Mutual funds are one of the most ideal investments for wealth creation in India as the Indian economy is one of the fastest growing large economies of the world. However, creating wealth is challenging for several new investors as they do not have adequate knowledge on how to identify the best mutual funds to invest and how to invest.
In this article we have got you six clever tips for wealth creation with mutual funds:
One of the most common advice any financial advisor would give you is to start investing at an early age. As a regular college passout, most of the young individuals do not find it necessary starting their investments that early and end up spending everything they have earned and in some cases even get in debt traps.
For such young grads, we simply want to say that the sooner you start investing in the best mutual funds in India, the sooner you will be able to achieve your goals.
Also, you do not have to invest large amounts of money; instead, you can start from as low as 100 per month and gradually increase your investments. You can always start investing in the best mutual funds in India with the help of the amazing financial market experts at EquitySeeds.
Another important suggestion that we have to grow your wealth exponentially is to have a regular investment through SIP. SIP or Systematic Investment Plan is the best form of investment style for wealth creation in the long term as it offers two useful benefits:
- Diversification in investment at the lowest possible investment size.
- Rupee cost averaging of your investments that beats the volatility in market risk investments over the long run.
You can choose to invest in the best mutual funds in India regularly in SIP. There are a number of fund types having different risk-return ratios, and you can invest in the funds based on your risk appetite and then increase your investment with time.
Take calculated risk
Among different types of mutual funds available in the market, equity mutual funds are believed to be the best mutual funds to invest in as you can grow your wealth exponentially with calculated risk.
Equity mutual funds are risky as your funds are invested in stocks whose returns are linked to the market. Hence, if for any reason, the market does not perform well, there is risk of not making much returns or even losing the capital initially invested.
Investing in stocks can be risky for some as they do not possess adequate knowledge of the stock market and economic trends. However, with equity mutual funds you need not worry about it as these mutual funds are managed by financial experts having excellent track records in the stock market and economic trends.
Although risky, the stock market is one of the best investments for growing wealth which can be seen in the past performance of several years where equities have the highest returns compared to gold and real estate.
Tax is an expense that hurts the returns on your investment the most. Most of the traditional forms of investments have majorly three problems:
- Either, do not offer any tax benefits.
- Or extremely low returns.
- And low liquidity due to longer lock in period.
Equity linked savings scheme (ELSS) solves all three problems that traditional investments face and hence is the best mutual fund to invest in for wealth creation and saving tax simultaneously. You are eligible for a tax deduction of up to ₹ 1.5 lacs in a financial year under these mutual fund schemes. It has a higher liquidity as the lock-in period is just 3 years.
Another great advantage of ELSS is that you can also invest in them through Systematic Investment Plans, making it easier for you to diversify your investments without having to lock huge amounts of money at once. So now that you know all about ELSS, it’s time to save on taxes and grow your wealth exponentially.
Growing your investment value
As we discussed above, regular investment in mutual funds through SIPs is a great way to build wealth in the long term, but it is important to increase your monthly investments to grow your wealth gradually.
For example, let’s say you start a SIP in your 20s with ₹1000 per month. Then, as your income increases in a few years, it is advisable to start a new SIP in the same or other funds with a higher investment size, say ₹10000 per month. This way, you will slowly create more and more investments and be able to enjoy diversified returns by getting your money to work for you.
Get Expert Advice
There are thousands of mutual funds available in the market which creates a problem of choice for many investors. Moreover, not everyone has the required knowledge or time to analyse the risk to returns of different schemes to select the best mutual funds in India they should invest in. Hence, it is advisable to consult an AMFI Registered Mutual Fund Advisor who are qualified and licensed to provide you with the best investment advice depending on your risk appetite, time horizon and returns expectation.
With the efficient execution of these ideas, reaching your wealth creation desires could not be as complicated as it seems. We wish you all a happy investing journey!