Mutual funds are a really popular investment choice for individuals as people can get access to a professionally managed and diversified portfolio at a low cost. But they are never fully risk-free; a small amount of risk is always attached to them. For example, equity mutual funds are considered riskier than debt mutual funds. Therefore, most people invest their money in low-risk mutual funds because they carry minimal risk but have an assurance of stable returns if not major profit. Another benefit is that low risk high return mutual funds are less affected by inflation.
Therefore, individuals need to choose the best low risk mutual funds investment by considering facts such as income goals, risk factors, fund performance, expense ratio, taxes, etc.
Key Takeaways:
- Low risk high return mutual funds are the most popular investment choice among individuals
- Mutual funds give individual investors access to a diversified portfolio at low cost
- There are different categories of mutual funds based on the risk factor they carry and the type of return they have
Read This to Know How You Can Increase Your Returns with Low-Risk Mutual Funds
Nowadays, low risk high return mutual funds in India are gaining acceptance because people understand that they are beneficial and have minimum risk attached to them. There are many ways through which people can increase their returns with low-risk mutual funds. These are described in detail below:
Funds should be invested with proper diversification of the portfolio:
People should invest their funds in low risk funds with proper diversification of portfolios. It is necessary to go with overall economic and market conditions. The returns are dependent on asset allocation, its classes, and the uncertainty attached to it. Short-term and long-term debts also affect low risk high return mutual funds as, whenever the interest increases, short-term debts perform better than others. When low-risk mutual funds are invested with proper portfolio diversification, they will give you risk-adjusted returns.
Always go for direct plans of low-risk mutual funds:
The cost or expense incurred in low-risk high return mutual fund direct plans is less than that of regular plans. According to experts, it is 1-1.5% higher than the regular plans. In regular plans, there are many distribution expenses that will affect the returns. The direct plans are simple and follow the direct path to reach maturity. It will also give higher returns to its investors.
Follow the SIP route:
SIP means a systematic investment plan. In low risk funds, the SIP route always enables an investor to invest a predetermined amount at regular intervals such as weekly, monthly, quarterly, etc. SIP route is an automatic plan where people need not invest manually. It has a feature of automatic deduction where the amount is deducted automatically at regular intervals to maintain discipline in investment.
Opt for consistent low risk mutual funds:
The mutual funds that show consistency in their performance should be chosen. Consistent low risk mutual funds with high returns deliver results accordingly.
Planned Exit from low-risk mutual funds:
People should plan an exit strategy from low-risk mutual funds before investing in them. It will be more valuable if exits from mutual funds are pre-planned. Ideally, most investors exit mutual funds investments after achieving their financial goals. Investors who stay in mutual funds for extended periods will get good returns after the investment duration is over.
A regular watch is required:
Investors who invest in low-risk high return mutual funds should review their performance at regular intervals. It will help you track the fund’s performance in different market conditions. Keeping a regular watch will explain to you the condition of your invested funds. It will be a good decision to exit a fund if it underperforms consistently.
Refill your SIPs during market corrections:
SIP investments will work better in fluctuating market conditions. A downturn is an ideal time for SIPs to work in the investor’s favour. Such a market condition will help the investors buy the best low risk mutual funds at low NAV. It is always advisable for investors to continue their investment when the stock market falls.
Consider your age while investing:
The age of the investor is also important and should be considered while investing in low-risk mutual funds as it shows investors’ risk-taking capacity. An investor should invest in equity and debt funds as per their increasing age. There are some simple formulas of investment used by many investors before investing in mutual funds.
Word to remember:
SIP: It stands for systematic investment plan and is used as an investment tool. It will suggest and allow investors to invest in fixed amounts in mutual funds for regular intervals.
Source: https://www.mutualfundssahihai.com/en/what-systematic-investment-plan-sip
Did you Know?
The Indian mutual fund industry is one of the fastest-growing and most competitive segments of the financial sector. As of August 2013, the total AUM stood at Rs. 7.66 trillion.
Source: https://www.sebi.gov.in/sebi_data/DRG_Study/OpportunitiesChallenges.pdf
Advantages and Disadvantages of Investing in Mutual Funds:
Pros:
- Low risk mutual funds have higher returns and are more tax-efficient than other traditional investments.
- Investors get access to advanced portfolio management.
Cons:
- The choice of mutual funds is overloaded by a list of offers which may create difficulty for investors to choose.
- Many mutual funds carry high expense ratios, advertising fees, and sales charges.
Choose Wisely
Investment in mutual funds is as simple as other investment plans. There are several investment plans in low-risk mutual funds with different portfolios. Investment can be made in funds after proper research, management of funds, and market tracking. The asset management company manages the whole mutual fund investment. There are several asset classes for investment, such as equity, debt, money market instruments, and many more.
There are many factors people should consider while making investments in mutual funds, such as age, prevailing market conditions, and many more. The low-risk mutual funds also require regular performance reviews so that investors can decide to exit from mutual funds at the right stage. Every investor requires the proper guidance or research before investing in mutual funds. Otherwise, investors will suffer huge losses with a minimum amount of investment.
Did you know?
Mutual funds are a pool of a range of investment options rather than one basket like bank investments.
Source: https://www.bankrate.com/investing/low-risk-investments/
Conclusion:
The low-risk mutual funds have the potential to generate long-term wealth and are a powerful investment option for investors. Investors can start investing early, but a proper understanding of the portfolio is a must for low risk high return mutual funds. Mutual funds also offer many retirement plans with low risk. Mutual funds are flexible and can be withdrawn during any emergency.
FAQs:
There is no age limit. You may start at any age. But, experts predict that the right age to get into the mutual funds is 20 years.
Some facts that must be considered before investing in mutual funds are:
Different mutual fund categories have different risk levels.
Direct plans always give higher returns.
Returns fluctuate every year.
SIPs help in creating investing discipline.
Consistent returns will be the hallmark of good funds.
There should be a bank account with proper KYC details and verification of an investor for investing in mutual funds. Without such documents, no one can invest and trade.
Several banks offer mutual fund plans. Banks play a vital role in savings, loans, and mutual fund investments.
The mid-way falls in the mutual fund’s investment may highly affect the non-SIP accounts. But those investors who have invested with the help of a properly diversified portfolio will deal with less impact.
