This is that time of the year when many of us take up New Year resolutions. Staying fit, eating healthy, going to the gym more regularly, saving more, investing better, and so much more.
This article is addressed towards making the readers more aware of how they can start investing better this New Year by investing in mutual funds. The article seeks to answer the question – Why should one invest in mutual funds this year?
Investing in mutual funds this New Year shall be the beginning of a resolution that will only strengthen not only this year but each year in future, culminating in fulfilling your financial goals and desires.
Did you know that investment in mutual funds is one of the best ways to invest one’s money and achieve one’s financial goals in a planned and disciplined manner?
And what better time than the beginning of a New Year to incorporate investing in mutual funds in your list of New Year resolutions.
To put things into perspective, a SIP in small-cap funds can give you a return of around 20-25% in a year, generally. Say you want to purchase a new Maruti car and you decide to buy it via installment scheme (EMI).
According to your savings, you may decide to spend ₹10,000 every month on the car installment. At the end of 5 years, you sell off the car and buy a new one.
Now consider what if you had invested that ₹10,000/month in the Maruti stock or a small and mid-cap fund for that matter, for a period of 5 years.
Your investment would have grown over 5 times in 5 years. Mutual funds allow investors to invest small amounts monthly and grow their investments to meet their financial goals.
Alternatively, you may plan to buy a home after 3 years. Using easily available mutual fund calculators, one can arrive on a SIP amount which when invested periodically (say, for example, ₹10,000/ month) could compound to roughly the amount required to purchase a house after 3 years.
This would help investors plan for their future in a systematic manner, without taking significant risks or being a victim of uncertainty.
This might address the fact that investment in mutual funds is a means to invest better this New Year. Now the next pertinent question-
There has been an incredible rise in the monthly SIPs this year, as more people find investments in mutual funds to be a better investment alternative than asset classes such as real estate, gold, among others.
Reliance Nippon Life Mutual Fund manager, CEO, Sudeep Sikka said:
“There is no doubt that acceptance of mutual funds as an investment vehicle has certainly increased among investors. Further, with typical investment avenues like gold and real estate not having a bright outlook amid declining deposit rates in banks’ fixed deposits, more and more investors are opting and enquiring about mutual funds, which is quite a positive sign for the sector’s growth.”
Aditya Birla Sun Life Mutual Fund, CEO, A Balasubramaniam said:
“The industry is going through a golden phase. Collective efforts by all stakeholders — AMCs (asset management companies), distributors and the regulator, have helped the sector shape and go on a growth path.
However, though the participation is on the rise from across the country, we still have a long way to go.”
Government reforms such as Demonetization, GST, Recapitalisation of banks, housing for all by 2022, among others put India on the world map as a prospective economic superpower and the equity and bond markets have taken this into account and expect to grow exponentially in the medium to long-term.
Investors can ride this rally by investing in mutual funds and benefitting from capital appreciation.
Disclaimer: the views expressed here are those of the author. Mutual funds are subject to market risks. Please read the offer document before investing.