A mutual fund scheme that is good for one may not be good for another ...

What is appropriate for an investor in one situation may not be good for another investor. In fact, the same scheme may not be appropriate for the same investor in some other situation. To understand more read my article in Gujarati Mid-day today ... Click on the link below:

A mutual fund that is good for one may not be good for another

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The English translation is as under:

“Where should I invest my money? Should I buy a particular stock, or a mutual fund or fixed deposit?” This is a very common question asked by many investors.

Very often, the expectation of the person asking this question is to get names of mutual fund schemes or stocks, in the expectation that the future returns would be high from these investments.

However, it is important to understand that the best funds for someone may be a bad choice for someone else. The best funds for someone in one particular situation may be a bad idea for the same person in another situation. Focus on what is important rather than what is generally best.

So how does one know what is appropriate for one in a given situation? In order to understand what is proper for a certain situation, one must understand the situation, to begin with.

This can be assessed through analysis of one’s financial situation, i.e. by looking at income, expenses, assets and liabilities. Also add the financial goals that one wishes to achieve in future.

You also need to consider certain other details like number of dependents in the family as against the number of earning members; whether you are adequately insured or not, etc.

Your investment plan can be made only on the basis of these details. Once you have done this analysis, one would come to understand which category of mutual fund schemes to be chosen. It is only after the selection of categories that one must consider which scheme is required I the portfolio.

Incidentally, if you find this too intimidating, please get in touch with a financial advisor or a financial planner.

- Amit Trivedi