No offences if you are a long term
investor or who wants to earn some quick bucks in a short time frame mutual
funds would be your preferred choice. Just opt for a mutual fund aligning with
your financial goals, risk profile and investment horizon. To start off if you
are averse to risk it is better to stick to debt mutual fund schemes. At the
other spectrum if you are an aggressive investor and willing to take extra
degree of risks then equity based mutual funds might not be a bad option. How
to invest in ELSS
seems to be a moderate strategy.
For a short strategy investment choice of
debt mutual funds is a recommended option. As per mutual fund experts debt
based mutual funds work for your goals if you have a preview of less than 5
years to earn post tax returns. Any investment made in debt mutual fund over a
period of 3 years falls into the category of long term capital gains. A 20 %
benefit is available with an indexation benefit. For this reason an investor
prefers investing in debt mutual funds and not bank deposits. At the same time
you need to choose a debt based mutual fund as per your investment portfolio.
For example to park money for a few days
opt for overnight funds. If you are looking to park money for a few weeks then
choose liquid based schemes. Short term ultra- schemes would be ideal to park
money for a few weeks. To park money for a few years, short term schemes may
not be a bad idea. If you are having an investment horizon of 5 to 7 years, it is
a better move to invest in equity based mutual fund schemes. Once again a
choice of a mutual fund has to depend upon your risk bearing capacity. If your
risk taking capacity is low then stick to hybrid schemes or even large cap
schemes. If the risk profile is moderate then you can stick to midcap schemes.
The aggressive investors choose the midcap or small cap schemes.
Investors who have abundant financial
resources can think about investing in international schemes. The investors of direct mutual fund app
opt for dividends to receive regular income from their investments. But this
might not work in your favour always. Mutual funds need to declare dividends
from the anticipated profits. It means that when the scheme is not generating
enough profits there is a possibility of skipping dividends.
In such cases a better option would be to move over to a SWP or systematic withdrawal plan. This is similar to a SIP but works just in an opposite manner. SIP allows you to invest a particular sum of money in a mutual fund scheme; SWP would allow a systematic withdrawal of money from a mutual fund scheme. But an investor needs to be careful about the percentage of money they are planning to withdraw. A higher percentage would deplete the capital resources in the long run.