Risk is there in every sector, but it also depends on the situation and other reasons. There are many instruments related to investment in the financial sector which carry different types of risks. I have learned one thing that investment and risk are two sides of the same coin and they always go hand in hand. But for this, we should come to manage things.
When it comes to investment, first we should give priority to our safety especially life and health. At the same time, an emergency fund should also be arranged for an emergency. When both these things are fulfilled, then one should think about investing.
Know the difference between saving, investment and speculation
Before starting our investment journey, we have to understand the difference between three things closely, what is the difference between Saving, Investment and Speculation. Savings and investment are easy to understand. While speculation is risky. Because this is done without understanding the risks involved when investing money in financial instruments. When you read about it, you read it with an investor mindset, not a betting mindset.
What is the biggest benefit of investing in mutual funds
One of the biggest advantages of Investment in Mutual Fund is that it takes a risk strategy in advance. This strategy is decided by expert professionals in their field. Therefore, to invest in equity directly and understand its risks, you should first invest in mutual funds.
To qualify for an equity mutual fund, the fund scheme must have an equity exposure of at least 65 per cent, which can be up to a maximum of 100 per cent. In addition, there is an Equity Linked Saving Scheme (ELSS) in which equity exposure is at least 90 per cent. Investment in this scheme is for a lock-in period of three years. The scheme also qualifies for tax deduction under section 80C of Income Tax.
Diversification in international stocks
The scope of Equity Mutual Funds extends to market capitalization and sectors of the Indian stock market, including international stocks. You can say that this fund provides adequate diversification. Various methods of investment are adopted for this.
Investment can also be done through SIP
One can also invest in Equity Mutual Fund through Systematic Investment Plan (SIP) to manage investment-related risk. There are many benefits of investing through SIP, but the biggest problem is the cost of rupees. When you invest through SIP, you try to buy more units in the mutual fund scheme. You invest when the market is down and when the number of units decreases, the market goes up. This method gives an opportunity to buy average units in the fund scheme after a period. The most important thing to note is that SIP handles emotions in the event of ups and downs of investment to achieve your financial goals.
For how long is the investment appropriate
Equity mutual funds are suitable for long-term investments of 7 to 10 years or more. Equity mutual funds make significant increases in compounding power over the long term. You can start investing by setting a financial goal. To achieve this goal one has to decide the amount and duration of the investment. According to your financial goal, there are many online calculators to calculate SIP investment. Through this, you can calculate the estimated return. You can create a Mixed Portfolio of Equity Mutual Funds to achieve your financial goal within a fixed number of years.
Be sure to consult Investment Advisor
Typically a portfolio may have 4 to 5 fund schemes, which you can decide after negotiating with an investment advisor. An investment adviser can give the best advice based on your experience during the conversation. I can also give you good advice only after negotiating, as I too have a mentor to help me achieve my financial goals.