Why Equity Mutual Funds?
Why we have chosen Mutual Funds as a tool to develop a good investment plan!
Since their creation, mutual funds have been a popular investment vehicle. Their simplicity along with other attributes provide great benefit to investors with limited time.
Here are a few reasons in favour of mutual funds.
Professional Management In-depth research is done by a team under an able Fund Manager who are experienced, qualified and specialise in the selection of companies to invest in. His access to detailed information, along with in-house expertise, allows him to make timely decisions which ensures growth.
Diversification of Risk Investments across multiple companies, industries and sectors ensures steady return reducing the risk of incurring a loss ensuring capital protection.
Convenience As the saying goes “Don’t buy the cow, if all you want is a glass of milk” - the same applies to equity investments. Buying stock directly is akin to buying a cow. One needs to ensure the health, the production capacity etc. If you are buying units of a fund, you are buying just the glass of milk you require. Also, it is extremely easy to invest into and redeem Mutual Funds with very less amount of paperwork making them extremely liquid.
Cost Effective Mutual funds buy and sell stocks in bulk thereby reducing overall transaction costs.
Tax Free Investment into equity MF is exempted from Capital Gains Tax if it becomes long term.
Anxiety Free MFs do not need to be watched throughout the day unlike stocks, futures and options.
A Good Mutual Fund Investment Plan
Identifying funds that are managed by successful fund manager and have been consistently outperforming the market. At the same time, the funds should be free from limitations that interferes with possible future returns.
Identifying multiple funds that collectively provides the highest probability of getting better returns than the broader market and the benchmarks
The value of investment should be growing consistently. The value addition should not only offset the inflation effect, but also at the same time provide for the changing lifestyles.
A systematic investigation into the study of market to identify the funds to invest into. This ensures that speculation is at the least.
The ability to change (increase or decrease) the plan owing to the changes in situation.
World may be able to give you wealth and relations;
But for peace, happiness and security, you must stay connected to the Divine.
Advantages Traditional SIP
Advantages of SIP
- Discipline - Investing on a regular basis.
- Rupee cost averaging - Buying at all price points, averaging the cost over a period of time.
- Power of compounding - Increased growth over a period of time.
- Convenience - Easy to invest, easy to redeem.
- No need to time the market - If the market is up, old investments make you happy; when the markets are down, the new ones make you happy
Disadvantages of SIP
- Underperformance - Returns are not at par with the indices or the benchmarks.
- Fixed Amount - No advantage of price movement at all.
- Too Big to Perform - Past history leads to subscription of more than what can be managed.
Our advice system takes full advantage of the benefits that a SIP provides and at the same time is designed scientifically to nullify the disadvantages.
You know how much money you have,
But do you know how much time you have to celebrate each moment?
Other Modes of Investment
The plan provides advantages over all traditional methods of investing.
Equities Equities can make you or break you. The risks and costs involved in direct investment into equities are very high.
Fixed Deposits The returns are low and more often just a few points higher than inflation.
Futures & Options Designed as a tool to hedge portfolios against sudden movements, these are widely used for speculation. The risks involved in futures are very high and it takes a lot of understanding to develop a strategy to benefit from options.
Insurance The underlying costs are not transparent. In guise of security a lot of misselling happens.
Mutual Funds Historical performance is most likely not to be repeated. Often, the fund manager gets due recognition after the smart money has been made.
Real Estate Extremely illiquid owing to the size of investment. Over-pricing is rampant and difficult to understand.
Arts & Collectibles Extremely illiquid owing to a limited number of investors. Valuation is subjective and without regulation or standardisation.
Richest wealth is wisdom,
Strongest weapon is patience,
Best security is faith,
Effective tonic is laughter.
Surprisingly all these are free!