Mutual fund is best option to create wealth. If you want to take advantage of capital market you can invest in mutual fund. Therefore you can start invest in equity market to create wealth. Probably, investor who is in 20s or 30s can take return benefits for long period in mutual fund schemes. Hence, you can check Top mutual funds for young investors.
Purpose of investing
You need to keep in mind before investing in mutual funds. If you want to gain from mutual funds you must invest with definite purpose. For example, invest money towards financial goal like child education. In addition, like wedding planning, overseas vacation or retirement plan. This will help you in making right savings for your long term financial goals.
Mutual fund holdings
As young investor you must know holding duration in any MF categories. Like liquid funds, equity funds, debt funds and hybrid funds etc. Moreover, you can invest your money in mutual funds for any financial goal. Hence, check Advantages of Mutual Funds
However, risk is associated in every fund as their holding period. So if you fail to invest as per benchmark you may lose money instead of making good returns. Therefore you must keep few things in mind to make good amount in long run.
Generally, equities outperform more than 3 years risk in equity funds reduces for over 3 years. Moreover, from few year governments had undertaken major reforms. But to increase public investment in physical infrastructure. By 2020-22 with low inflation and stable currency will start bearing fruits.
There are two ways to invest your money in mutual funds. You can invest through lump-sum in one go or SIP mode. Most advisors say SIP invest route is best. Doing SIP do not require market timing and also help to invest in disciplined manner. Therefore it becomes less risk for young investors to their investments for long term financial goals.
You need to invest in equity mutual fund your money for long term. It means that your financial goals have long term for 5 to 7 years. You can also see Bond Funds
Power of compounding
If young investor stays in market for longer you can generate more corpuses over a period of time. This happens because of compounding effect and rupee cost averaging benefit you get for long term.
For longer durations compounding interest yield is better results for money saved. You have set sum amount of Rs 5000 every month from age of 25 at return interest rate of 10%. So when you turn 60 years you will have funds worth about Rs 1 crore or more.
However, if you start at age 40 with same amount and rate of interest. Then retirement fund worth will only around Rs 33 lakh. At this juncture, you can have well allocated portfolio of equity and debt funds. You can always shift this money to other investment avenues.
Moreover, since every mutual fund is regulated by SEBI. You can be assured that your investments are managed in disciplined and regulated manner. And they are in safe hands.
Exist of market risks
Mutual fund can be considered as safe investment avenue only. Because, in terms that they are regulated by SEBI. And each company needs to maintain net worth to set up an AMC. However, investment made in any schemes is subjected to market risk.
You must always have clarity about scheme that you are investing in mutual funds. Hence, you need to read offer document before making any investment.
Finally, check Benefits of mutual fund in India. Therefore see Best mutual funds for 20 years old. And for better understand see risk of mutual fund. Hence, see disadvantages and advantages of mutual fund.