Mutual funds have been the go-to investment option for those seeking to create long-term wealth. Mutual funds pools together money from multiple investors to invest in a diverse set of securities. In the Indian market, mutual funds have grown in popularity, and their attractiveness, especially to beginners, is due to their low investment requirements. One can commence investing with as little as Rs. 500 ($6.64).
Investing in mutual funds requires a proper understanding of the various types and categories of mutual funds, their past returns, and future expectations. Factors such as market conditions, securities prices, financial performance, geopolitical crises, etc., might affect mutual fund performance. Given these challenges, it becomes vital to research and analyze before investing.
SIP Return Calculator
The Systematic Investment Plan (SIP) is the most common mode of investment in mutual funds. SIPs allow investors to deposit a fixed amount periodically in a mutual fund scheme, enabling them to invest in installments and not worry about the market's volatility. SIPs are ideal for investors who want to invest in mutual funds in a disciplined and consistent way and always secure maximum SIP returns.
SIP is an effective way of investing in mutual funds, but mutual funds' returns are not guaranteed. To calculate the expected return from an SIP investment, investors can use the SIP return calculator tool. It is an online tool that helps calculate the expected returns based on the investor's investment amount, the desired investment period, and the expected rate of interest. The SIP return calculator develops a projected investment return based on recurring investment for a specified investment horizon. This tool factors in the market movements, average return of funds in that asset category, and the accumulated compound interest.
For example, let us consider an investment of Rs. 10,000 per month, for five years, at an expected rate of return of 12%. The total investment of Rs. 6,00,000 ($7,973) will yield a return of approximately Rs. 8,97,938 ($11,937). The return percentage on SIP in this case is around 16%. It is an attractive gain, considering the low risk involved in such investments.
Hybrid Mutual Funds
Hybrid Mutual Funds refer to mutual funds that invest across different asset classes other than equity or debt only. Instead of investing in a single asset type, such as domestic equities or debt securities, they invest in a combination of both. They are, therefore, classified as balanced mutual funds since they enjoy the benefits of both equity and debt.
Hybrid mutual funds' allocation combines both equity and fixed-income securities in a single portfolio, typically including a mix of stocks, bonds, and other kinds of assets. This asset-class mix helps balance risks and returns. Hybrid mutual funds are flexible, liquid, and relatively low-risk. They offer better returns than debt funds, but lower returns than equity funds.
For example, ICICI Prudential Balanced Advantage Fund is a popular hybrid mutual fund that invests in both equity and fixed-income securities. As of November 30, 2020, the fund has a 38.67% allocation to equity and a 50.02% allocation to debt securities. The fund's five-year return is 10.98%, outperforming most categories of equity funds and debt funds.
Conclusion
Mutual funds are an excellent investment option for novices and experienced investors alike. With the right information and investment strategy, one can build a thriving mutual fund portfolio. It is essential to choose a mutual fund that fits your investment goals, financial risk appetite, and long-term plans. Investors need to follow the periodic performance reviews of mutual funds and compare their performance against standard benchmarks. This accomplishment helps to track investment progression and make informed decisions.
Using a SIP return calculator can help gauge realistic expectations and assist in selecting an appropriate investment period, investment amount, and expected returns. Hybrid mutual funds are an alternative investment option that combines equity and fixed-income securities' best features in a mixed-asset allocation.
In light of the risks associated with investing in the Indian financial market, it is essential to note that all investment decisions need to be taken only after analytically considering the advantages and disadvantages of investing. Always approach a certified financial advisor before investing.
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