Once bitten twice shy! This holds true for thousands of people, who start investing before acquiring proper knowledge. What should be your first Mutual Fund investment? The answer differs depending on the investor's age, risk capacity, etc. Let’s discuss some MF fund categories which are good options for first time investors.
Balanced Funds
These funds invest in equity as well as debt. These are hybrid funds. Diversification of equity and debt portions is done in order to avoid any concentration of risk. Debt provides safety from precariousness in equity markets and is very essential for people investing for the first time.
Experts say that these kinds of funds are perfect for first timers because of their pre-determined equity-debt mix.
Large Cap Funds
These funds have a very diverse portfolio, as the schemes invest most of their assets in large companies, keeping the first timers safe. Stability is a major factor here because large companies are less volatile, and that is good for novice investors. Tax-free long-term capital gains are another plus point for large cap funds.
Index Funds
The portfolio of these funds is an index and these hold stocks in exactly the same proportion as their weight in the index. No fund manager risk is entailed in these funds, as there is no call taken by them to increase or decrease holdings.
Tax Saving Funds
This is preferred by most retail investors, as this investment is eligible for tax deduction under Section 80 - C of the Income Tax Act. Because of having a three year lock-in, tax saving funds are considered advantageous. However, some financial planners consider them not so good for beginners.
Apart from this, there are other factors that need to be taken into consideration before investing for the very first time. Do consult your financial advisor before you make the decision.
0 comments: