mutual fund
Mutual funds have become very popular among investors in the last few years, especially for those who want to build a large corpus by adding small amounts every month. If you also have the ability to save only Rs 2000 every month, then you can create a huge fund in 10 years.
Often people think that investing in the stock market or mutual funds requires a huge amount, but the reality is the opposite. You can start even with a very small amount through Systematic Investment Plan i.e. SIP. Suppose you start a SIP of Rs 2000 every month and continue it for the next 10 years.
You get an average annual return of 12 percent on investment, so after 10 years you can have a corpus of around Rs 4,65,000. The thing to note is that the total principal amount going out of your pocket in these 10 years will be only Rs 2,40,000. That is, you can get a benefit of around Rs 2,25,000 only in the form of returns.
When it comes to investing, risk is a big factor. There are mainly three types of mutual funds, equity funds, hybrid funds and debt mutual funds. If you are an investor who wants to avoid direct risk of equity i.e. stock market, then 'Debt Mutual Fund' can be a better option.
Under debt mutual funds, instead of investing your money in the stock market, fund houses invest in safe places like government securities, corporate bonds and commercial papers. In a way, it is like giving a loan to someone. When you invest money in debt funds, you are giving loan to the government or companies. In return, when that bond or security matures, you get back your principal amount along with interest. For this reason it is considered safer than equity and hybrid funds.
Investing in debt mutual funds or SIP depends on your individual financial needs and risk appetite. There are many types of funds available in the market, but it is important to make the right choice. If you are an investor who does not want to take too much risk on your money and is looking for a stable return, then debt mutual funds can prove to be a good option for you. It is also helpful for those who want slightly better returns from Fixed Deposit (FD) but are afraid of the huge volatility of the stock market.
