Invest for Long Term
A long-term investment is always beneficial as the investor gets the benefit of compounding. When money is invested for a longer period of time, interest on interest is earned, thereby making the money compound into a large sum.
|Particulars||Value of monthly investment of Rs 10,000 invested for different periods|
|Monthly investment (SIP)||Rs. 10,000||Rs. 10,000||Rs. 10,000|
|No. of Years||10||15||20|
|Future value of the investment||Rs. 24,92,923||Rs. 56,52,071||Rs. 1,17,34,741|
The above table shows that a monthly investment of Rs. 10,000 for 10 years results into a future value of Rs. 24,92,923. If an individual remains invested for 5 more years, i.e. 15 years, the value becomes almost double - Rs. 56,52,071. Investing for a period of 20 years results in a future value of Rs. 1,17,34,741.
So, a monthly investment of Rs. 10,000 can help you become a crorepati in 20 years.
Mutual fund companies distribute earnings to its shareholders in the form of dividends. This payout is usually on a quarterly basis, from the interest generated by the fund’s investments.
Know all the expenses
If you investing in Mutual funds just to save on tax liabilities is not the right approach towards investing. You should look at MF investment in terms of wealth creation over a long period of time. At the same time, make sure you assess correctly how much tax you are saving on the total amount invested. Also, make a note of all the other expenses - exit load, expense ratio etc. The bottom line is that you should get the value for what you pay.
Goal-based Mutual Fund investment
You should be very clear with issues such as investment objective and what you aim to achieve from investing in MFs. There can be a number of reasons for investing:
- If you want to invest for a period of 1-3 years then putting your money in debt funds is a good option.. Floating rate funds is the best option in a rising interest rate scenario, while in a falling interest rate scenario, income/bond funds are considered to be a good investment.
- If the goals are 3-6 years away, one should invest in a combination of debt and equity based funds.
- If you are willing to keep your investment locked away for a period of 8-10 years, equity investment is the best option. Equity has the potential to beat inflation and provide exceptional returns over a longer period of time.