Growth Funds is Not Risky if Done Through an SIP
There are speculations still in some people's minds about whether it is good to invest in mutual funds because the performance is linked to the equity market. However, this doubt is based on half or incomplete information. When you invest in insurance that has an investment component, even that is tied to the equity market so you are not sure if you will really get good returns. However the fear of one.s security is so much that one says yes easily to insurance as he finds the investment component as a bonus. But actually in an insurance product, the investment returns is quite less as the main functionality of that product is covering life. A smart financial manager will always ask you to go for term insurance so that you get a full cover of life and realize the full value of investments by putting your money in mutual funds.It is not that there is a big risk when it comes to mutual funds; the risk factor actually depends on your appetite. For instance, you can choose to put your money in debt funds through some top performing mutual funds. Likewise there are balanced funds, where 50 percent of the money goes to debt while the other 50 percent goes to equity. There are growth funds as well, which give you very good rate of returns, in other words; high earnings because the money is invested in pure equity. When you invest in equity funds through mutual funds; the risk is reduced because there is a specialized team or an asset fund house which are like financial doctors. They are able to pool in your money in the best performing sectors. The risk is nullified to a huge extent when you invest through SIP(Systematic Investment Plan) where an investor can benefit from rupee cost averaging. This means when the market is down and the NAV (Net Asset Value) is low, you can buy more units which can turn out to be a profitable proposition when the market is high. So compared to a one time investment in a mutual fund, it is better to go the SIP route. It has been observed that those who have opted to invest through SIPs have been able to safeguard their investments as well as reap benefits of high profits.
When you buy a mutual fund product, you should keep a specific date as an SIP date so that the money goes out of your account on more or less the same day. Though the asset fund manager is there to invest your money in the right channels, you should also keep a watch on your mutual fund performance. For instance, you should keep in touch with the NAV(Net Asset Value) of your fund, this can help you sell or buy more units if you want to. You can be in touch with updates though the NAV value of the fund given in websites like Moneycontrol or you can even find out this information from financial magazines, newspapers and television. An equity diversified fund and a tax saving fund (that is closed ended for 3 years, meaning you cannot redeem the money for a minimum of 3 years) usually has options like growth and dividend. The dividend option does not reinvest the profits made by the fund and gives it to the investor from time to time. But in the growth option, the profits earned by the funds are reinvested into the scheme, which actually increases the value of NAV over time.