Mutual Funds Mastery Part 1 this is volume 1 of the Mutual Fund Series.
We have all come across the advertisement ‘MUTUAL FUND SAHI HAI.’ In today’s era, we have several types of mutual funds (Sectoral, Thematic, Index, etc.), so it is crucial to determine which one is best suited to our needs.
A Mutual Fund is just like a pizza where we are the owners of a particular part of a company and for the beginner, it is very simple and easy step to enter into the markets because as we are you so we do not have that much of knowledge to build a conviction of a Stock eventually as we grow by our knowledge it gets developed.
Mutual Funds Mastery Part 1 is going to be the introductory part of the series where we are going to discuss the basics.
he Index Funds could be the best investment for the beginner as the person didn’t have prior experience with the markets so this product is very appropriate again according to the Risk profile it gets divided into 3 Categories (Large cap, Mid cap, Small cap) Funds the low-risk investors prefer the Large-cap Funds, Medium Risk Midcap and more risk is in the Small-cap funds.
The most important is to define the tenure of investment it should be a minimum of 5 Years, for mid and small cap 5 Years could not generate many returns as this are high-risk & high return investment theme and if probably markets do not perform well then this is bleeding, but these funds are having the potential to generate great wealth as compared to Large cap in long tenure (15 Years or more time frame).
Large-cap Funds invest in Nifty’s top 50 companies Next to nifty’s 50 companies the NIFTY NEXT 50 which shows that potential to be the next Nifty 50’s participants Where Midcap invests in companies ranked from101 to 250 Small cap invests in companies rank below 250
Investment Basket
The mutual funds are already diversified and we should always think of maximum of 4 to 5 funds for wealth creation beyond this range the portfolio becomes over diversified due to which we are minimize the returns IDEAL BASKET should consist of Lage , Mid,Small cap (i.e 1 fund from each category )for a longer duration can create massive exponential wealth .
Goal Planning
We are able to achieve our desires (Car ,Home ,Luxurious life) via mutual funds but one needs to define the exit point it is ‘ WHEN YOU KNOW THAT THE AMOUNT YOU WANTED FOR PURCHASING A CAR OR HOME etc is about to complete in this theme then you should plan for exit once the amount is done from the markets OR the amount you were expecting beyond that the markets had given you the wealth then enjoy the profits by buying your dream car, dream house inspite of the market conditions.
Analysis
The most important thing is how to select the proper fund so for that focus on these parameters
• Expense Ratio
• Rolling Returns
• Exit Load
The expense Ratio is the amount that the mutual fund company is charging from your pocket, it is seen that the Funds of the same category are giving the same Returns still one of them is charging high fees from you in spite of the competition. Select the one having the lowest Expense Ratio.
Rolling Returns are the returns show that how consistently the fund is generating returns for you in spite of the market scenario (Bullish or Bearish ). For the magic compounding consistency is the main key aspect ‘ WE HAVE TO LOOK FOR A PLAYER LIKE DRAVID WHO IS A CONSISTENT PLAYER ‘despite a player who does well in one match and none in the others.
Exit Load many times we didn’t give importance to this term but it is also an important parameter before investing in a fund it is our duty to look for the exit load (i.e when you are exiting from this fund then how many charges will get deducted from your invested amount that is important.
For the short term 1 year or 6 months we had to pay these charges but when we are thinking long term then it is going to be nil for us.
NOTE – Do check the returns that the fund had delivered for a 5-year tenure it is considered as a safe one and if any fund beats its benchmark and gives extraordinary returns is the one for you to check this website for mutual fund analysis
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To be continued in part two
Till then STAY HUNGRY STAY BULLISH
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