Being a first-time investor, you will probably be having a lot of confusion. You should have an idea how mutual funds work. If your concern is tax saving, then there are elss based tax saving mutual fund. Under it you can save taxes up to 1.5 lakh. Sometimes mutual funds don’t perform well because of weak market sentiment. But if your priority is saving tax, you may easily opt for tax saving mutual fund.
You can have diversified fund portfolio if you like and you can keep your investment very low. There are such schemes available in the market. Elss or equity linked savings scheme has been gaining popularity because it is a kind of tax saving mutual fund. Section 80 c under income tax act provide tax deductions on some financial instruments, and tax saving mutual funds belong to that category. Investing in mutual fund is a simple process. Investing in them does not require much paper work. It is a paperless process. But that does not mean that you are unable to keep track of your investment. You can monitor and check the investment market and make investments as you like. You can switch between various schemes easily. It is possible that you have no prior knowledge of capital market. It is probably also true that many people have no idea how this market operates, where the pits are and where there is a possibility to gain over a period of time. The money in the capital market is managed by a professional fund manager. The fund manager is the one who formulates strategy of investment for one’s asset allocation. This person has access to the financial eco system. He is in a better position to adjust and manage your mutual fund portfolio. You should have an investment goal first of all. Have a knowledge of budget, finances and tenure of investment. It will bring you towards more comfort and confidence. You have to decide how much you can squirrel away from your coffers for your investment. One should also be aware of one’s risk appetite. This will embolden one to go ahead, and if required, employ a professional who is knowledgeable in this market. Only reading about various types of mutual funds is not enough. That will give you a superficial idea about the capital market and the mutual fund market. You should select a fund that has been performing well for over 5 years of period. You should also check on the fund manager’s credentials. You should be aware of portfolio components, asset management, etc. If one does some research and employs a professional, one should go ahead with mutual fund investment. One should go for smart SIP to spread one’s investment over a period of time.
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