When it comes to investing the money in a financial instrument, the focus is not only on the earnings you can make but also the safety. And when it is about mutual fund investments, which are market-linked, there can be risks of varying degrees. While for some, equity mutual funds can be the best bet. But many may not find them appealing. Different investors have different risk-taking capacities, which actually dictate their investment style. So, the definition of best mutual funds can vary across the classes of investors. Therefore, I have chosen the moment to elaborate on the best mutual funds for different investors.
For people with a greater risk-taking ability, the equity mutual funds are the best investment they can opt for. These funds invest in a wide range of equity and equity-related instruments to raise the value of your investment. The investment objective of these funds is primarily to build the capital as the time moves along. The risk factor in these investments can be extremely high as the subdued market movement can erode the value of your investment. But if your investment horizon is long, say 10-15 years, the risks get averaged out and the investment value grows substantially higher.
Investors with Low-Risk Appetite
Retirees or investors with lower risk-taking ability can take advantage of the stable income generation plans of debt mutual funds, which invest in a myriad of debt securities such as bonds, monthly income plans, and others. The prime motto of these funds is to ensure the safety of the investment. So, if you have a low-risk ratio, these funds are the ones you should subscribe for.
Investors who have a moderate risk ratio can opt for balanced funds to start off their mutual fund journey. Balanced funds, which invest in both equity and debt instruments in different proportions, aim to appreciate the invested capital and ensure safety at the same time. Balanced funds can be debt or equity oriented. While the debt oriented funds would mostly like to put your money in debt instruments, equity oriented ones would invest predominantly in equity and equity-related securities.
Investors Looking for Liquidity
If you are looking for investments that can offer higher liquidity, the answer lies with liquid funds that invest in instruments with a very shorter maturity period, typically ranging upto 3-6 months. Fixed Maturity Plans (FMPs), treasury bills, call money and government securities are the investment area of liquid funds.
Above funds are based upon your risk profile and wants. But it’s important to know your risk profile at the same time. Do you know the ways to assess the risk profile? If ‘No’, then read the below points carefully.
Present Situation- The present circumstances such as your amount & sources of income, assets & liabilities, age, dependents, and the capital ready for investment also influence your risk appetite.
Past Experience- Your approach to a mutual fund investment could well depend upon the experience you would have had earlier. Using that experience, you can judge your risk profile.
Investment Attitude- But it’s the behavioural traits of investors that ultimately dictate the choice of mutual funds. If you are comfortable bearing short-term losses for higher gain in the long-term, it would mean a higher risk-taking ability on your part. Else, your risk capacity is either moderate or low.
The choice of mutual fund investments would also be influenced by the investment goals you may have set for yourself to accomplish over a period of time. Commonly, investors have the following goals to achieve through mutual fund investments.
To achieve a maximum of the goals stated above, it can be easily inferred that the best route is to invest in equity funds that aim to appreciate the invested capital. If you are in for a long haul, equity funds can make your life better.
I hope you now know your risk profile and the best funds for yourself to sail through in your investment journey. Do not pick funds without assessing your risk profile as it can put you in a state of bother.
Article Source: https://goo.gl/4M9uLl