Mutual funds, especially SIP investments in mutual funds are often considered by salaried investors since they offer high convenience and the opportunity to build an investment corpus basis regular, small investments.
Moreover, they allow salaried investors the convenience of online investment, tracking, and withdrawal. Since there is no minimum time commitment, it also offers them peace of mind about getting to liquidate their investments in case of any emergency. However, often, salaried investors end up overlooking the different types of mutual funds available to them. They end up focusing on tax-saving mutual funds as opposed to other mutual funds such as equity mutual funds, hybrid mutual funds, debt mutual funds as well as international mutual funds. This is because salaried professionals are always on the look out for great tax-saving products that offer add on benefits with regards to investments and returns. While tax-saving mutual funds do offer their own set of benefits, it is important to understand that their primary goal is to save tax rather than maximize potential of returns. Further, it is important to build a diversified and balanced portfolio by investing in different types of mutual funds. Here are 4 types of mutual funds that most salaried investors overlook, but should be considered for a well-balanced portfolio: Equity funds As the name suggests, these mutual funds are linked to the equities market. However, instead of opting for a single equity mutual fund, it is important to diversify across large-cap, mid-cap, and small-cap equity funds after considering one’s investment tenure and risk appetite. Unlike tax-saving mutual funds, equity funds do not require to make a minimum holding period. More importantly, you can expect these to meet your long-term investment goals such as your child’s education or your retirement since these are subject to short term market fluctuations. Debt funds Debt funds can help protect your portfolio from equity-related volatilities. They see your SIP and mutual fund investments going into PSU bonds and the likes to give you safe returns. Unlike traditional debt instruments, debt mutual funds can be considered for mid-term investment needs such as 5 years. Hybrid funds This is ideal for busy salaried investors who do not have the time to periodically look out for new funds that help build a balanced portfolio. Hybrid funds balance asset allocation into debt and equity. This is because they are designed to give you the benefit of equity-linked returns while give you the safety one associates with debt-based fund allocation. Further, investors typically opt for such hybrid funds when they are unsure if their portfolio needs more equity or more debt-based allocation to meet their mid-term investment goals. International funds This is easily the most overlooked mutual fund when it comes to salaried investors. This is because they typically associate international investment opportunities as one that require significant research as well as high SIP amounts. However, this isn’t true. International mutual funds or international funds allow salaried investors to let their portfolio benefit from global equities market by investing small amounts on a regular basis. Further, since it doesn’t require any additional documentation as compared to mutual funds that allocate in the Indian market, the process is fairly simple and straightforward. Investing in international funds lets you diversify and protect your portfolio from local market volatilities. Conclusion There are various types of mutual funds that can help build a diversified and robust portfolio. Further, most of them are fairly simple to understand in terms of their asset allocation approach. Hence, salaried investors must consider and broaden their horizon.
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