Rather than investing directly in stocks, investing monthly through mutual fund schemes over a long period of time is a better way to see a lot of cash, investors suggest. Let’s take a look at the things people who want to invest in Mutual Fund SIP for the first time should know.
A mutual fund is a company that takes money from us, appoints a fund manager, and invests that money in various stocks with growth potential in various sectors. This will increase our investment. If the fund manager is incompetent and his research and resulting predictions are wrong, there is a chance that the investment will be eroded. Mutual fund schemes, especially those with small and mid-cap stocks, are high risk. At the same time, they are also the funds that have given the highest returns.
First-time investors invest money in anything. It is important to base it on the time frame you want to achieve and how much risk you are willing to take. You can start by setting goals like buying a car debt free in 5 years, investing in a house in 15 years, etc.
Investors who want to invest in mutual funds for the first time should focus on low-risk schemes. There is a Balanced Fund scheme. It will be a mix of equity and debt securities for investors. If stocks fall, bonds balance and vice versa.
Hence, financial advisors recommend balance schemes of 70% equities and 30% debt securities for risk takers. Investors with a moderate risk appetite can opt for schemes that go 60% in equities or 40% in bonds. Later, when the salary increases, one can take more risk and invest in fully equity funds.
Now technology has made investing easy, all available on digital platforms. Investors can easily manage, retrieve and transfer their investments digitally. Anyone who wants to invest should invest for the long term. Only then can the power of compounding be enjoyed.
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