Earn.. Spend.. Save what you can.. And then repeat. This is the cycle that guides your finances from the day you start earning until you retire. What we say is Earn.. Save for investments.. and spend what is balance.
You must have understood the importance of savings. The primary difference between savings and investing is that, if you’re just focusing on saving, your money stays idle. Once you start investing, that money begins to multiply and grow. It’s important to invest to beat inflation and grow your money.
There are various investment options available; to include Physical Assets( like Real Estate, Gold etc) and Financial Assets(like Bank FDs, Government Bonds, Mutual Funds etc). However returns on physical assets have been diminishing over a period of time and more and more investments are forthcoming in financial assets, primarily into Mutual Funds for better returns.
Why Invest Through Mutual Funds ?
Diversification: It is always recommended to invest across different asset classes and mutual fund by default provides diversification as fund manager will invest in different securities to manage investment risk
Disciplined Investment: Through mutual funds, you can plan to invest regularly over a period of chosen time frame as part of systematic investment plan(SIP) thus ensuring disciplined investments. These disciplined investments will create wealth over a period of time through magic of compounding.
Professional Management: Mutual funds are managed by professional fund managers. They invest in securities after a thorough analysis and are governed by Securities and Exchange Board of India (SEBI), thereby ensuring safety of your investments.
Wide Variety of Funds to Choose From?
Mutual funds can help to achieve a wide variety of financial goals. For example
A young investor with many years to invest might take more risk to achieve a greater potential return. For them, the best option may be an equity fund.
A mid-career investor trying to balance risk and return could invest in a more balanced mutual fund and buy a mix of stocks and bonds.
An investor approaching retirement may not be comfortable with risk and be more at ease with fixed-income investments, thus investing in a bond fund.