What are mutual funds?

Mutual Funds are investment vehicles which collect money from all the investors and invest in bonds, equities and/or money market instruments. These investors share a common objective, as in the kind of instruments the investment has to be made, or the combination of two or more kinds, or on the basis of risk profile. You can start your investment with just Rs. 500!!

This entire pool of money is managed by fund manager. He is the one who strategizes in order to make a particular mutual fund scheme a profitable bet.

All these mutual fund scheme charge an expense, upto 1.5% of your invested amount, in order to pay the fund manager, and for their management plus miscellaneous expenses)

The profit or the returns generated from a particular instrument (after deducting the fees), is distributed on the proportionate basis, depending upon the investment amount.

Types of mutual funds

On the basis of risk/return


Source: AMFI


Broadly, mutual funds are divided into three categories:


These categories are further sub divided into:


Open Vs Closed Ended Mutual Funds

Units of Open Ended Schemes can be purchased and redeemed round the year.

However, you can subscribe for closed ended funds only in the initial offer period, and redeem only after the maturity date.


Actively and Passively Managed Mutual Funds

The fund manager of the ‘actively’ managed fund works on the mutual fund portfolio throughout the year, taking decisions like; which stocks to buy, hold and which stocks to let go off in order to maximize returns, and outperform benchmark returns ( at least!). He/ She also has to make sure that the risk capacity of the investors is not compromised in view of generating great returns.

In case of ‘Passively’ managed fund, the fund manager does not reason much when it comes to making investment choices. He/ She simply follows the index.


Mutual Fund Vs Other Investment Options

Mutual Funds are no doubt better than other investment options, mainly because of following reasons:

  • They offer better returns than traditional investment options
  • Mutual Funds are simple and best modes of investment for those who lack huge amounts of money and/or don’t have time to do research on the financial instruments.
  • You can choose from a variety of schemes depending upon your risk profile.

Have a look at the following table to know which is the best investment option for you:


How to grow money with Mutual Funds?

How a mutual fund performs depends much on the fund manager. Which stocks he chooses for investment, when to hold, when to buy and when to sell – are the important drivers for growth of any mutual fund.

Then there are bunch of other reasons as well; how is the country’s economy doing? And what is the general sentiment in the country?

Further, if an investment has to be done in mutual fund schemes, make sure that the investment is at least for 3 years.

Also there are short term factors like market sentiments, elections, because of which indexes are not stable. Herein lies the opportunity to gain. Because of this very ‘volatile’ nature of market, mutual funds, especially equity mutual funds’ NAV tend to fluctuate.

You can invest when the market is low and redeem when the market is high.


Here are the 3 year rolling returns of BSE Sensex since 2002:

Rolling Return graph for the investment of 3 years has been constructed for last 17 years. With these 3 yr rolling graphs, it can easily be construed that what have been the returns of the market.
Rolling returns are the annualized returns taken for a specified period (rolling returns period) on every day/week/month and Taken till the last day of the duration. For example, 5 year rolling in a 10 year time frame (monthly) would take into consideration returns from 1st April 2009 to 1st April 2014, 1st may 2009 to 1st may 2014 , 1st June 2009 to 1st June 2014, and so on till 1st April 2014 to 1st April 2019. The average of these values will be the rolling return for your mutual fund scheme.


Why you need a Mutual Fund Advisor?

Trusting someone with your hard earned money is difficult indeed.

Choosing a scheme out of 18000+ schemes is worse.

When you are investing, the kind of scheme you are putting in your money matters the most. It is extremely important to know how much risk you are ready to withstand, which again depends upon multitude of factors.

Also, with time, portfolio rebalancing is important. How much should be allocated to debt, and how much should be put in equity and with time making sure that the ratio is maintained, is a mountainous task.

Here is where the financial advisor comes in.

A qualified advisor (Certified Financial Planner), are better in money management than non professionals in this area. Your advisor will take care of your money, your taxes, and will be answer to all your questions like where and when to invest?

There are some miscellaneous services for which your advisor is responsible; like change of address, email id’s, capital gains statement, portfolio performance, etc.

Not everyone can make their investments alone mainly because of the time constraint or/and the inclination in the research part.


How can Wealthcare Securities help you in choosing the right mutual funds?

Wealthcare Securities works on the client based model. Investments are dictated by client's needs.


Here’s how we work:

Assessing client’s risk profile
Assessing client’s risk profile is a initial step in the ladder of financial planning.

In order to assess client’s risk profile, we assess his/her current financial situation; make a list of all assets and liabilities; and arrive at the conclusion, whether your risk appetite is conservative, balanced or aggressive.


Insurance

We advise on the insurance part as well. Whether, the client has adequate insurance cover like- health, term, etc.


Emergency fund

It is advisable that one should have an emergency fund equal to 6 months of expenses.


Identifying Goals

Identification of goals is important, as all the investment will be based on it.
Goals can be classified on the basis of their time line: whether they are short term or long term, and deciding their priority is also important.


Investment as per risk profile and goals

Once we know about your financial situation, risk profile, and goals, we make a financial plan for you- how should the money be invested and in which mutual fund scheme?


Periodic review

We do a periodic review of your investments- whether they are in sync with the goal planning or not.


Portfolio rebalancing and restructuring

Wealthcare Securities makes sure that the client’s portfolio is modified with time keeping in mind the goal amount required. We do timely rebalancing and restructuring, in order to generate best possible returns for the client.