Mutual Funds - Expectation vs Reality

Mutual funds are no more an unknown tool or hidden investment option. Investing your savings in today's day and age can be pretty overwhelming. Investment through mutual funds is so accessible to the public. At the same time, the significant population in India is not financially literate, which creates few specific expectations regarding investment in mutual funds.

Investment is definitely a game of facts, data, and information but the journey to investment starts with clarity and a positive mindset toward money.

Let's explore the expectation and establish the reality regarding mutual funds investment.

Expectation - Mutual funds givers constant returns year on year at the investment.

Reality - Mutuals can't always give equivalent or constant returns. Usually, the websites show the return on mutual funds from the date they have been started, but that doesn't imply it gives the same returns every year. Mutual fund returns can be low at some point or at an all-time high, depending on various market factors.

Expectation -SIP can only be done on a monthly basis

Reality -Majorly people create monthly SIP on Mutual Funds, though SIP can be done on a daily, quarterly, or even half-yearly basis. Most investors automate SIPs as it simplifies the investing process and builds a discipline for constant investment. Automation of investment through SIPs encourages monthly investing. Moreover, investors have the option to create SIPs at different regular intervals. The interval between two SIPs is a personal call by an investor depending on their access to funds for investments.

Expectation - Mutual funds are equivalent to the stock market.

Rality-That's something most beginner investors think that mutual funds are the same as the stock market. The stock market is for investing in equity shares, whereas mutual funds consist of

investing in different companies at varying proportions.

Expectation - Mutual funds are risk-free.

Reality- Many people are under the impression that mutual funds are entirely risk-free. This is not totally true, and one of the main risks is that you could lose money if your mutual fund has a wide market exposure.

Mutual funds are made up of stocks, bonds, and cash in proportions that vary with each fund. The amount of risk associated with a mutual fund depends on the type of assets it owns. The more stocks and other volatile investments in its holdings, the greater the risk.

Generally speaking, large-cap funds have less risk than small-cap funds because there is less chance for rapid changes in their underlying value. Likewise, bonds have less risk than stocks because their value does not fluctuate as much. Cash holdings also tend to be very stable.

Expectation -Multiple Mutual Funds will always generate higher returns.

Reality - Mutual funds are already a diversified form of investment, so investing in multiple mutual funds of the same category won't help to diversify. Investing in multiple mutual funds neither help to diversify the portfolio nor generate higher returns. It can also backfire on the investor by lower returns and stress of managing diverse mutual funds. Returns on mutual funds depend on various market factors that apply to all mutual funds.

Expectation -It needs a considerable amount to start investing in mutual funds.

Reality- Still, a sector of the population thinks investing in mutual funds requires a large sum of money. It doesn't require much money to start investing; all it needs is a will to invest and the mindset to create wealth. One can start investing in mutual funds for as low as Rs. 100 per month by investing in mutual funds through SIP.

A reality check is always needed to start something new, and even the things are known. It helps to grow and think strategically. So don't make random expectations at the start of the investment journey; focus on disciplined and strategic investing.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

  Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

 

How to get excited about savings?

Everyone wants to have some savings, but most are unable to achieve their goals, primarily because the journey can be lengthy and monotonous because it requires discipline. You can, however, change this by making the financial savings journey exciting and keeping you on your toes.

Here are some of the ways you can achieve that.

Save for your goals

The most important thing to add excitement to your saving is mapping it with your goals. This adds purpose to your savings and thus keeps you motivated. For instance, if you plan to have a foreign vacation next year and are saving for that, tag that portion of savings with that goal. This will add that bit of incentive to your savings when you have to make your periodic investments and deter you from dipping in to that portion of the savings for another reason.

Break your bigger goals into smaller sections

It can be a little intimidating to achieve a big goal as it might seem out of reach. But, planning your goals with regular investments, such as investing in a mutual fund through a Systematic Investment Plan(SIP), can make it easier to achieve those goals.

You can talk to an expert who can help you figure out the amount you can save regularly. 

Add dexterity 

Now dexterity, by definition, is building skills for a task, but here we mean to say that individuals should add skills to their savings and investment patterns. This dexterity gives an additional kick to your investments and keeps you excited. And the simplest thing to do is invest in the right products as per your risk-return profile and horizon. For instance, if you plan to buy a second home five years from now, you would be better off investing in hybrid mutual funds to generate a better return on your investments compared with the traditional instruments.

Track progress 

Another essential thing that individuals can do to be excited about savings is tracking the progress of their savings and investments. By doing this vital step, you can track where your savings are headed and feel connected to them. The former is essential since it helps you tweak your savings strategy basis your position in the financial journey, while the second aspect helps you remain connected with the original goal for which you were saving. This is important for you to remain not only updated on your savings but also excited for the end outcome.

Reward yourself 

It is also important to treat yourself with some reward to keep yourself motivated on the savings journey. Imagine it like the cheat day you binge on when you are on a strict regimen. That one day not only keeps you excited but also helps reduce the stress from the other days. In financial parlance, this cheat day could be the day you spend on things you want if you can achieve one leg of your financial savings journey. It would be better to plan and note these rewards so that you don’t go overboard with them.

Summing up 

The financial savings journey should not be an unknown and uncharted path leading you nowhere. Not only do investors not benefit from it, but they also usually tend to get astray from their goals. By adding excitement to their savings and investments, investors can keep themselves hooked on this financial journey while also aiming for their goals in a planned manner. Individuals can apply the methods detailed in the article to keep themselves motivated and excited about their savings.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

 Raja Bhattacharjee

Email:  investment.junctions@gmail.com

Phone: 09830146206  ,  Office : 09681518774   /  7449858289