I am 33 year old. Our (wife and I) monthly income after taxes is Rs 1.5 lakh per month. Our monthly expense is Rs 50,000. I wanted to invest that in equity, debt, and gold ETF. I have NPS and term insurance. I have already invested Rs 5 lakh in mutual funds. I am ready to invest for the next 12 years so that I can be financially independent and grow my wealth. Is it a wise decision to invest 100 % in MF/ Stocks? My wife is asking me to invest in LIC / Post office / PPF / VPF, but I am not interested.
--Balaji
Mutual funds are not all about stocks. Mutual funds invest in stocks and debt securities. They even invest in gold, silver, commodities, etc. So, don't think all mutual funds invest in stocks. Mutual funds that mostly invest in stocks are called equity mutual funds. Debt mutual funds invest in debt instruments or fixed income securities. You have to choose mutual funds based on your goals, investment horizon, and risk profile. You should invest in debt schemes to achieve your goals that need to be achieved in five years. You can invest in equity schemes to meet your long-term goals. Further, you should choose the ideal category based on your investment horizon and risk appetite. For example, if you are looking to park idle cash for a few weeks, you should choose a liquid scheme. If you are looking to invest for a long-term goal without taking too much risk, you should invest in a large cap mutual fund. If all this sounds very confusing, you should seek the help of a mutual fund advisor.
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FAQs
Investing 100% of your portfolio in small-cap mutual funds is generally not recommended. Here's why: * Higher risk: Small-cap stocks are more volatile than large-cap stocks, meaning their prices can fluctuate more dramatically.
Are mutual funds 100% safe? ›
Mutual funds are largely a safe investment, seen as being a good way for investors to diversify with minimal risk. But there are circ*mstances in which a mutual fund is not a good choice for a market participant, especially when it comes to fees.
Is it good to invest all money in mutual funds? ›
Given how high the risk is with these mutual funds, it is best to limit yourself to a limited number of small cap mutual funds. Also, avoid putting in a great percentage of your total mutual fund investment in small cap mutual funds. Debt Funds: Ideally 1, but 2 is also good.
Should you only invest in mutual funds? ›
All investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. Since they hold many company stocks within one investment, they offer more diversification than owning one or two individual stocks.
What percentage should I invest in mutual funds? ›
Some experts recommend at least 15% of your income. Setting clear investment goals can help you determine if you're investing the right amount. If you're new to investing, you might be asking yourself how much you should invest, or if you even have enough money to invest.
Why are mutual funds not giving good returns? ›
-If there is a change in the fund manager and the track record of the new fund manager is not promising. -If the Asset Management Company (AMC) is facing uncertainty – either looking at exiting the mutual fund business or too many changes in management.
Do we lose money in high risk mutual funds? ›
High-risk mutual funds are those that invest in stocks or equity that have a higher risk of losing value. These funds are also known as equity funds or growth funds. They are designed for investors who are willing to take on more risk in exchange for the potential of higher returns.
Is it good time to buy mutual funds now? ›
Starting Early for Compounding Benefits
One of the most compelling reasons to start investing in mutual funds early is the power of compounding. Compounding refers to earning returns not just on your initial investment but also on the returns generated over time.
Does your money grow in mutual funds? ›
Mutual fund returns can come from several sources: Appreciation in the fund's NAV, which happens if the fund's investments increase in price while you own the fund. Income earned from dividends on stocks or interest on bonds. Capital gains or profits incurred when the fund sells investments that have increased in price.
How many funds should I invest in? ›
So, what's the ideal number of funds? Well, there is no right or wrong answer. It can depend on a number of factors including the number of funds you're comfortable monitoring in your portfolio, your investment objectives and risk appetite.
Disadvantages include high fees, tax inefficiency, poor trade execution, and the potential for management abuses.
What is a better investment than mutual funds? ›
Overall, ETFs hold an edge because they tend to use passive investing more often and have some tax advantages. Here's what differentiates a mutual fund from an ETF, and which is better for your portfolio.
What are the five cons of a mutual fund? ›
Potential Cons
- High fees. Mutual funds have expenses, typically ranging between 0.50% to 1%, which pay for management and other costs to operate the fund. ...
- Market risk. Just as with stocks and bonds, mutual funds generally have market risk, meaning that prices can fluctuate up and down. ...
- Manager risk. ...
- Tax inefficiency.
In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.
How much money do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
What is the 80% rule for mutual funds? ›
Under the final amendments, when a fund employs a derivatives strategy, the fund will generally be required to use the notional value to determine if 80% of its funds are invested in accordance with the focus its name suggests.
Do mutual funds have a lot of risk? ›
No investment is risk-free and while mutual funds are generally low-risk because they invest in low-risk securities, they are not completely risk-free.
Can mutual funds go to zero? ›
The chances of a mutual fund becoming zero are very low. This is because a mutual fund invests in several assets. So, even if a few assets do not perform well, other assets can generate returns. This can balance the losses of non-performing assets.
Are mutual funds safer than stocks? ›
All investments carry some degree of risk and can lose value if the overall market declines or, in the case of individual stocks, the company folds. Still, mutual funds are generally considered safer than stocks because they are inherently diversified, which helps mitigate the risk and volatility in your portfolio.
