There are moments in life where the financial hardships hit you hard. Managing financial goals are necessary to deal with such unforeseen situations. Picking the right investment option is equally important as setting monetary goals. To shape your goals into reality, you need to have a proper roadmap to accomplish that. Mutual funds make for an indispensable part among all the financial options. Reaching the right type of mutual funds can seem like a daunting task. But, if selected carefully, this investment option can cater to your long term and short term financial needs.
Read on to know reasons to consider mutual funds’ investments in your financial goal plans.
Categories of mutual funds
One of the primary benefits you’ll achieve by investing in mutual funds investment plans is the exposure to a variety of asset classes. Generally, Mutual Funds invest in debt or equities. These are furthermore categorized into various types based on its functions. Among them, Equity Schemes allows investors to participate in the stock market and provide high returns in the long run. On the contrary, debt funds offer steady and regular income to investors. Hybrid funds, as the name indicates, is a mix of both equity and debt funds and invest funds in both. Similarly, balanced funds balance the investments between equity and debt. Choosing the right option can be easy if you have a proper understanding of your goals.
How to achieve your goals through mutual funds
Recognizing your goals and distinguishing investment objective of the schemes is imperative while choosing the Mutual Funds. If you are a young salaried individual, with sufficient time to achieve your long term goals, you can select equity-oriented funds. Equity funds can provide you with high returns in your long term run. You can also consider Equity-Linked Saving Scheme (ELSS) for your long term goals as it can be a rewarding experience. ELSS funds can help you get tax deductions under Section 80C of the Income-tax Act. Conversely, if your investment goals are locked for less than three years, you can consider debt mutual funds that can bestow you with a regular, steady income. Short-term goals can include a dream vacation, buying a gadget or motorbike, to name a few. Additionally, you might have medium-term goals that you wish to attain in the next 3-5 years. For this purpose, you can start investing a certain monthly amount regularly through Systematic Investment Plans (SIP). SIPs are an ideal choice for medium to long-term investment plans. Mutual fund investments always rewarded the investor with the doubled returns most of the time. Though the returns are subjected to the market risks, mutual funds always made a comeback. The tax benefits and the ease in investments and operations make mutual funds a popular choice among the investors.