Mutual Funds – Net Brokers

Tips for Smart Investing in Mutual Fund SIPs

Akhil Chugh — Thu, 02 Jan 2025 10:55:15 +0000

Tips for Smart Investing in Mutual Fund SIPs

By Akhil Chugh

Date Jan 05, 2025

SIP – Think of it as your reliable financial companion, offering you access to market-linked returns.

Systematic Investment Plans (SIPs) serve as a pathway to building wealth over the long term through consistent, incremental investments. These plans enable you to steadily accumulate savings in mutual fund schemes, guiding you toward achieving your financial objectives.

In essence, SIPs represent a methodical approach to investing a predetermined sum in any fund or scheme at regular intervals. By navigating through market fluctuations, SIPs ensure that the investment costs average out over time.

Systematic Investing entails:

Committing to a fixed investment amount
Consistently investing over a sustained period
Working towards a specific financial objective

However, maximizing the benefits of SIPs requires strategic planning and thoughtful execution. In this blog, we’ll explore five tips to help you make the most of your SIP investments and achieve your financial goals.

Tips for Smart Investing in Mutual Fund SIPs:

1. Link your SIP to goals:

For any investment to be successful, understanding your financial goal is key. The goals can vary from retirement planning to child education planning.

Goal-based investing is all about identifying your financial goals, setting a timeline for each one of them, and investing for them regularly via SIP to be able to reach them. Mapping out all your needs gives you a clearer picture and the time for which you need to stay invested to achieve each goal. Even the type of risk you should take will be defined by your goals. The importance of goal-based SIP is that it not only gives you a good investment strategy, but also a direction to achieving your dreams and in the process making your future stress-free.

The benefits of SIP can be amplified by aligning your SIPs to your respective financial goals. For example, as you progress with age your risk appetite comes down and so should your equity allocation. At some point, you will find that your SIPs in equity are actually redundant to your asset mix. The answer is to shift from equity SIP to a debt SIP if warrante

2. Start early:

Beginning your investment journey early ensures that you allocate more time to savings and growth. The regularity of investments offered by SIP, coupled with an early start ensures that you generate adequate returns on your investments.

To help put things into perspective, here is a little representation of the impact of delaying investing.

Mr. A & Mr. B are working professionals and are expected to retire at the age of 60. Mr. A starts monthly SIPs of Rs 30,000 in equity mutual funds at the age of 30 years, giving him 30 years to accumulate the desired retirement corpus. On the other hand, Mr. B starts monthly SIPs of Rs 45,000 in equity mutual funds at age of 40 years, leaving him with 20 years of investment horizon to accumulate the corpus.

Let us assume that they both invest in an equity mutual fund with an inflation-adjusted annual return of 12%,

As evident from the above illustration, even though Mr. A and Mr B invested same amount of money over their respective investment horizons but Mr B could not accumulate a corpus anywhere close to Mr. A (Which is >2x) because he started late.

Thus, it is essential to start SIP early to maximize your returns in mutual funds.

3. Top-up your SIP with rising income:

Sticking with the same investment amount while investing for the long term via regular SIPs will provide you with good returns. However, to make sure that you get the best growth from mutual funds increase your SIP amount every year via SIP Top-ups. Just increase it by 5%-10%, based on the increment in your annual income and you can see the huge impact it will have on your total corpus.

Let’s understand it with an illustration.

Suppose, Mr. Suri wants to save money for his retirement in 25 years. He decides to start a SIP in a chosen mutual fund scheme. By investing Rs 50,000 each month and assuming a return of 12% p.a., Mr. Suri can reach a corpus amount of Rs 9.5 crores in 30 years.

However, if Mr. Suri decides to top up his SIP amount by 10% every year, he can increase the accumulated corpus amount to Rs 21.4 crores in the same time period of 25 years. Now, Mr. Suri can afford to spend a more comfortable and luxurious retirement life.

Below is the graphical representation of two strategies:

4. Avoid early withdrawal:

Financial crunch can arise anytime and to meet these unexpected situations you may choose to stop and withdraw your SIP investment. Knowing the volatile nature of the market, if you exit when the market is low, your portfolio value would be less. While systematic withdrawal can be a great tool to supplement your income, avoid using this early in your investment journey. This should be done once you are nearing your financial goals and reaching your retirement age. Moreover, once you choose to take systematic withdrawals, ensure you are only withdrawing the returns part of the investment and the principal portion is intact so that it can keep generating returns for you.

5. Periodic Reviewing & Rebalancing:

For a profitable mutual fund investment, reviewing and rebalancing the mutual fund schemes portfolio at regular intervals is as important as investing in them regularly. So, keep a track of your investments and check the performance of your schemes at least once in 6 months. If you find that the scheme is not performing well for a very long time and is lacking behind in comparison to the peers, you should consider stopping the SIP and switching to a different one. To make sure that you can easily track your investments, opt for online investment portals like Net Brokers.

Net Brokers Takeaways:

In order to get the maximum returns from your SIP, you should start early and invest systematically over long tenure to maximize your returns.
Remain disciplined in your investments and do not get disturbed by volatility. SIPs help you take advantage of market volatility by rupee cost averaging.
Increase your SIPs every year with a rise in your income. This will boost your wealth substantially in the long term.
If you have 5 goals, then don’t try and spread across 25 SIPs. That is just too complex to handle. Stick to 6-8 SIPs at best but ensure that each SIP is specifically tagged to specific goals. It will ensure that the purpose of each SIP is clearly known.

SIP makes money work hard for you but it is in your hands to ensure that SIPs work continuously in your interests and in the interest of your long-term goals.

Remember, patience and discipline are your best allies in the journey of SIP investments.

Get in touch with us today to learn more about how to make your existing SIPs more rewarding.

Download our mutual fund app & start investing for your long-term financial goals.

Happy SIPs!

The post Tips for Smart Investing in Mutual Fund SIPs appeared first on Net Brokers.

Your Ultimate Guide to Selecting the Right Mutual Fund

Akhil Chugh — Fri, 19 Jul 2024 15:14:08 +0000

Your Ultimate Guide to Selecting the Right Mutual Fund

By Akhil Chugh

Date July 21, 2024

Investing in mutual funds can be a smart way to grow your wealth, but with thousands of options available, how do you choose the right one? The process can seem overwhelming, especially if you’re new to investing. Fear not! This guide is designed to simplify the process, providing you with clear, actionable steps to select the mutual fund that best aligns with your financial goals and risk tolerance.

In this ultimate guide, we’ll explore the various types of mutual funds, key factors to consider when making your choice, and some practical tips to help you make informed decisions. Whether you’re a seasoned investor or a beginner, this guide will equip you with the knowledge you need to navigate the mutual fund landscape confidently.

Selecting a mutual funds is a 2-step process:

Selection of the mutual fund category
Selection of the scheme in the chosen category

Factors for selecting the mutual fund category:

1. Investment Objective:

Understand your investment goal before investing. A goal can be short-term like purchasing a car or an international family holiday or it can be long-term like retirement planning or child education / marriage planning. Choose the mutual fund category whose investment strategy align with your goals. Based on your financial goals, you can select across different categories of Mutual Funds – Equity, Debt or Hybrid.

2. Investment Horizon:

Investment horizon is the time frame for which the investors want to invest his money in a mutual fund scheme. It can vary from a week to few years. Different fund categories are suitable for different time horizons. Like equity mutual funds are best if the investment horizon is more than 5 years. Below is the recommended fund categories for different time horizons:

3. Risk appetite:

Every investor has different risk-taking capacity depending on the age, financial goals and personality traits. Investor should invest in those category of mutual funds where risk profile matches their risk appetite. SEBI has mandated for all mutual fund houses to display a riskometer for every scheme – low, moderately low, moderate, moderately high & high.

Below table summarizes the fund categories for different risk profiles:

Factors for selecting the Right Mutual Fund Schemes:

Once the fund category is selected, the next step involves choosing the right mutual fund scheme in that category. Below are few of the parameters to pick the right mutual fund scheme:

1. Fund Performance:

Measure the fund’s performance against the benchmark index. Check the performance for a reasonable time period. This is to ensure that fund investments have gone through multiple market cycles and returns have been consistent. Investors usually look toward 1 year returns and start assuming that the fund is a winner, however, always look towards 3 to 5 years returns to understand how consistent is the performance.

2. Fund Manager experience:

The success of any scheme largely depends on how efficiently the fund manager allocates the fund’s corpus into different assets. Therefore, the performance track record of various funds managed by the Fund manager and his experience is one of the detrimental factors while choosing any mutual fund scheme.

3. Expense ratio

The expense ratio is the fees charged from investors by the fund houses for managing the investments. It is actually the fund manager’s fees for his professional expertise utilized in successfully managing the fund. As an investor, Mutual Fund schemes with lower expense ratios should be preferred, as the percentage may look quite small but it can have a big impact on costs when it is calculated across your total investment portfolio. Normally, the maximum expense ratio varies from 2%-2.25% approximately, so be prepared to choose your fund wisely.

4. Exit load

Exit load is the fee charged by fund houses from investors upon exiting / liquidating the scheme. Exit load will be levied only if the investor withdraws from the mutual scheme before a set limit. It is important to check Exit Load of the mutual fund scheme as you might need money before the investment horizon. Avoid schemes with stringent exit load criteria.

5. Asset Under Management (AUM)

The Net Asset of a mutual fund scheme is a good indicator of the amount of trust and confidence that investors have in the particular scheme. Also, it’s been observed that fund houses deploy their best fund managers for flagship mutual fund schemes with high AUM. AUM is one of the important parameter while zero-in the mutual fund scheme for your investments.

Net Brokers Takeaways:

Selecting the right mutual fund doesn’t have to be a daunting task. By understanding the different types of mutual funds, considering key factors like your investment goals and risk tolerance, you can make informed decisions that align with your financial objectives. However, an experienced finance professional can be invaluable in this process, providing his insights and personalized advice to help you navigate the complexities of the mutual fund market and choose the right fund for your specific needs.

Remember, the goal is to build a diversified portfolio that supports your long-term financial success.

Download our mutual fund app & start investing in Mutual Funds for your long-term financial goals.

Happy investing!

The post Your Ultimate Guide to Selecting the Right Mutual Fund appeared first on Net Brokers.

8 Mistakes To Avoid While Investing In Mutual Funds

Akhil Chugh — Sat, 13 Jul 2024 05:40:07 +0000

8 Mistakes To Avoid While Investing In Mutual Funds

By Akhil Chugh

Date July 14, 2024

“Try to learn from your mistakes – better yet, learn from the mistakes of others!” – Warren Buffet

Most investors are smart people showcasing excellent financial knowledge and expertise when it comes to saving money.

But, when it comes to investing, they act in a different manner. They make irrational decisions like making investments based on hearsay or gut feeling, making investments in haste for year-end tax saving, on friend’s advice, hot news or just to test the waters.

These decisions not only lead to erosion of wealth, but they also infuse a sense of disbelief and mistrust with investing, leading to staying off from investing for an indefinite period.

With so much on the line and a stake in investing, investors cannot afford to go out blindfolded into investing world. A person who only started to learn driving yesterday can’t just become Michael Schumacher tomorrow, right?

The problem is not making mistakes, because mistakes are a part-and-parcel of our life. As an investor, we should be able to understand what the mistakes were, why we made them, when we tend to make them and how to avoid them.

To help you navigate the investment landscape, here are eight common mistakes to avoid while investing in mutual funds.

8 mistakes to avoid while investing in Mutual Funds:

All of us make mistakes. But, some of us have trouble accepting that we have made one. Only when you can accept and learn from these common mistakes, then can you triumph in your investment journey. Learning from your own mistakes is good. It’s even better to learn from the mistakes made by other investors.

1. Investing without financial goals:

Investment in any instrument be it stocks or mutual funds must be made in accordance with the financial goals you need to achieve. But, most of the retail investors in India are guided by the recommendations from their relatives and friends and not by the financial goals, ending up making wrong investment decisions and as a result face monetary loss. So, make sure you make a goal and allocate your finances accordingly.

Having a goal-based investment can help you decide your risk appetite and investment horizon to achieve a pre-defined goal. This process will help give a clear direction to your investments.

Taking assistance from an experienced finance professional is a must. He understands your goals and recommends investments that complement your goals. For example, if you are saving to fund your children’s education and if you have 7-8 years, you can consider building a diversified equity fund portfolio instead of parking your money in debt funds or a fixed deposit.

2. Timing the market:

‘Timing the market’ means buying at lows and selling at highs. Though it appears simple, it is very difficult to implement in the real-world given uncertainty in the market.

As an investor, you might feel that the market is overpriced when it is not. Or you might predict a market crash. However, the fact is that the future is always uncertain. And no wolf of wall street was ever successful in correctly predicting the market.

So don’t put your efforts into trying to figure the right time to invest or withdraw your funds; rather stick to the plan which you drafted and religiously follow it. Have a disciplined investment strategy, like investing in mutual funds via SIPs.

SIP is an instrument that takes the advantage of market highs and lows. The biggest advantage of investing with SIP is that it remains unaffected by your emotions. It also allows investors to follow an investment timeline with systematic and timely investment. It also inculcates investment discipline in investors.

When markets fall investors get more units and when the market rises the number of units purchased gets reduced, thereby helping to average out the investing cost making timing the market irrelevant.

3. Undermining your risk appetite:

Each one of us can take risks depending on our personal financial situation. Don’t take more risk than you can manage; at the same time, don’t shy away from risk. Both of these actions lead to disappointment.

Understanding how much risk you could take; helps you plan your path better and choose routes accordingly. For example, if you are a low-risk investor then midcap or smallcap funds will not suit you. They might generate higher returns, but they will also carry very high risks. Hybrid funds / Debt funds are more suitable for you.

Before investing in any mutual fund, you should always access your risk tolerance to match your risk profile with the fund’s risk profile. Use the fund’s riskometer to understand the fund’s risk profile.

To know your risk profile, download our mutual fund app & answer few basic questions!

4. Investing in too many or too few funds:

If there is one phrase that all investors should always remember no matter where they are in their investment journey it is that ‘Putting All Your Eggs in One Basket’ is harmful. In the investing world, this saying is like one of the Ten Commandments. It simply means that you should avoid putting all your money in a single basket because this makes you overexposed to risks. For instance, consider the situation where an investor has dumped all his/her savings in high-risk equity funds. Now if the markets enter a slippery slope, the chances of losses will amplify and the investor may even end up suffering significant losses. Now had the investments would have been spread across different asset classes, the non-equity component of the portfolio would have acted as a shock absorber and diminished the impact. Thus, diversification is essential to reduce portfolio risk.

Alternately, there are many investors who tend to over diversify their portfolio and even that can be a recipe for disaster. Managing too many funds and related SIPs and keeping a tab on the performances of all funds can prove to be a nightmare and you may end up having funds in your portfolio that may not be suitable for your goals and your risk appetite.

5. Frequent reshuffling of the portfolio:

Following the herd is something very common in the investment world. By looking at the returns or a promising headline, makes a lot of investors sway towards doing the same thing. Many investors make the mistake of falling into this trap too often. Based on the predictions based on headlines and by following the herd, they try to reshuffle their investment portfolio too often, attracting exit loads, which eventually eat into your overall returns.

Frequent churning of the portfolio also hampers the growth potential of investments. This is because some funds, like equity funds, perform well only in the long run. Frequent churning would make you lose out on time and bring you back to where you started. So, it will take you more time to realize your goals, and also, you will miss out on various opportunities that happened during the time frame.

6. Overlooking tax implications

Ignoring the tax implications of mutual fund investments can lead to unexpected tax liabilities and reduce your overall returns. It is always recommended to understand the tax treatment of different types of mutual funds. For instance, equity funds held for more than one year qualify for long-term capital gains tax, usually lower than short-term rates. Similarly, gains from debt funds with an equity exposure of 35% or less are considered short-term capital gains and are added to your taxable income, taxed at your slab rate. . However, debt funds with more than 35% equity exposure and a holding period of over 3 years qualify for indexation benefits. Plan your investments with tax efficiency in mind.

7. Not reviewing investments periodically:

Just making a mutual fund investment is not enough, its performance should also be reviewed periodically. It is always recommended to review the investments at regular intervals to take timely decisions regarding increasing the investment or exiting it. Not doing so is a common investment mistake observed among investors. Investors often forget or act lazy in doing such reviews and fall prey to market crashes, incurring heavy losses. Thus, the regular review helps an investor to take timely investment action like replacing poor-performing funds with better quality funds.

8. Lack of research:

There are hundreds of schemes available in the market. Before choosing any mutual fund to attain your financial goals, it is imperative to do research about the fund.

For example, it may not be a good idea to go by the ranking of a mutual fund scheme before deciding to invest in it. Investment is for the future, while the rating is based on past performance. It is important to know their expense ratio, asset size, the company and the fund manager, as well as their past performance. If you can do it on your own, by all means, do it. If you feel the need for a professional assistance from financial professional, go for it. We, at Net Brokers, with our strong research team can give you the edge in terms of selecting schemes suitable for you.

Net Brokers Takeaways:

Goal-based investing helps you define the risks you can take and goals act as the signpost to stay disciplined and on track with your investments. To understand more about goal-based investing, click here.
Gather all the information and research to ensure that the fund is right for you before you start investing. Getting carried away by the buzz in the market can prove to be a costly mistake in the long run.
Many investors tend to over-diversify their portfolios, which can also lead to problems. Managing too many funds and tracking the performance of all of them can become overwhelming and counterproductive.
Do consider the impact of inflation on the returns of your fund because parking your money in an investment that is not able to beat inflation defeats the purpose of investing.
Regular reviewing with the right asset allocation can help you reach your financial goals sooner.

Investing is an art. One should not treat it as a DIY thing and seek the advice of a qualified financial professional to chalk out a strategy that will help one achieve one’s goals with minimal risk.

Get in touch with us today for assistance!

Download our mutual fund app & get started with your investment journey.

Happy investing.

The post 8 Mistakes To Avoid While Investing In Mutual Funds appeared first on Net Brokers.

Tips to Make Your SIP Rewarding

Akhil Chugh — Fri, 10 May 2024 14:53:36 +0000

Tips to Make Your SIP Rewarding

By Akhil Chugh

Date May 12, 2024

SIP – Think of it as your reliable financial companion, offering you access to market-linked returns.

Systematic Investing entails:

Committing to a fixed investment amount
Consistently investing over a sustained period
Working towards a specific financial objective

Tips to make your SIP more effective:

Let’s learn about key tips to turbocharge your SIP returns:

1. Link your SIP to goals:

For any investment to be successful, understanding your financial goal is key. The goals can vary from retirement planning to child education planning.

2. Start early:

To help put things into perspective, here is a little representation of the impact of delaying investing.

Let us assume that they both invest in an equity mutual fund with an inflation-adjusted annual return of 12%,

Thus, it is essential to start SIP early to maximize your returns in mutual funds.

3. Top-up your SIP with rising income:

Let’s understand it with an illustration.

Suppose, Karan wants to save money for his retirement in 30 years. He decides to start a SIP in a chosen mutual fund scheme. By investing Rs 50,000 each month and assuming a return of 12% p.a., Karan can reach a corpus amount of Rs 17.6 crores in 30 years.

However, if Karan decides to top up his SIP amount by Rs 5000 every year, he can increase the accumulated corpus amount to Rs 56.4 crores in the same time period of 30 years. Now, Karan can afford to spend a more comfortable and luxurious retirement life.

Below is the graphical representation of two strategies:

4. Avoid early withdrawal:

5. Periodic Reviewing & Rebalancing:

Net Brokers Takeaways:

In order to get the maximum returns from your SIP, you should start early and invest systematically over long tenure to maximize your returns.
Remain disciplined in your investments and do not get disturbed by volatility. SIPs help you take advantage of market volatility by rupee cost averaging.
Increase your SIPs every year with a rise in your income. This will boost your wealth substantially in the long term.
If you have 5 goals, then don’t try and spread across 25 SIPs. That is just too complex to handle. Stick to 6-8 SIPs at best but ensure that each SIP is specifically tagged to specific goals. It will ensure that the purpose of each SIP is clearly known.

SIP makes money work hard for you but it is in your hands to ensure that SIPs work continuously in your interests and in the interest of your long-term goals.

Get in touch with us today to learn more about how to make your existing SIPs more rewarding.

Download our mutual fund app & start investing for your long-term financial goals.

Happy SIPs!

The post Tips to Make Your SIP Rewarding appeared first on Net Brokers.

7 Things to Consider When Opting for SIPs

Akhil Chugh — Sat, 02 Sep 2023 07:41:27 +0000

7 Things to Consider When Opting for SIPs

By Akhil Chugh

Date September 3rd, 2023

In order to create wealth, one has to do more than just park their money in a savings account or Fixed Deposits in Banks. In order to generate wealth, you need to invest in instruments that will offer you inflation-beating returns like mutual funds.

For investors with a small risk appetite, starting a SIP is one of the best investment decisions because it encourages financial discipline and regularity in investment giving the benefits of rupee cost averaging & compounding in the long run.

Systematic Investment Plan, commonly referred to as a SIP is a disciplined form of investing that allows you to invest money into a mutual fund scheme periodically, such as daily, weekly, monthly, quarterly, or half-yearly, etc.

In this case, a fixed amount gets deducted automatically from your bank account and is invested into the mutual fund schemes you have chosen every month on a predetermined date.

Let us look at 7 key factors to consider when investing through SIPs in mutual funds.

Key Factors to Consider When Investing Through SIPs:

1. Defining time-frame for your financial goals:

When planning for your financial goals, adopt a systematic approach. Categorize your SIP investments based on time-frames such as:

Short-term goals: Goals with tenure of less than 3 years like international travel, and buying a car.

Medium-term goal: Goals with tenure of 3-5 years like buying a house.

Long-term goals: Goals with more than 5 years of tenure like child education planning and retirement planning.

Setting a deadline for your financial goals can help you to choose the right mix of asset allocation and the SIP amount you need to reach the target within the desired time frame.

2. Determine the amount to invest:

Usually, most mutual fund schemes via SIP allow you to invest with a minimum of Rs 500. But to know your SIP amount needed for your financial goals, estimate the future cost of your goal based on the tenure of your goal and the probable returns you are expecting from the investments.

Understanding your cash flows, duration and expected returns can help you determine the right SIP amounts to start your investments to attain your financial goals.

3. Risk Tolerance:

Your risk appetite is the amount of risk you’re prepared to take when investing in a specific asset class. Every investor’s risk appetite is uniquely different and is influenced by several factors such as disposable income, investment horizon, and, most importantly, age and immediate financial needs.

If you are a young investor, you may have a higher risk appetite than investors in their middle or near-retirement age. Similarly, liabilities such as expenses, debts, number of dependents, etc., can also influence your risk appetite. Understanding the kind of investor, you are and the amount of risk you can tolerate can help you pick the right mutual fund schemes & asset class to invest in. Besides, mutual funds offer a plethora of schemes with different risk profiles and investing in multiple funds can help spread the risk.

4. Topping up your SIP with rising income:

SIP Top-ups is an option available to SIP investors wherein they can automatically increase their SIP contributions in the fund they are already investing in. As investors’ income grows with time, they are more likely to have more sum available for investments. SIP Top-ups allow these investors to increase the investment amount periodically.

Top-up SIP can help your investments match your income, beat inflation and reach your goals sooner with lesser operational hassles. Thus, it helps you stay flexible and regular with your investments at the same time.

5. Goal-based SIPs:

SIPs work best when they are assigned to specific goals. Goals can be long term, medium term and short term. This helps you monitor your goals more effectively across milestones and take decisions on rebalancing if required.

You may have multiple objectives to accomplish, like saving for a vacation, paying for your child’s education, saving for retirement and so on. Having separate SIPs for every goal can help you gauge your investment smartly. Find the appropriate asset allocation that is suitable for a particular goal and look at investing in the correct category of mutual funds in line with your timeline.

6. Selecting the right fund:

Here are a few pointers to select funds for your SIP.

Look at the pedigree and the AUM of the fund. This gives you assurance that the funds are here for the long term.
Secondly, the fund management team cannot keep changing too often. That is a sign of an unstable investment philosophy.
Past returns do matter. More than absolute returns focus on the consistency of returns. Such funds are more predictable.

7. Review & rebalance the portfolio regularly:

A periodic review and rebalancing of your SIP mutual fund portfolio are essential. Doing so once in three or four years would help to remove non-performers from your portfolio and to boost your portfolio returns.

Key Takeaways from Net Brokers:

SIP is a time-tested investment strategy to create wealth in the long run for investors. SIP makes the market timing irrelevant and ensures you stay on the right track for your long-term financial goals.
Do not expect returns in the short run. SIP can really make the power of compounding work in your favor in the long run. The longer your SIP sustains the more rupee cost averaging works in your favor to reduce your cost and enhance your returns.
To ensure good returns and the safety of your investments, it is essential to choose the right mutual fund. Contact the expert team of Net Brokers today to guide you in choosing the mutual fund aligned with your financial goal & risk appetite.

Keeping the above points in mind, start investing systematically through Systematic Investment Plans (SIPs) in mutual funds and move closer to achieving your dreams.

For more information, get in touch with us today! Download our mutual fund app & start investing for your long-term financial goals.

Happy SIPs!

The post 7 Things to Consider When Opting for SIPs appeared first on Net Brokers.

Why Is ELSS Both A Wealth Creation & Tax Saving Tool?

Akhil Chugh — Sun, 25 Jun 2023 03:10:00 +0000

Why is ELSS Both a Wealth Creation & Tax Saving Tool?

By Akhil Chugh

Date June 25, 2023

While there are multiple tax saving options available in India, ELSS or Equity Linked Savings Scheme has become the most popular as:

ELSS provides higher returns compared to PPF, Tax Saving Bank FDs etc
ELSS has the shortest lock-in period of 3 years amongst other traditional tax saving options.

Let’s understand what are ELSS Mutual Funds and how investing in ELSS provides the dual benefits of wealth creation & tax saving.

What are ELSS Funds:

ELSS funds are the tax-saving mutual funds that invest the major portion of the investment corpus in equity and equity-related instruments.

ELSS funds are also called tax-saving schemes as they offer tax exemption of up to Rs 1.5 lakh from your annual taxable income under Section 80C of the Income Tax Act.

Benefits of ELSS:

1. Shortest Lock-in period:

Compared to other popular tax saving options like Tax Saving FD or PPF, ELSS Mutual Funds have the shortest lock-in period of three years only.

2. Inculcates Financial Discipline:

There are two modes of investing in ELSS – Lumpsum or Systematic Investment Plan (SIP). SIP enables you to invest a predetermined amount at regular frequencies regardless of the market condition to accumulate the desired corpus over a longer time frame. This periodic mode of investment inculcates the habit of saving & investing on a regular basis. In addition, SIP provides the benefits of compounding along with rupee cost averaging to beat market volatility.

3. Wealth Creation Tool:

Equities as an asset class beats fixed income instruments and inflation by a wide margin over the long term. As ELSS Mutual Funds invest 80% of their corpus in equities, they have the potential to deliver high inflation-beating returns. Individuals aiming to achieve long-term financial goals (buying a dream home, children’s education, their wedding expenses, retirement needs, etc.) and have a longer investment time horizon may consider ELSS funds for tax-saving and wealth creation.

4. Tax-saving potential:

ELSS provides tax benefits under Section 80C of the Income Tax Act up to Rs. 1.5 Lakh every year. You need to calculate the amount you would be investing in ELSS funds along with other options like FD, NPS, PPF, EPF, NCS, ULIP, etc. if any because you cannot exceed the total amount of Rs 1.5 lakh to claim for tax exemption under Section 80C.

Note: The gains you make from equities if redeemed after 1 year of investment are considered as long-term capital gains (LTCG). LTCG on equities of up to Rs 1 lakh in a financial year is tax-free, whereas LTCG exceeding Rs 1 lakh in a financial year is taxable @ 10%.

Illustration:

Yash has a taxable income of INR 12 lakh. This puts him in the 30% tax bracket. He decides to invest INR 1.5 lakh in an ELSS fund. This reduces his taxable income to INR 10.5 lakh.
Yash earns a capital gain of INR 1,10,000 on redemption of ELSS. This attracts a 10% tax on the INR 10,000 while the remaining INR 1 lakh remains exempt. Tax payable will be INR 1,000 (plus cess).

How You can get a Tax Benefit from ELSS:

A taxpayer can claim up to ₹1,50,000 tax benefit under section 80C of the Income Tax Act, 1961, which leads upto Rs 46,800 in Tax Savings as shown in the below table:

As the return from ELSS is considered as Long-Term Capital Gain, the capital gain from ELSS will be taxed at 10%. If the capital gain is under ₹1 lakh then it is completely exempted from tax.

Net Brokers Takeaways

Net Brokers believes that ELSS is one of the best tax-saving tools available to an investor to get the twin benefit of tax savings and an opportunity to harness the potential upside of investing in the equity market.
One should carefully scrutinize various ELSS schemes before making investments. Gauge your risk appetite and the time horizon for which you can stay invested to choose the fund that best suits your investment goals.
Taxation plays an integral role in overall financial planning; hence Net Brokers strongly suggest investors plan their investments in ELSS systematically at the starting of the year and not towards the end of the fiscal. One can start looking at investing in an ELSS scheme through SIP to benefit from rupee cost averaging to beat market volatility and avail tax benefit up to Rs.1.5 lakhs for a year as per the current tax laws.
Equity markets can be volatile in the short term and therefore, investors should be patient and have a sufficiently long investment horizon for Equity Linked Savings Schemes (ELSS). Though the lock-in period for ELSS investments is 3 years, an investor should be willing to stay invested for a minimum horizon of 7-10 years to earn higher returns.

Equity Linked Savings Schemes are one of the best Section 80C investment options to avail tax deduction. Invest smart with Net Brokers Mutual Fund App in the right ELSS fund and start a monthly SIP in an ELSS fund to get triple benefits – tax savings, systematic investing, and an opportunity to harness the potential upside of investing in the equity market.

For more information, get in touch with us today! Download our mutual fund app & start investing in an ELSS fund to save tax and grow your capital significantly over the long term.

Happy investing!

The post Why Is ELSS Both A Wealth Creation & Tax Saving Tool? appeared first on Net Brokers.

5 Tips to Make Your SIP Rewarding

Akhil Chugh — Fri, 19 May 2023 11:13:45 +0000

5 Tips to Make Your SIP Rewarding

By Akhil Chugh

Date May 21, 2023

SIP – Think of it as your trusty old piggy bank giving you access to market-linked returns.

Systematic Investment Plans, called SIPs, help you create wealth over the long term through small and periodic investments. By making small, disciplined savings in mutual fund schemes over a period of time, these plans bring you closer to realising your financial goals.

Simply put, a SIP is a vehicle or an approach to investing a fixed amount in any fund or scheme at regular intervals. By investing across market ups and downs, SIP ensures that the cost of investment averages out over a period of time.

Systematic Investing means:

Investing a fixed amount
Investing for a continuous period
Investing for a defined goal

Why opt for SIP?

SIP offers a host of advantages as listed in the below chart making it the smart way of investing in mutual funds.

Tips to make your SIP more effective:

Let’s learn about 5 key tips to turbocharge your SIP returns:

1. Link your SIP to goals:

For any investment to be successful, understanding your financial goal is key. The goals can vary from retirement planning to child education planning.

2. Start early:

To help put things into perspective, here is a little representation of the impact of delaying investing.

Mr. Dheeraj & Mr. Neeraj are working professionals and are expected to retire at the age of 60. Mr. Dheeraj starts monthly SIPs of Rs 50,000 in equity mutual funds at the age of 25 years, giving him 35 years to accumulate the desired retirement corpus. On the other hand, Mr. Neeraj starts monthly SIPs of Rs 1,00,000 in equity mutual funds at age of 40 years, leaving him with 20 years of investment horizon to accumulate the corpus.

Let us assume that they both invest in an equity mutual fund with an inflation-adjusted annual return of 12%,

As evident from the above illustration, even though Mr. Neeraj invested (Total investments: Rs 2.4 crores) more than Mr. Dheeraj (Total investments: Rs 2.1 crores), he could not accumulate a corpus anywhere close to Mr. Dheeraj because he started late.

Thus, it is essential to start SIP early to maximize your returns in mutual funds.

3. Top-up your SIP with rising income:

Let’s understand it with an illustration.

Below is the graphical representation of two strategies:

4. Avoid early withdrawal:

5. Periodic Reviewing & Rebalancing:

Net Brokers Takeaways:

In order to get the maximum returns from your SIP, you should start early and invest systematically over long tenure to maximize your returns.
Remain disciplined in your investments and do not get disturbed by volatility. SIPs help you take advantage of market volatility by rupee cost averaging.
Increase your SIPs every year with a rise in your income. This will boost your wealth substantially in the long term.
If you have 5 goals, then don’t try and spread across 25 SIPs. That is just too complex to handle. Stick to 6-8 SIPs at best but ensure that each SIP is specifically tagged to specific goals. It will ensure that the purpose of each SIP is clearly known.

SIP makes money work hard for you but it is in your hands to ensure that SIPs work continuously in your interests and in the interest of your long-term goals.

Get in touch with us today to learn more about how to make your existing SIPs more rewarding.

Download our mutual fund app & start investing for your long-term financial goals.

Happy SIPs!

The post 5 Tips to Make Your SIP Rewarding appeared first on Net Brokers.

Invest in Mid Cap Funds

Akhil Chugh — Sat, 25 Feb 2023 07:01:38 +0000

Invest in Mid Cap Funds

By Akhil Chugh

Date February 26, 2023

Equity mutual funds can be classified into Large Cap, Mid Cap, and Small Cap funds – based on the market capitalisation of the companies they invest in. In this blog, we’ll take a look at one such mutual fund known as Mid Cap funds.

What are Mid Cap Funds?

A Mid Cap fund can be an open-ended/ closed-ended equity scheme that predominantly invests in mid cap stocks. Mid-caps are the 101st to the 250th company listed in terms of market capitalization. Mid Cap funds invest in mid-sized companies that fall between Rs.500 crore to Rs.10,000 crore in terms of market capitalization. This makes it less volatile in comparison to Small Cap funds.

A Mid Cap mutual fund must have at least 65% of its total assets invested in equity and equity-related instruments of mid cap companies.

Whether or not you invest in Mid Cap funds depends on your age, risk appetite, financial goals and portfolio allocation. There are certain benefits or pros of investing in Mid Cap funds as mentioned below:

Mid Cap funds usually outperform Large Cap funds in the long run
Mid Cap funds are less risky than Small Cap funds
Mid Cap funds offer more liquidity than Small Cap funds
Mid Cap funds invest in companies that are reasonably stable

Who Should Invest in Mid Cap Funds?

Mid-cap stocks have a reputation of being usually under-researched and under-valued and if researched well you may find stocks with the potential for growth.

Investing in Mid Cap funds is not recommended for new or first-time investors.

If an investor has high risk appetite and can commit to an investment horizon of about 7 to 10 years, this may turn out to be a good opportunity to create wealth. As an investor, if you are willing to take greater risks of exposure to volatile market conditions than as compared to a Large Cap fund, you may invest in this fund.

An investor can also look at investing in Mid Cap funds to diversify their portfolio, if the rest of the portfolio is low-risk and low-return.

Factors to Consider Before Investing in Mid Cap Funds:

Past Performance of Funds:

Before selecting a Mid Cap fund, it’s important to evaluate its performance during all phases of the market cycle. A good fund will outperform its peers not only during the bull phase but also during a bear phase. Since the mid-cap companies are relatively new or not that extensively researched, it takes a keen eye to spot the ones with potential. Mid Cap funds with good rating and consistent performance should be opted for investment.

Investment Horizon:

To gain from Mid Cap funds, an investor must be willing to give his investments a time period of at least seven to 10 years. Equity investments are volatile in the short run and make more sense from an investing point of view to hold for a longer period of time.

Age Factor:

The compounding benefits of Mid Cap equity funds can only be experienced with time and as a young investor with a good number of years left for retirement, you will have the advantage of age on your end. For an investor who is nearing retirement or is already retired, investing in balanced funds would be a much better option. Age is, therefore, an important factor for consideration while investing.

Quality of Fund House:

As we know, mid-cap stocks are under-researched stock so while choosing the fund house it must fulfil certain criteria like an experienced in-house research team that has good coverage and techniques to manage risk, etc. The performance of the fund during both the good as well as the bad cycles must be taken into consideration.

Risk Appetite:

The risk quotient of an equity fund varies, unlike its debt counterparts. Even within equity funds, Mid Cap and Small Cap funds are the riskiest when compared to Balanced funds. If your risk tolerance is high, you may think of investing in Mid Cap funds. Make sure that the objectives and risk profile of the Mid Cap fund is aligned with your individual objectives.

Key Takeaways from Net Brokers:

Net Brokers believe that there is value in diversifying your portfolio away from pure large caps to include mid-caps. They have added value in return and risk terms over the longer run.
Investors can look at adding Mid Cap funds to their portfolio for diversification and for return enhancement, although it can be limited to a certain portion of the portfolio only.
Mid Cap Funds are suitable for investors who have a high-risk appetite and an investment horizon of at least 7 years or more.
Finally, when you invest prefer the SIP mode to reduce the impact of volatility and benefit from the power of compounding.

Net Brokers believes that investing in Mid Cap funds is a smart way to park your funds for your long-term financial goals. Mid Cap funds are ideal for investors who want capital appreciation and wealth building, and are ready to take a measured risk in companies that have a potentially high growth trajectory.

Historical data suggests that no particular market cap can be an outperformer every year. Hence, diversification across market cap viz. large-cap, mid-cap, and small-cap is necessary. This will help lower the impact of volatility on your portfolio and thereby earn better risk-adjusted returns.

For more information, get in touch with us today.

Download our mutual fund app & start investing for your long-term financial goals.

Happy investing.

The post Invest in Mid Cap Funds appeared first on Net Brokers.

5 Things to Consider Before Choosing a Mutual Fund

Akhil Chugh — Fri, 11 Feb 2022 07:57:51 +0000

5 Things to Consider Before Choosing a Mutual Fund

By Akhil Chugh

Date February 13, 2022

Mutual funds have been gaining a lot of popularity in the recent past as an effective investment product. There is plethora of mutual fund schemes available in the market seeking different investment objectives with varying risk profiles. But having multiple options is not favorable every time. Studies have shown that the best decisions are made when there are fewer options. The paradox of choice is what supermarkets thrive on. They give you so many options to pick from that you end up buying more than what you actually need–often to try things out.

On a similar line, the mutual fund investor is also spoilt for choice given various mutual fund schemes floating in the market. But when it comes to mutual fund investments, an investor cannot afford to “try” funds out. There is no room for errors here as it is your hard-earned money that you are putting into a fund, which is why picking the right mutual fund is of utmost importance to achieve your financial goals. Here, seeking financial help from professional team of Net Brokers can make a big difference to your investment journey.

You can either invest in mutual funds through a systematic investment plan (SIP) that requires the investor to invest periodically in fixed intervals at a pre-determined date or via a one-time investment (Lumpsum). While opening a mutual fund account is seamless and convenient given that online platforms such as Net Brokers App help even first-time investors complete the registration process within just a few minutes and in a completely paperless manner, it’s important to know how to pick the right mutual fund to invest in to achieve your financial goals.

Things to Consider Before Choosing a Mutual Fund

How do you pick the right restaurant when you go out for a dinner? Usually, you’d consider which cuisine you feel like eating. Then you’d consider the budget, the reviews people have given for the restaurant or your previous experience with it. Keeping these in mind, you’d probably choose one restaurant.

Choosing mutual funds to invest in can be approached a little like that.

1. Know your financial goal:

Before picking a mutual fund, ask yourself an important question: What exactly are you saving and investing for? To make a right investment decision it is very crucial to link it with a goal (Goal-based investing). This goal could be the purchase of a new luxury car or house, saving for your child’s education or a vacation abroad. Mapping out all your needs gives you a clearer picture and the time for which you need to stay invested to achieve each goal.

Depending on the goal, one will able to determine the right mutual fund category – debt mutual fund, equity mutual fund, or hybrid mutual fund.

For short-term goals, an investor should opt for debt mutual funds.
For medium-term goal like child education, an investor can begin investing in an equity fund and gradually shift towards debt mutual funds as he/she come nearer to his/her goals.
For long-term goals, an investor can consider equity funds because they are best placed to give you inflation-beating higher returns in the long run.

There is a plethora of schemes in the market, each with a unique investment objective. Invest in a mutual fund scheme which you share a common investment objective with.

2. Do your research:

When it comes to choosing the right mutual fund, there are various parameters to look into – return expectations, risk level, investment horizon, etc., and the quality of the mutual funds can be judged based on past performance, assets under management (AUM), fund manager’s experience & track record, and more. It is crucial to conduct a certain degree of preliminary research before beginning your investment journey as the research will help you make a more informed choice and enable you to get a clear idea of the “what is what” in the mutual fund space.

Few of the parameters to consider are:

a. Performance against benchmarks

Every mutual fund publishes data about the benchmark index against which it is pitted. For example, the BSE Sensex or NIFTY index is the benchmark for some equity funds. Look at the benchmarks of funds and how they have performed in its comparison.

b. Performance within Peers

Analyse your chosen funds’ performance against other similar funds. You can look at their historical returns, ratios, debt profile, management and more to make your decision.

c. Consistency of Performance

Look at the performance of your chosen mutual fund over the period of time.

d. Exit Loads

These are charges that the fund house imposes on you while redeeming from the fund.

e. Scheme’s AUM

Asset Under Management (AUM) is the total value of all the assets managed by the scheme. This can give you an idea about the size of the fund house.

f. Fund Managers’ Past Performance and Experience

You can look at the fund manager’s profile and past and present performance by looking into the performance of the schemes they have managed in the past and are managing currently.

Contact Net Brokers to help you choose the right mutual fund to chart your mutual fund investment journey.

3. Know the risk profile:

The very first thing for any investor to do before making any investment decision is to know the risk involved with an investment. An individual’s risk appetite might play an essential role in deciding which type of mutual fund is more suitable for you. But it is equally important to understand the risks that come with each mutual fund and whether it aligns with your risk appetite.

For example, equity mutual funds come with a higher degree of risk and the mutual fund portfolio may see some ups and downs in the short term. But the returns from equity mutual funds are often higher as compared to other type of funds, making them suitable for moderate to aggressive investors who are willing to go with the “high risk high-reward approach”.

On the other hand, debt mutual funds involve lesser risk and are more stable, but the returns are usually lower than equity mutual funds and are often ideal for conservative investors.

Risk-adjusted measures such as Sharpe ratio, information ratio is some of the important performance metrics to evaluate the relative performance of a scheme versus its peers and the benchmark.

4. Know the taxation impact:

Tax consideration is something that investors must not overlook.

Tax on equity mutual funds: The returns from equity mutual funds in India are taxed based on the holding period and the applicable tax rate. Mutual funds are often efficient in terms of post-tax returns. For instance, long-term capital gains (12 months and above) are taxed at 10% over and above the exemption limit of INR 1 lakh while short-term capital gains (less than 12 months) are taxed at a rate of 15%.

Tax on debt mutual funds: The minimum holding period for short term capital gains in debt funds is 3 years. Short term capital gains (if the units are sold before three years) in debt mutual funds are taxed as per applicable tax rate of the investor. Therefore, if your tax rate is 30% then short term capital gains tax on debt fund is 30% + 4% cess. Long term capital gains of debt fund are taxed at 20% with indexation.

There are also type of equity mutual funds – ELSS (equity linked saving schemes) which are tax-saving mutual funds that invest the major portion of the investment corpus in equity and equity-related instruments. ELSS funds are also called tax-saving schemes as they offer tax exemption of up to Rs 1.5 lakh from your annual taxable income under Section 80C of the Income Tax Act.

5. Seek professional help:

Finally, as the last step in your investment journey, you should always seek advice from an experienced finance professional to help you make the right choice. Contact Net Brokers to help you choose the right mutual fund aligned to your investment objective and investment horizon.

Keep these 5 things in mind to become a successful mutual fund investor and reap exceptional benefits from mutual fund investments. You can also be a successful investor with the right approach and discipline. If you seeking professional guidance to start your mutual fund investment journey, connect with us & download our mutual fund app today.

Happy Investing!

The post 5 Things to Consider Before Choosing a Mutual Fund appeared first on Net Brokers.

Understanding Goal-Based Investing

Akhil Chugh — Sat, 22 Jan 2022 08:21:43 +0000

Understanding Goal-Based Investing

By Akhil Chugh

Date January 23, 2022

Invest money to have the right amount of funds at the time of “need.”

Here, the “need” is the financial goal.

From our childhood days, we have been taught that goal setting is fundamental to our long-term success. After all, it is difficult to get to the desired destination without clearly defining the destination. But once you realize what is important to you, the goals set by you will help you remain determined to achieve them.

Like all other aspects of life, this applies to our finances as well. And this is where the concept of investing based on your financial goals or goal-based investing comes in.

Let’s understand goal-based investing in detail.

What is Goal-based investing?

Before you start a new investment, ask yourself an important question: What exactly are you saving and investing for?

This is a serious moment of introspection! In order to invest for the future, you are cutting back on spending your wealth now. There must be some future purpose for this sacrifice – a future goal whose present value and importance outweigh the pleasure of today’s spending.

Goal-based investing is not just “another fancy way” of saving money. It focuses on investment from a more goal-oriented outlook. Goal-based investing is more like a philosophy that can help in identifying, quantifying, and designing an action plan for achieving various financial goals. The idea is to achieve a goal instead of chasing returns from financial investments. A financial goal could be buying a house, foreign tour, higher education, marriage expenses, setting up a retirement corpus, etc.

Goal-based investing is all about identifying your financial goals, setting a timeline for each one of them, and investing for them regularly to be able to reach them. Mapping out all your needs gives you a clearer picture and the time for which you need to stay invested to achieve each goal. Even the type of risk you should take will be defined by your goals. The importance of goal-based investing is that it not only gives you a good investment strategy, but also a direction to achieving your dreams and in the process making your future stress-free.

How Goal-Based Investing Works?

To achieve your goals, you must climb the ladder step by step. Here is a comprehensive step by step process to get you started with goal-based investing to achieve your goals:

1. Identification of financial goals:

“Goals” are a personal budgeting mechanism that has been around for hundreds of years! Remember your grandmother’s old system of separating money into tin cans – one for clothes, the other for groceries and the other for buying gifts? That’s the exact same rationale behind goal-based investing. By separating your savings into buckets for clearly defined future objectives, you’ll stay disciplined and will be reaping multiple benefits in the long run.

Investors should start by identifying their financial goals and the time available to reach that goal. When you allocate your assets based on your financial goals, you have a clear, well-defined, and realistic plan to achieve success.

Financial goals are often categorized as follows:

Short-term financial goals – These are goals you want to achieve within a year. For example, going on a trip abroad

Medium-term financial goals – These are goals with a time between one and five years. For example, buying a car

Long-term financial goals – These are goals you wish to achieve beyond five years. For example, child education and retirement.

2. Calculate your appetite to save and invest:

Once you identified and quantified your goals and figured out the investment horizon, it is time to ascertain how much you can save for investment from your monthly income. You must account for an emergency fund with at least 6 times of monthly income in liquid funds that is able to meet your expenses in case of any unexpected development.

For instance, let’s assume you want to plan higher education for your child 10 years away. Currently, it costs Rs. 50 lakhs. When you plan for it, you will calculate how much it will cost in the future after factoring in the inflation. So, assuming an average inflation rate of 8% in education, it will cost nearly Rs. 1.1 crore in 10 years. Now you know how much money you will need for this goal. So you can download the Net Brokers app and use the Child Education calculator to calculate the required SIP amount that needs to be invested in mutual funds to accumulate the required corpus assuming a certain annual rate of return.

3. Assess your risk appetite:

Every investment has risks of its own. It is essential to know what your risk appetite is before investing. An ideal investment portfolio should be aligned to your financial goals based on your risk appetite and time horizon.

4. Pick an ideal investment instrument:

When you know the amount, you will need for a goal and know the time you have to accumulate that corpus you can effectively build your investment strategy. You can pick from asset classes like equity, debt, gold, etc., as per your investment horizon, risk appetite and financial goals.

For instance, if you have short-term goals like international travel, kid’s school fees, etc., your focus will be on investing the money in safe assets and getting some growth on them. And hence you will go for Debt Funds or even Fixed Deposits.

On the other hand, for your medium-term goals (3-5 years away) like buying a car, you can have a mix of Equity and Debt. That’s because you have a slightly longer investment horizon, and if there is some interim volatility or a fall, you can live with it. So, Hybrid Funds become the right product for you.

And on the other hand, are long-term goals for which you can pick pure equity funds and focus only on growing your money.

Consult a financial expert at Net Brokers to know about the amount of required investment and the right asset class to reach your desired goals!

5. Review & rebalance your portfolio:

Your goals might keep changing over time depending on the situation you are in. Therefore, it is important to keep reviewing your portfolio and track where you stand financially. This will not only help you plan ahead for the future but will also facilitate in improving your portfolio’s financial performance.

Why To Opt for Goal-Based Investing?

Goal-based investing is an approach to investing that is linked to your financial goals. It maps your savings and investments to a fixed goal and is aimed at bringing discipline to your investing method. Some of the benefits of goal-based investing are:

1. Helps to identify the required investment amount to achieve your financial goals:

When you do goal-based investing, you will list down the goal you want to achieve, by when you want to achieve it, and the money you will need for it. And while you do it, you will consider the current cost of achieving that goal and calculate the future cost based on the expected inflation.

2. Helps you choose the right investment product:

Knowing your requirements gives you the headway in determining the life cover needed, what allocation of funds needs to be made in mutual funds, and the amount you would need to invest to ensure financial freedom post-retirement. This will enable you to make the right investment decisions rather than following the herd mentality and investing in a random manner with no clear objective.

3. Helps to attain portfolio diversification:

The primary objective of investing is to earn higher returns. When you match each rupee of your investment to a financial goal, you are able to earn better returns. In most likelihood, you will include different investment products to meet various objectives. This allows you to diversify your portfolio thereby reducing your risks while being beneficial in wealth creation over the long term.

4. Helps to avoid debt trap:

If you do not clearly define your goals and do not invest in them, the chances are that you will not have enough money when the time comes. In such a situation, you might be forced to take a loan. The loan will help you achieve the goal at that point. However, you can end up in a debt trap.

Therefore, it is essential to stay clear of taking loans as much as possible. Take the goal-based investing approach and you will never need to take a loan in desperation.

5. Inculcates fiscal discipline in investors:

Investing without goals is a less disciplined way of investing. Many investors who do not have a goal in mind eventually stop investing due to some distraction or random reason.

But if you have specific goals to achieve, you are more likely to stay the course. Because you know that you will never reach your goal if you stop your investments. This clarity on the cost of not investing can be a significant driver to continue investing.

So, you are more likely to deal with adverse market movements in a better way if you follow goal-based investing. This is a massive advantage because keeping your emotions at bay is as important as picking the right investment products in investing.

Why Mutual Funds are Ideal to Achieve Financial Goals?

Investors can invest in mutual funds to create a diversified investment portfolio to meet their long-term, medium-term and short-term financial goals. However, it is necessary to ensure that there is sufficient diversification or spread of investments across the chosen mutual fund schemes. It is important to take into account the risks and avoid under or over-allocation in a particular asset class.

Mutual funds also offer asset allocation funds that can mirror your life-stage and progressively reduce the exposure to volatile assets and move to more stable options as you grow old. These funds are a good option if you want to leave the rebalancing of your asset allocation to the fund manager.

All in all, you have a variety of mutual funds to choose from, each with a different investment objective. Further, you can leverage mutual fund investments via SIPs to instil financial discipline and meet your financial aspirations in a structured and timely manner.

Key Takeaways from Net Brokers:

The goal-based investment approach is the right way and very important when it comes to investing in mutual funds. Goal-based investing helps you answer important questions like how much to invest, where to invest, and when to start investing. Moreover, it also gives you a purpose to stay invested.
Goal-based investments not only help create a significant corpus but also help save money in a disciplined manner over a period of time.
Linking investments to goals prevents investors from digressing. If you get some extra money from somewhere but don’t have goals or targets, it’s very easy to digress unless you are really disciplined. On the other hand, if goals are clear, chances are that you will want to use the surplus money to give an extra push to your goal-based savings in order to get closer to the goals.
Goal-based investing is helpful in taking corrective actions. When all investments are linked to financial goals, you can track, review their performance at intervals. Doing so not only allows you to identify underperforming avenues but also helps you correct any deviations that can take you away from the set goal.
Perseverance, consistency, and patience are indispensable and the most important aspects of goal-based investing.
Focus on your financial goals, prioritise them, and then select investment options that best match your requirements.

Mutual fund categories provide a variety of goal-oriented baskets created by experts to assist investors in selecting the best-curated investment mix for their objectives. Download our Net Brokers mutual fund app and get access to our goal-based calculators like the child education calculator, the retirement calculator to get started with your goal-based investing.

For more information, get in touch with us today! Download our mutual fund app & start investing for your long-term financial goals.

Happy investing!

The post Understanding Goal-Based Investing appeared first on Net Brokers.