Mutual funds do more than just invest in asset classes. You must first plan your work and then execute your plan. You must be prudent and wise when investing in mutual funds because many of your long-term goals rely on these investments.
We will help you by conveying a short story that will guide you in investing in a mutual fund with a better understanding! The story is about “Elephant and the blindfolded men.”
Once upon a time, six older men in a village were called by a man. They were all blind. The man asked them what it was like touching various parts of an elephant while describing them. Can they recognise the elephant parts? Well, they have never seen an elephant before and are imagining what it is like by touching it.
The first man touched the belly of the elephant and said that it was a huge wall. The second man touched the elephant’s tusk and said it seemed like a spear. The third person touched the trump of the elephant and thought it to be a snake. The fourth one touched the leg and thought it to be a tree trunk. The fifth man touched the elephant’s ear and felt like a fan. The sixth one touched its swinging tail and was convinced it was a rope.
Unfortunately, the six men couldn’t recognise the elephant’s parts rightly.
What is the moral of the story?
The moral of the story is that one must look at the bigger picture. They shouldn’t allow misconceptions and partial knowledge to make you take a decision.
Is it the same when investing in mutual funds?
Perhaps on occasion. Mutual funds are perceived differently by different people. Most people see it as a risky investment and thus avoid investing because they do not understand the potential for wealth creation. Some people attempt to time the market and make poor investment decisions.
How would you approach this?
- Put money into mutual funds.
- Plan your investments based on your objectives and risk tolerance.
- Seek expert advice.
Mutual Fund Investment for the long run
Invest in the best mutual funds that have been algorithmically selected to meet your needs. Investing in mutual funds is always beneficial for long-term, short-term, tax savings, or emergency needs.
Which is the most effective way to invest in mutual funds?
SIPs are the most effective way to invest in mutual funds. You learn not only to save regularly but also to invest with discipline. However, as you progress along your investment path, you may encounter market swings from time to time.
However, this should not cause you to withdraw from the fund or prevent you from investing. Like any wise investor, you should remain goal-oriented and adhere to your investment horizon. When you stay committed to your SIPs, your chances of accumulating wealth increase as you have opted for high-return mutual funds.
Mutual Funds benefit the investors
Mutual funds provide access to professionally managed portfolios of stocks, bonds, and other securities to small and individual investors. As a result, each shareholder shares proportionally in the fund’s profits or losses. Mutual funds invest in a wide range of securities. Their performance is measured as the change in the fund’s total market cap, which is calculated by aggregating the performance of the underlying investments.
Mutual fund investment typically provides a return to investors on a quarterly or annual basis. An investor will see either the total return or the change in the value of an investment over a specific period when researching mutual fund returns. This includes the fund’s interest, dividends, capital gains, and the change in its market value over time. In most cases, total returns are calculated over one, five, and ten years, as well as since the fund’s inception date. HDFC mutual funds are considered the best mutual funds in India.
Key takeaways from Mutual Funds
- A mutual fund is an investment vehicle that consists of a portfolio of stocks, bonds, or other securities.
- Mutual funds provide access to diverse, professionally managed portfolios for small and individual investors.
- Mutual funds are classified into several types based on the securities they invest in, their investment objectives, and the type of returns they seek.
- Mutual funds levy annual fees, expense ratios, or commissions, reducing overall returns.
- Mutual funds are often used in employer-sponsored retirement plans.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
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