Owing to their lucrative returns and diversified portfolio, mutual funds are one of the most preferred investment schemes among investors. Be it the best mutual funds for SIP or any other scheme; it is essential to understand that investing timely in life is very important in order to create a secure future for you and your loved ones.
Gone are the days when saving money was putting a chunk of your monthly earnings aside. Nowadays, investing timely and smartly is very important to create more wealth from your current wealth.
Around a year back, when I entered the professional field, even I was intrigued by the lucrative returns offered by mutual funds. So, after thorough research and development, I invested in the same from the comfort of my home only.
Here are the top four factors on how to choose the best mutual funds for your savings plan –
● Identify your goals
The first and foremost step to figure out is to jot down all your financial goals. Next, don’t forget to calculate the actual value of your goals. The real value of goals can mean their current rate plus inflation over the investing period.
● The right asset allocation
Another critical factor is asset allocation. This means how much of your money you can allocate to which types of mutual funds to meet your goals, duly considering your risk appetite.
● Identify your risk
The risk appetite can largely influence your mutual fund investment choices. So, when you search for the ‘best mutual funds for SIP’ or anything similar on your search engine, ensure you do the proper research and accurately assess your risk appetite to arrive at the correct asset allocation for your portfolio.
● Performance of fund
Fund performance matters a lot and should be considered for a reasonable time frame. So, it is essential to know whether the fund you are going for has been able to beat its benchmark over three, five, or, say, ten years.
● Financial Advice
Don’t be afraid to seek advice from professional financial advisors. Not only do they help you choose funds that are suitable for your financial goals, but they also analyze each and every factor.
Moreover, a prime benefit of investing in mutual funds, especially the tax saver mutual funds, is that it helps you save income tax. So, if you invest in an ELSS (Equity Linked Savings Schemes) fund, you’ll be able to reduce your taxable income by as much as Rs 1.5 lakh. As per the law, this comes under Section 80C of the Income Tax Act, 1961.
Mutual funds are an excellent way to stay ahead in financial planning.
The overall process involves evaluating the current situation, identifying goals, and developing and implementing relevant propositions.
(Tip: Before investing, also make sure that you use a mutual fund calculator to get the exact figures on what you’ll be getting on your invested money.)