The top-performing mutual funds are expected to give good returns to the investors in the year 2019. The valuation in many of these has attained worthy levels post the correction in the market in the year 2018. Following are the best mutual funds for SIP plans in which you can invest currently and expect good returns in the long run.

1. Axis Bluechip Fund

This is an equity large-cap fund and is one of the best mutual funds for SIP with an AUM of 6,501 crores as on July 31, 2019. The date of inception of this fund is January 5, 2010, and it stormed the charts to become one of the top-performing large-cap funds. The outperformance of this fund is quite impressive due to the reason that similar funds of this nature had failed in the past years. The performance of this fund was considerably good over a long period. The 5-year CAGR of this fund at 12.04% is favored comparably to 8.62% on the BSE Sensex 50 on the S&P.

The fund is managed by Shreyas Devalkar who has been in the position since November 2016. He is a veteran of the mutual fund industry and holds only 23 stocks but knows how to pick up the best of the lot. Axis Bluechip makes the portfolio of the mutual fund industry in 2019 stronger as being a large-cap fund; it holds up to 80% assets in large companies of the country. The data provided by value research indicates that the fund is able to provide a return of 2.43% in one year, 13.39% in 3 years and 12.04% over a period of 5 years.

2. Kotak Standard Multicap Mutual Funds

This fund lies in the category of Equity Multi-Cap and has an AUM of 24,959 crores as on July 31, 2019. The fund was incepted on September 11, 2009. It is the flagship scheme from Kotak AMC and it has given a steady name to Kotak in the market. The returns delivered by this fund over a period of past 5 years stand at 13.23%. This is far more than the 8.74% return which has been delivered by S&P BSE 200.

This fund is being managed by Harsha Upadhyaya since the year 2012. The fund manager has been able to sway the fund towards being a large-cap which will shield investors from the volatility of the market. Over 78% of the assets of this fund have been placed in large-cap.

Over 21% of the assets are in mid-cap while 1% is in small-cap. This has opened up the growth opportunity for this fund in mid-cap space. This is a diversified fund and has as many as 53 stocks. If you are a cautious investor, this fund would be perfect for meeting your needs. The 1-year return of this fund is -3.84%, 9.69% for 3 years and 13.23% for 5 years.

3. HDFC Small Cap Mutual Funds

This is a small-cap fund with an AUM of 7,849 crores as on July 31, 2019. This fund came into existence on April 3, 2008, and has been performing very well of late. The mid and small-cap category stock had a rough ride in 2018 and a reflection of the same was also felt in this fund too. However, despite this fact, the fund has been able to come up with a 5-year CAGR of 12.36%. The fund has exposure to chemicals, engineering and service sector which has given it wide variation.

The fund has diversified its investments with an investment of 62% of its assets in small-cap companies. 32% of its assets have been invested in mid-cap and only 6% of its assets have been diverted towards large-cap. The cash component of this fund is fairly low currently and this fund is poised to grow in mid and small-cap sectors. The 1-year return of this fund is -17.85%, 8.45% for 3 years and 12.36% for 5 years.

4. Franklin India Pharma Fund

This is a mid-cap equity fund and has an AUM of 6686 crores as on July 31, 2019. The fund came into operation on December 1, 1993, and has completed 25 years of its existence. Over a period, this fund has been able to deliver a CAGR of 17.01%. If a person would have invested Rs 1 Lakh in 1993 in this fund, it would now translate into Rs 59 Lakh which would be a fairly handsome amount currently.

The fund is managed by R Janakiraman who has been at the helm of affairs since long. The 1-year return of this fund is -10.67%, 4.86% for 3 years and 12.14% for 5 years.

Check out these funds and pick the best of the lot after consulting your financial adviser and doing some homework. You will surely make good gains. Happy investing!

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When it comes to investing, the age-old tradition among investors is to seek the help of a financial broker who will take care of the nitty-gritty of the process. But the times have changed and a trend among young investors these days is to invest directly with an AMC. That way, you do not have a third party interfering in your investment decisions.

If you have never been told that you can invest in mutual funds without the help of a broker or an agent, then this might have come as a surprise to you. If you have always taken help from a financial advisor, this article will tell you how to break free from the unnecessary tradition of paying a broker to invest in mutual funds.

How to Buy Mutual Funds without a Broker?

There are two different ways to invest in mutual funds: direct plan and regular plan. Popular until now, a regular plan involves going to a broker or an agent and paying them a commission to become invested.

Direct plan is when you go to the website of the mutual fund or an online platform that allows you to invest in the mutual fund of your choice. Here the procedures are minimal and are completed online in a matter of minutes.

Bear in mind there is no difference whatsoever between these two in terms of investment made. A person who invests through regular gets the same shares in the same fund under the same AMC as a person who invests directly. The difference lies in the amount paid as commission, which may vary for regular plans and is zero for the latter.

What are the Benefits in Investing Directly?

Direct plans were introduced in 2013 under the instruction of Securities and Exchange Board of India (SEBI). The order made it mandatory for every Asset Management Company (AMC) to include a choice of direct investment in mutual fund for investors.

There are several other benefits to investing in a direct plan as opposed to a regular plan:

No commission – The benefit of investing in mutual funds without brokerage is that you save a considerable amount of money that is otherwise spent as commission. Usually, the broker, agent or the distributor is paid either by the investor or the company.

Higher returns – Not having to pay commission will cut down the expense and increase your returns.

Transparency – You will know where your money is at all times, and there is no threat of being conned by fraudulent distributors and agents.

Freedom – You are free to choose where you want to put your money without anyone trying to influence you. As there is no commission involved, there is no bias, and you are free to act according to your convictions.

Benefits of Regular

On the other hand, regular has its own benefits too.

Financial Advice – A regular plan comes with free financial advice from the agent who has many years of experience in the field.

Convenience – Investing directly in mutual funds without a broker makes it necessary for you to do the research which is done by the agent in case of regular plans. This is especially convenient for a busy person. However, this comes at a price that could be avoided.

A major disadvantage that people usually talk about is that when you invest directly, you are likely to make more mistakes out of lack of experience or understanding. But this is an outdated argument because now a days, mutual fund platforms like Grow have features like performance tracking, informative videos and assistance in financial decisions. Such platforms are hassle-free and easy to use from the convenience of your phone. There is an added advantage of being able to understand how to handle your investments rather than putting the responsibility on someone else.

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The practice of investing in mutual funds is not as old as investing in fixed deposits or term deposits in India. Most Indians have traditionally opted for safer money saving and investing options that include FDs, Post Office Saving Schemes and PPFs. MF will take some more time to inspire the same level of trust as the old-school savings and investment methods. However, in the past decade, people have taken more interest in MFs than they had in the 90s.

Smart investors have come to realize that the only way to override the high rates of inflation in India is by taking an interest in MFs. It is important for every novice and experienced investors to vet their options of investment thoroughly. As every mutual fund company states – “MF investments are susceptible to market risks”, there are two ways to ascertain the safety of the funds you are investing in:

• The reputation of the company or institution, and its history of operations.
• The capital protection and terms of return upheld by the fund house of your choice.

Today, the presence of countless mobile applications and online sites, that give the investor a direct access to a fund’s performance, history and trends of returns, has made investing in MF a lot safer than it was even 5 years ago.

The 5 Safest MF Investment Options

Nonetheless, while looking at different investment options, you should pick MFs that have had a steady performance in the last couple of years. You should only pick trusted and well-established fund houses. Here’s a list of the five mutual funds we believe are the safest for any Indian investor in 2019 –

1. Franklin India Focused Equity Fund

The Franklin India Focused Equity Fund hit the markets in January 2007. It has shown steady performance for almost 12 years. It is one of the safer mutual funds for long-term investments.

If you check the past 3-year period, the scheme has generated an average return of 12.81%. Although, it is much lower than the benchmark (Nifty 500-tri) returns, the 5-year returns of the franklin India Focused Equity Fund are rewarding at 20.27% against the benchmark 15.15%.

Franklin India Focused Equity Fund has invested close to 69% of the assets in large cap companies, 17% in small cap and 14% in mid cap companies. The scheme has invested in the following sectors – banking (36.08%), petroleum products (10.25%) and pharmaceuticals (7.08%). The steady performance of these sectors ensure more security to the investors who have chosen this scheme.

2. SBI Focused Equity Fund

The SBI Focused Equity Fund has been around since September 2004. It is a diversified fund that has provided an impressive return of 13.46% for the 3-year period. It is as close as it gets to its S&P BSE 500 benchmark of 13.97%. However, for a 5-year period, the SBI Focused Equity Fund has generated a healthy return of 18.72% against the benchmark 15.22%.

The SBI Focused Equity Fund is one of the best performing mutual funds in the SBI Mutual Fund house. Its secret of stellar performance includes its highly diversified portfolio where only 50% of the assets have been invested in large cap companies. The scheme has invested 13% and 22% in mid cap and small cap holdings respectively. It has allocated close to 31.30% to the Financial Services sector, 21.15% to Consumer Goods and 7.27% to service sectors. Its aggressiveness in combination with high diversification makes this SBI Mutual Fund scheme one of the safest in the market in 2019.

3. Kotak Standard Multicap Fund

After its launch in 2009, the Kotak Standard Multicap Fund has been providing steady returns for the last decade. It is one of the few schemes that have outperformed its benchmark in the last 3-year and 5-year periods. The scheme has generated a 3-year return of 14.06% against a benchmark of 14.09%, and a 5-year return of 19.37% against the benchmark of 14.81%.

The Kotak Standard Multicap Fund is relatively conservative when the question of diversification arises. It has invested only 1% of its assets in small cap, 20% in mid cap and approximately 79% in large cap companies. According to reports, its sector-wise allocation has provided maximum exposure to the Financial Services section (35.7%), Energy Sector (14.1%) and IT Sector (8.48%).

The Kotak Standard Multicap Fund has proven to be one of the safest and most stable funds for investors with a low risk appetite.

4. Invesco India Multicap Fund

The Invesco India Multicap Fund has been around for more than 10 years. In the last 3-year period, it has yielded a return of 9.63% against a benchmark of 13.62%. However, its 5-year return performance has been commendable at a return rate of 19.27% against a benchmark of 15.16%.

The relatively aggressive mutual fund scheme has invested around 45% only in large cap funds, 35% in mid cap and 20% in small cap companies. The top three sector allocations of this scheme includes Banking, Software and Finance.

5. Reliance Focused Equity Fund

The Reliance Focused Equity Fund has been around in the market since 2006 and till date it has not disappointed the investors. With a 3-year return of 14.13% and 5-year return of 26.31%, it has always been quite ahead of its S&P BSE SmallCap benchmark. It should be noted that the small cap and mid cap adjustments of the previous year has impacted the returns of Reliance Focused Equity Fund adversely, but its heavy reliance on large cap assets has helped it override the market volatility.

Reliance Focused Equity Fund has allocated close to 9% in small cap, 26% in mid cap and 65% in large cap companies as of January 2019. Its sector-wise allocation shows a rather aggressive approach with around 27.79% in Banking, 10.13% in Finance and 9.93% in Consumer Non-Durables.

Reliance Focused Equity Fund is the perfect choice for any investor with a high risk appetite and a yearning for higher returns.

Safety of mutual fund investments depends upon the current investment market, and the diversification of the fund portfolio. If you are unable to comprehend the fine points that influence the returns on your investment, it is always safer to invest via a fund house like SBI Mutual Fund, who can take good care of your money.

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A citizen who moves abroad to look for a brighter future and attains the status of a Non Resident Indian (NRI) is still interested in the fortunes of the country. Apart from the cultural and political happenings in India, an NRI is also keen on the change in the country’s attractiveness as an investment destination. Whether they have plans to come back to their homeland one day or not, they do have intentions in partaking in the country’s success.

Given that India is one of the largest emerging markets with a robust investment infrastructure as well as bright economic prospects, it is unsurprising to know that the country is an exciting prospect for wealth creation for an NRI. And one of the easiest way to do that is to choose the mutual fund route.

A primary question to ask, though, is whether they can invest in Indian mutual funds in the first place?

The Answer is Yes

Unlike some investment avenues like government schemes or even direct equities, investing in Indian mutual funds is neither off limits nor requires an approval from the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI). It is important, however, for an NRI to take care that the investment is in adherence with the Foreign Exchange Management Act (FEMA).

How can an NRI invest in Indian mutual funds via direct schemes?

Expense in an important aspect to look at for any investor as it eats into his returns. Investors can see how expensive their mutual fund scheme is by looking at its expense ratio. Thus, it is advisable to choose a fund with lower expense ratio among those which follow a similar investment strategy.

In order to lower the cost of investing in mutual funds, market regulator SEBI had released a circular in September 2012 directing Asset Management Companies (AMCs) to provide a separate plans for direct investments which are not routed through a distributor. This was done for both new as well as existing schemes.

The primary feature of direct investment is that is has a low expense ratio and no commission is paid from it. Further, such investment has a separate Net Asset Value (NAV) as well.

After this circular was released, fund companies have started offering regular and direct plans for all schemes.

An NRI can invest in direct plans like any other resident. The main difference is that he cannot do so in foreign currency as Indian fund houses do not accept payments in any unit apart from the Indian rupee. An NRI needs to decide whether the investment needs to be done on a repatriable basis or non repatriable basis. Also, for making investments in the rupee he needs to open either a non resident external (NRE) or non resident ordinary (NRO) account with an Indian bank. Funds in an NRE account are repatriable whereas those in an NRO are non repatriable. Such an investor can also open a Foreign Currency Non Resident (FCNR) account.

An asset is considered repatriable if it can be moved from an account in a foreign country to the country of residence or citizenship of an investor. For instance, while cash is repatriable, real estate is not. Repatriation laws of a country can determine whether a foreign investor can invest in a country or not.

Once an NRE, NRO or FCNR account has been opened, it can be used to carry out investment in direct plans of mutual funds. An application form should include KYC (Know Your Customer) details as well as indicate whether the investment being done is on a repatriable or non repatriable basis.

The documents that are required to be furnished with the application form are bank statement, overseas residence proof, photograph(s), PAN (or a substitute thereof), and any other identification required by the AMC. A copy of the passport is mandatory. In case the payment for the investment is made via a draft or cheque, a Foreign Inward Remittance Certificate (FIRC) is required to be presented as well. In lieu of the FIRC, an investor can present a letter from his bank confirming the source of funds.

The fund house may also require an in-person verification (IPV). This can be completed by a visit to the nearest Indian Embassy or a similar representative office. If so required, documents can be verified during the IPV as well.

Apart from making the investment directly with the AMC himself, an NRI can also make use of the Power of Attorney (PoA) facility offered by Indian mutual funds. By using it, he can allow someone else to make investments in direct mutual funds as well as take other decisions related to the portfolio. It is important to note, though, that both the NRI and the individual holding the PoA must sign on the application documents in order to make investments.

Alike investment, the redemption process is quite similar to that for a resident. The fund house may either issue a cheque after receiving the redemption request or directly credit the amount to the linked NRE or NRO account. The payment will only be in Indian rupees and in case of the NRI having marked the investment as non repatriable, then the proceeds will be credited only in an NRO account.

If Investing from US or Canada

If an NRI is investing from US or Canada, it is important to note that the compliance requirement in these two nations is much more stringent than others.

The Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act (BSA) are two main regulations which require US persons to report foreign financial accounts and asset holdings. Also, the US imposes taxes on income earned from overseas which disincentivises repatriation.

Due to these compliance regulations, only a few Indian AMCs accept investment from NRIs based out of these countries. Thus, they should take care to understand the impact of these regulations on their income as well as get to know the fund houses whose schemes they can invest in.

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With each passing year, education in India is becoming more and more expensive. The cost of getting admission in a decent college has touched the sky. The report by National Sample Survey Office (NSSO) has stated that the average annual private expenditure for general education has shot up by a staggering 175% in the last ten years.

For instance, the fees for the class of 2018 in IIM-Ahmedabad will be around Rs 19.5 lakh for the two-year course. This figure is 400% higher than what the Management schools charged in 2007. If this trend persists, the cost will rise roughly Rs 95 lakh by 2025.

Looking at the above-rising costs of education, it is prudent that parents have a sizeable amount of savings for their child’s education. In this scenario, implementing a sound financial strategy with a robust investment portfolio will be the key.

Investing in the mutual fund portfolio can help cover all the educational expenses, and reduce the burden on your monthly budget. Here is how you can use mutual funds as your child education plan:

Early Bird Catches Many Worms

Mutual funds feature various advantages over many traditional investment options. Regular investment with an early start can provide you with the benefits of compounding.

For instance, if you start investing in mutual funds when your child is five years old, a monthly investment of Rs 6,700 can yield up to Rs 25 lakhs when your child is of college-going age (18 years).

But if you start investing when your child is 11 years old, the monthly investment can go up to Rs 19,000to yield the same corpus of Rs 25 lakhs.

Use SIP schemes

You can go for, Systematic Investment Plan (SIP), which is the most preferred method of investing in mutual funds. With SIP investment, you can fix the amount you are comfortable in investing. Your investment goals can be easily aligned with your SIP investments as the SIP method requires you to invest a certain amount regularly and helps to ride out the market fluctuations.

This method also benefits from the rupee cost averaging by getting more units when the market price is low and buying fewer units when the market is high. Let’s see how investing in SIP plans benefits:

Let’s say, you decide to invest Rs 5000 per month when your child is five years old. Considering the average returns to be in the range of 10%-12%, after 13 years, your total corpus would be worth around Rs.18.61 lakhs.

If you increase your investments in the above SIP, a higher corpus can be accumulated. For example, if the amount of investment is increased by 20% annually, your total accumulated corpus should be worth over Rs 1 crores by the time the child is ready for college.

Choosing the right mutual fund as your child education plan

To generate adequate long-term savings for your child’s education, you must select the ideal mutual fund based on your requirements. You can also invest in two or three different funds to reap the benefits of diversification. Ideally, an average a Rs.2000 SIP in each fund is a good amount to start with.

The main idea for investing in mutual funds as your child education plan should be building an investment portfolio which has relatively lower risk diversified equity funds.

If you are extremely risk-averse, choosing a few hybrid funds might be a good alternative. However, your returns will be lower as compared to the equity investments.

Also, look at the time frame you want to stay invested to reap the essential benefits. If you have more than ten years, investing in equity funds can reap you the highest growth potential. However, if you have a lesser time frame, between 5 and 10 years, opt for a balance between equity and hybrid funds.

Planning to use Mutual Funds

To sum up, let us list the key points to keep in mind when planning to use mutual funds as your child education plan:

1. Start saving early as it will lessen your financial burden at a later stage.

2. You can accumulate a considerable corpus for child’s education over the long term by investing through SIPs in mutual funds.

3. Build your investment strategy based on the time you have to build the corpus, your target corpus, your risk appetite, and your income level.

4. Don’t ignore your risk profile.

5. Don’t pick schemes based only on one-year performance.

6. Invest regularly to beat market volatility and build an investment discipline.

Challenges in Funding Education

Funding education isn’t straightforward due to inflation, which can double course fees in a few years. Plus, tuition fees and living expenses often change unexpectedly. Relying solely on loans or last-minute savings can lead to a financial burden. Without a clear plan, you might find it difficult to gather enough funds when your child needs it most. That’s why disciplined and consistent investing is essential.

Benefits of Mutual Funds for Education Goals

They are managed by professionals who pick the best stocks and bonds. With decent historical returns, mutual funds have helped many grow their money steadily. They also give flexibility and liquidity—meaning you can access your invested money when needed. All these factors make mutual funds a smart choice for education planning.

Types of Mutual Funds Suitable for Child’s Education

Equity Mutual Funds

These funds invest mainly in stocks and have good growth potential over the long term. If your child is young and you’re planning for college in 10-15 years, equity funds can help your money grow faster. Some aggressive growth funds aim to maximize returns, but they come with more risk. They’re ideal if you have time on your side.

Debt Mutual Funds

Less risky than equities, debt funds invest in bonds and fixed-income securities. They give steady, predictable returns and are better suited for near-term goals, like funding school fees in the next 2-4 years. Options include liquid funds and short-term bond funds, which are safe options for short horizons.

Hybrid Funds

Combining stocks and bonds, hybrid funds aim for balanced growth with moderate risk. They are perfect if your child is in middle school, and your goal is medium-term, like high school expenses. They adjust the mix based on market conditions, offering a good compromise.

Index and Sector Funds

These track specific market segments or indices, often at lower costs. They provide a way to invest in particular sectors like technology or financials, which can boost diversification. They’re suitable for investors looking for cost-effective options to diversify their portfolio.

Planning and Selecting the Right Mutual Funds

Setting Clear Education Goals

Start by estimating how much your child’s education will cost in today’s terms. Then, consider inflation to find out the future amount needed. Decide whether the goal is funding primary school, secondary school, or college. This clarity helps determine your investment plan and timeline.

Risk Appetite and Asset Allocation

Assess how much risk you’re comfortable with, especially as your child gets older. A common approach is to allocate more towards equities when your child is young, then shift to safer investments as the time approaches. For example, a 10-year-old might have 70% of investments in equities, shifting to 30% by age 18.

Lumpsum vs SIP Investments

Lumpsum investments mean investing all your money at once. They work well when markets are low or if you have a large sum saved. SIPs spread your investments over time, reducing risk. Combining both strategies can be effective—lumpsum for immediate needs and SIPs for continued growth.

Leveraging Tax Benefits

Investments in tax-saving mutual funds, called Equity-Linked Savings Schemes (ELSS), can provide tax deductions under Section 80C. This not only helps grow your money but also reduces your tax liability. Remember, ELSS funds come with lock-in periods but can be used effectively for education savings.

Automating Investments

Set up automatic monthly deductions from your bank account. Automation ensures you stick to your plan without missing payments. Over years, this discipline builds a significant corpus for your child’s education.

Conclusion

Investing early in mutual funds is a smart move to secure your child’s educational future. Choose the right funds based on age, risk appetite, and goals. Stay disciplined, review regularly, and adjust your plan as needed. Starting today can make the future a lot brighter for your child’s dreams. Make that first step now—your child’s education deserves it!

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Have you ever heard about mutual funds investment? For ordinary people, the term of mutual funds may still sound quite strange. What is it actually? Mutual fund id an alternative for people who have some limited capital (fund) to be invested through the Company’s Investment Manager. The funds collected by MI from the members with limited capital will be divided into several types of investments (stocks, bonds, and deposits) and not only in one company but several companies. Each mutual fund has several different investment objectives, according to the product type of the investment. A mutual fund is a practical choice for communities to invest in stocks even in several companies at once, but with a relatively small fund.

The Advantages of Investing in Mutual Funds

Perhaps, many people think why not purchase common shares directly on the stock exchange. There are several things that make mutual funds as an alternative investment that makes people feel interested in. A mutual fund can give benefit to investors in terms of investment monitoring at any time. It is the responsibility of investment manager entirely. The public can choose the type of mutual fund that can be tailored to the investment characteristics of each investor and also can adjust the level of return or reciprocal. The advantages of selecting mutual funds as an alternative investment are:

1. Managed by a Professional Management Team

Investment Manager is a professional management who has special expertise in fund management. His role is very important because he will serve those investors who only have limited time and cannot do research on the company and their investment directly in order to analyze the effects of price and information access to capital markets.

2. Transparency information

This type of investment clearly provides portfolio information development and costs continuously. This is done so that the Unit holder can monitor the benefits, costs, and risks all the time. As a mutual fund manager, he also must publish a net asset value every day in newspapers and publish annual financial statements and the prospectus is also performed regularly. With this information transparency, the investors can also regularly monitor the progress of their investment.

3. Investment Diversification Lowers the Risk that May Occur

A mutual fund is an investment that does not only focus on the investment of one company. This will obviously reduce the risks involved in such risk despite it cannot be eliminated. In other words, the existing risk is not concentrated in one type of investment but scattered. Keep in mind that there are two types of risk, namely the risk of gain and risk of loss. If your mutual fund puts the investment funds in 20 companies and 3 of them have the risk of loss, the investors do not need to worry because there is still a possibility in which other companies may not suffer from a loss risk but it can even experience gain risk.

4. Low Costs

A mutual fund is known as the set of many investors and professionally managed. In line with the magnitude of the ability to make this investment, then it will produce cost efficient transaction anyway. Transaction costs will be much lower compared to investors who invest directly in the stock exchange.

5. Safer

As already mentioned above that the risk level of the mutual fund is relatively low, then this clearly provide better security for investors compared to investments made individually and directly on the stock exchange. The money deposited is not held directly by the company but it is deposited in a special bank account, known as the custodian bank.

6. High Return Potential

A mutual fund is an investment alternative that the advantages can be enjoyed in the long term and is particularly suitable when used as an investment alternative that guarantees investors to prepare for retirement, preparing education fund, and various other long-term plans.

7. Diversify your Stocks

Traders and investors must have a good portfolio of stocks. If few stocks underperform, others may bring a balance. The risk and volatility associated with a particular asset type can be reduced with a diversified portfolio. Stocks of different industries are least likely to be affected equally by the market risk.

By and large, with a diversified portfolio, investors are more secured against market risks. The Zack’s investment review is the go-to place for investing advice. The site’s comprehensive database provides you with the tools you need to invest smartly.

The Disadvantages of Investing in Mutual Funds

When talking about the risk, the mutual fund also has this risk where the value of the risk is obviously smaller than stock investment, but it is still bigger than other investments such as gold investment, product properties, product or deposits. Well, a few things that you need to pay attention concerning to mutual fund weaknesses are:

1. Impairment Net Assets Risk

This is caused by the price of investment instrument market which is lower than the initial purchase price. This price deterioration could be caused by many things such as the deteriorating stock market performance, the deteriorating of issuer performance, political and economic situation which are not stable, as well as a variety of other supporting factors.

2. Market risk

Market risk occurs when the price of investment instruments decreases due to lower stock market performance drastically.

3. Default Risk

This problem occurs when the investment manager buys bonds belonging to issuers who were experiencing financial difficulties whereas previously the company’s performance is still fine. As a result, the issuers were forced not to pay its obligations.

4. Liquidity Risk

This could be caused by the Participation Unit holder to withdraw funds in large quantities at the same time so that the investment manager experiences a rush. Usually, this occurs because of the sizeable negative factors such as political and economic situation worsens, there is closure or bankruptcy of several listed companies, even the liquidation of investment manager as a mutual fund manager.

Well, those are several advantages and disadvantages of investing in mutual funds. So, what are the solutions? Considering there are risks that could threaten your money in a mutual fund, there are several things to consider before deciding to make mutual funds as an investment option:

1. It is advisable to invest in mutual funds at least 3 years so that investors could enjoy a better return. If you want a return in less than 3 years, then you should choose other investment alternatives such as fixed income fund or the investment of deposits.

2. Do not forget to ask about costs that may arise from the product you want. Each product typically provides different charge rates ranging from 0-2%.

3. Most banks are agents of mutual funds, but not all products are available in the bank. Then, you as an investor should be able to choose the best mutual funds.

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