You must have seen the television commercial of ‘the Mutual Fund Sahi Hai’. The ads are really very good and try to tell you about the mutual fund. These television ads were required as very few of us know about the mutual funds. A recent survey found that 95% of the people still invest their savings in bank deposits. Most of these people don’t even know about the other investment avenues.
Ironically most of the people consider insurance schemes as a saving scheme while these are basically a protection plans. Hence, this campaign’ Mutual Fund Sahi Hai’ is a noble initiative.
However, These campaigns tell you only the good things about the mutual funds. It seems that mutual fund is really the best investment scheme. Do you really believe this? I don’t think so. Most of us have some apprehension. In this post, I would discuss about your basic apprehension about the mutual fund. So that you don’t repent later.
Is Risk Really don’t Matter
In one of the ad of ‘Mutual Fund Sahi Hai’ campaign, a fearful man goes through the roller coaster ride. After various twists and turns, ups and down, the man comes out safe and happy. The ad shows that mutual fund investment is also like a roller coaster ride which may go through ups and down but finally you would be a happy person.
It is true that ups and downs of mutual fund is not as fearful as you think. In the long run, you would be a happy person. The ups and down of mutual fund investments are temporary. But, the roller coaster ride doesn’t show the complete truth about the mutual funds. There are some apprehensions about the mutual funds. You must also know the associated risk of the mutual fund.
The roller coaster ride would be enjoyable only if you love thrills. Everyone doesn’t enjoy these sharp ups and down. You would agree that some people sink during this ride. You must know the people who never sit on roller coaster ride. My wife is very fearful of such type rides.
Similarly, everyone can’t face ups and down of mutual fund investment. The market downturn can wipe your investment. Everyone can’t be patient and firm enough to deal with such situation. Even some people can try to jump out of such mutual fund ride. This abrupt ejection can be most dangerous. Thus, Mutual Fund investment is not for those who can’t take a risk. Fixed deposit is still better for them.
Mutual funds are for every duration
Another AD of ‘Mutual Fund Sahi Hai’ tell you that mutual fund is available for every duration. You can put your money for even 7 days. True, Few people know this. The liquid funds are similar to saving deposit. You can even put your money for one week. There is no maximum duration of mutual fund schemes.
However, you are not advised to invest in equity mutual fund for a short duration. The market behaves erratically in short duration so you should never invest in equity mutual funds for short duration.
The debt funds are good for short duration. These funds are relatively secure and give the return like a fixed deposit. However, if you have a small amount, it is not good to invest in debt mutual funds.
- Indeed, it is difficult to monitor debt mutual fund for a small amount.
- Your profit would be taxable while interest earning of bank deposit upto ₹10,000 is tax free.
- Your money is insured in bank deposit while there is no such provision in debt mutual funds. If bank defaults you would get upto ₹1 lac.
Are Mutual Funds better to buy a car or wealth creation?
In an another advertisement, the lady buys a car by using the mutual fund corpus. So, Should you also use the mutual fund route to accumulate money to fulfill wishes?
Yes! but choose the correct mutual fund scheme.
For your short term goal, the debt fund would be suitable as there are little ups and down. It ensures that your target amount would be almost available at the time of requirement.
For a long term goal, equity mutual fund would be better. These mutual fund goes through the ups and down but in a longer period, it averages out. I must tell you that if you want to to invest for more than 10 years, equity mutual fund would give highest return. Indeed, equity mutual fund is perfect way for retirement planning.
Can you invest small amount
The mutual fund ad campaign also asserts that mutual fund investment does not require a big amount. Rather you can even invest ₹500 in a mutual fund scheme. Again, this is not the whole truth. Let me clear the picture.
There are various mutual fund schemes. And every scheme can have it’s own limit for investment. Most of the mutual fund scheme requires ₹5000 for the first time investment. For subsequent investment, you can submit any amount above ₹500.
However, mutual fund scheme lowers the minimum investment limit if you are opting for systematic investment plan (SIP). In an SIP, you commit regular investment for one year. The minimum investment limit for SIP also differs across the mutual fund schemes.
Mutual Fund Sahi Hai? Should You Invest?
Definitely! Mutual Fund are a good investment option if you want to earn better return than the saving deposit. These don’t give a fixed return but have the potential to earn much more. You have to take the calculated decision.
- There are different types of mutual fund. You can choose a mutual fund scheme according to your need. Be careful while investing in equity mutual fund as it carries greater risk.
- Every mutual fund scheme may not be beneficial to you. There are various underperforming schemes as well. You have to avoid such scheme. Thus investment in mutual funds need more care and research. It is not as simple as opening a FD account.
- Investment in equity mutual fund require patience. You have to remain firm during market downturn. The equity mutual fund is not for fainthearted.
- It is better to take the services of a mutual fund advisor.
I hope now you know that how much Mutual Fund Sahi hai for you. Take the informed decision and enjoy good return.