Topic 2: Use mutual funds to diversify with small amount
You can invest through the mutual fund route by buying units of equity mutual funds. Even if you want the liquidity that cash offers, you can avail of the same by investing in liquid funds or ultra short-term. So you can see that a mutual fund scheme can work as a bridge to investing in various asset classes. This is because such a scheme is more like a pass-through vehicle for your investment in an asset class, but that scheme itself is not an independent asset. This characteristic also brings in flexibility for investor to diversify even with a small amount of money.
In short, for cash you can use liquid and/or ultra short-term funds which are very close to bank deposits. For investing in debt, you can use medium- and long-term debt funds, income funds or fixed maturity plans. They give you a steady income and tax efficiency too. And for investing in , you can invest in diversified equity funds, or large-, mid- or a small-cap fund and also in sectoral funds.
Mutual funds also offer a variety and choice to investors. As an investor, one can choose to invest his/ her money in funds from over thousands of funds managed by about 40 fund houses. “When an investor chooses to go with equities, he/she can opt for a growth fund or a value fund or even a fund which combines both. For those who prefer dividends, he/she can select income funds. The opportunities are limitless,” says a financial planner. One can also use mutual fund schemes for asset allocation. For example, allocation funds include equity funds and debt funds simultaneously by investing in equity and fixed income instruments in different proportions. Although here the fund manager decides in what proportion the allocations would be made to various assets while remaining within the broad contours of the scheme, “in effect, such funds are a one-stop shop for asset allocation”. The last but not the least is the tax efficiency that mutual funds offer. If one invests in debt instruments directly You may not enjoy all the tax benefits available in the mutual fund route.
For more details contact your Financial Planner.
In short, for cash you can use liquid and/or ultra short-term funds which are very close to bank deposits. For investing in debt, you can use medium- and long-term debt funds, income funds or fixed maturity plans. They give you a steady income and tax efficiency too. And for investing in , you can invest in diversified equity funds, or large-, mid- or a small-cap fund and also in sectoral funds.
Mutual funds also offer a variety and choice to investors. As an investor, one can choose to invest his/ her money in funds from over thousands of funds managed by about 40 fund houses. “When an investor chooses to go with equities, he/she can opt for a growth fund or a value fund or even a fund which combines both. For those who prefer dividends, he/she can select income funds. The opportunities are limitless,” says a financial planner. One can also use mutual fund schemes for asset allocation. For example, allocation funds include equity funds and debt funds simultaneously by investing in equity and fixed income instruments in different proportions. Although here the fund manager decides in what proportion the allocations would be made to various assets while remaining within the broad contours of the scheme, “in effect, such funds are a one-stop shop for asset allocation”. The last but not the least is the tax efficiency that mutual funds offer. If one invests in debt instruments directly You may not enjoy all the tax benefits available in the mutual fund route.
For more details contact your Financial Planner.