Not all mutual funds invest in equity - and still many continue to believe so ...
Read my article on the above topic
http://epaper.gujaratimidday.com//epaperpdf/gmd/30032015/30032015-md-gm-12.pdf
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Here is the English translation of the article:
“The mutual funds must be doing well these days! Is this a good time
to start investing in mutual funds?” – someone asked the other day.
Such questions are quite common these days. And it has been the same
in the past, too. Whenever the equity markets have gone up, many consider that
mutual funds must be doing well. On the other hand, during a bear phase in
equity market, many think that even the mutual funds are also going through a
bear phase. This strong link between mutual funds and equity markets is a big
misconception that lots of investors are living with.
In order to address the misconception, we need to understand what a
mutual fund really is.
All of us need to manage the surplus money we have saved out of our
income. The money must be managed such that we have enough available to provide
for our various needs in future. How do we manage our money? There are two
major alternatives – do it yourself or get help. Whose help do you get? One
professional whose help you may take is a fund manager or the asset management
company. An asset management company manages a mutual fund portfolio. this firm
has to launch a scheme that would be managed in a particular manner. In order
to explain how the scheme would be managed, the asset management company must
disclose where the money would be invested (also known as asset allocation) and
the style adopted by the managers of the scheme.
Such a disclosure helps investors decide if the scheme can help them
in their investment plan. You see, investors start with their own investment
plan and then choose mutual fund schemes that are in line with their own
objectives.
Seen in this manner, investing through a mutual fund is equivalent
of outsourcing the investment management work.
With that, let us understand the options available among the mutual
funds, as there are different schemes investing in different investment
categories – equity, fixed income, and gold. With that, thee could be different
types of schemes – debt funds, equity funds, gold funds, liquid funds as well
as hybrid funds, which are a combination of one or more of the above. Different
funds serve different purposes. Equity funds offer potential for growth; debt
funds offer stability to the investment portfolio; liquid funds offer high
liquidity with safety of capital; and gold funds help investors take exposure
to gold.
All mutual funds are not equity funds. In fact, mutual fund is a
vehicle that helps you invest in a variety of investment options. Understand
the scheme and check if it matches with your requirements.
Thus, answering the question asked in the beginning – anytime is a
good time to invest, if you have surplus money. Instead of time, one needs to
focus on one’s own situation and requirements and there would be an option
available from among the mutual fund schemes.
Happy investing!
Amit Trivedi
The
author runs Karmayog Knowledge Academy. The views expressed are his personal
opinions.
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