Mutual Funds and Investment Planning

Changing lifestyle, jobuncertainties, high rate of inflation and chaotic market conditions is taking a toll on the income and savings of the people. Besides earning and saving money, financial planning should also be prioritised. It is now more than ever that people are required to follow a sound financial plan to remain financially competent both at present and in the future and also to be able to manage their finances properly.

Can an investor only depend on mutual funds for financial planning?

The mutual funds are deemed effective in financial planning as they are among the best market-linked instruments that aid investors in achieving their financial goals.  The mutual funds pool savings from the investors who tend to pursue a similar financial goal and make an investment with the aim of earning higher profits. The mutual fund redistributes the profits earned on the invested money and generates more income.

The mutual funds aid in the financial planning in the following ways:

  • Risk profile:A thorough financial plan enables investors to be aware of their risk tolerance. When an investor invests in mutual funds the basic step requires profiling their risk appetite before investing in a scheme. This move ultimately makes the investors aware of their level of risk tolerance and helps them manage their finances better.
  • Investment period:Depending on the market situation, the mutual fund investor put their money in long-term and short-term schemes to generate returns on their investments. A sound financial planning requires the investors to follow a systematic approach of investment that is spread over a feasible period of time. The mutual funds offer the investors with the choice of investing in schemes that have a flexible time period and can be customized as per their financial requirements.
  • Diversification: In order to manage one’s finances better, the investor must diversify their funds to harness the benefits of compounding and most importantly to lessen the burden of the risks associated with the investment. Mutual funds enable investors to invest in diverse funds including both traditional and non-traditional schemes. It helps the investors to balance their flow of returns and intensity of the risks involved.
  • Professional assistance: A good financial plan can be chalked out only if the investors have a thorough knowledge about the market and the tact of investing in it. When the investor chooses to invest in mutual funds they automatically avail the professional assistance of fund managers who help them to balance and redistribute the investment and associated risks on the basis of the market conditions at a low cost.

A sound financial plan acts as a security blanket for your finances. It is also important that you appoint professionals to do it for you. Only an expert can help you build a sound financial plan that takes into consideration all your financial requirements and at the same time is able to tackle the changing market conditions. Get in touch with our financial experts to help you plan your finances.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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