already invested in the stock markets: 1) Hold fundamentally strong options The domestic macroeconomic fundamentals are strong. The GDP growth rate is expected to slow down slightly from the nine percent last year to around 7 - 7.5 percent this year. This is still quite good and encouraging in comparison to other developed countries. The current market crash can be attributed largely to foreign institutional investors' ( FIIs ) outflows but...
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