Q. What is the right time to start investing in mutual funds?
A. If you have money then the best time to start investing in mutual funds is now. There are many different types of schemes to suit different investors and you can start investing with as little as Rs. 500. No matter what your age is or what your investment goals are, start investing in mutual funds now as there is a fund for everyone.
Q. Is every mutual fund scheme risky?
A. To an extent, Yes! However, the risk vastly varies between different types of schemes. For instance, there is a significant difference between the risks of investing in a small-cap equity mutual fund scheme and investing in a short-term debt fund. Consider your risk appetite to select the right fund.
Q. Is there any lock-in period for the investments made in mutual funds?
A. Apart from ELSS (Equity-Linked Savings Scheme) which has a lock-in period of 3 years, all the other open-ended schemes do not have any lock-in period. You can redeem the units on any business day. Once redeemed, the money will get deposited into your bank account within 2-3 business days.
Q. Are mutual funds better than FDs?
A. If minimum returns but capital protection is what your investment objective is then FDs can be an option for you. But if you want your investment to earn positive returns after taxes and inflation are factored, mutual funds are the way to go. No lock-in period, flexibility, minimum investment amount and complete transparency are some other benefits of investing in mutual funds.
Q. What are the different types of mutual funds?
A. Mutual funds are of many different types. There are largely divided into three- Equity, Debt and Hybrid funds. Equity funds invest your money in stocks, debt funds invest in debt instruments, and hybrid funds are a combination of equity and debt funds.
Q. What are the benefits of investing in mutual funds through SIP?
A. SIP allows you to start investing in mutual funds with as little as Rs. 500 every month. As the investment amount is minimal, you can start investing at an early age which according to experts is very important for long-term wealth creation. Rupee cost averaging and power of compounding are two of the most important benefits of investing in mutual funds through SIP. With regular payments, SIPs also make you a disciplined investor.