How Financial Planning with Mutual Fund investment can help you during the Pandemic?

The pandemic is a reminder that unexpected events can happen anytime and can wreak havoc on your finances, impacting your wealth creation goals. This has called for a proactive approach in financial..

According to AMFI, mutual funds in India have achieved Rs. Rs. 92900 cr net inflow in April 2021. There are different types of mutual fund investment suitable for every investor risk profile. Largely there are three types of mutual funds which are Equity Mutual Fund, Debt Mutual Fund and Hybrid Funds.

Equity Mutual Funds

An Equity Mutual Fund is a type of mutual fund that help you achieve capital appreciation over the long term by taking on market risk. Equity mutual fund investments are volatile and is suitable for long term investment.

Debt Mutual Funds

A debt fund is a type of Mutual Fund also referred to as a Fixed Income Fund or a Bond Fund that invests in fixed income instruments, such as Government and Corporate Bonds, corporate debt securities, and money market instruments etc. Debt Mutual Fund Investments are generally less volatile than equity mutual funds. During uncertain times, it is natural for investors to divert their investments from riskier asset classes such as equities and move to mutual fund investment plans such as Debt Funds to park their money. However, care must to be taken to redeem only in the case of an actual need. Untimely exits from mutual fund investment plans can prove detrimental to your wealth creation plans.

Liquid Funds

Liquid fund is a type of Debt Mutual Fund that invest in debt and money market securities with maturities of up to 91 days. Liquid Fund and overnight funds contributed nearly Rs 60,000 cr in the month of April as per AMFI.  Liquid Funds can meet the liquidity needs in case of emergencies such as medical expenses or unexpected travel, etc. Liquid mutual fund returns would typically be related to the prevailing short term interest rates which means the impact of any interest rate changes may be negligible.

Hybrid Funds

Hybrid Fund is a type of mutual fund that invests in both Equities and Debt instruments. Examples would be Balanced Fund, Multi Asset Fund, etc.

How to invest in mutual funds

Mutual Fund investments can be started by using any mode of investment, i.e. start investing through an SIP or through a lumpsum. An SIP (Systematic Investment Plan) is where you invest a fixed amount every month. Whereas lumpsum investment refers to a one-time mutual fund investment in a chosen mutual fund of your choice. You can make use of mutual fund investment calculator that help you determine what is the SIP or lumpsum amount you need to invest to achieve your desired financial goal.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.