First-time Equity Investor : Is Mutual fund Ideal?
by Mr. Kaushlendra Singh Sengar, Advisorymandi.com
If you are new to stock market, then it is
advisable not to invest without knowledge.
Stock market is not a gamble, it is a
business.
However, we make it a gamble by investing
without knowledge.
On the other hand, stock market professions
make money from the market because they research about the fundamentals of
stocks and have wide experience selecting stocks.
1. Mutual fund route..!
Ideally, one must take help from expert fund
manager to manage your funds in stock market. Mutual funds collects money from
investors and invests in stocks.
They charge a nominal fees as fund management
charges for investing your money in stocks. Mutual fund houses are regulated by
Securities and Exchange Board of India (SEBI).
In mutual funds, first time investors should
look at Systematic Investment Plans (SIPs) to build long-term wealth. SIPs
allow an investor to buy units on a given date each month. One can start with a
minimum amount of Rs. 500.
The biggest advantage of an SIP is that the
investor doesn’t have to time the market. Investing every month ensures that
one is invested during the highs and the lows
To be sure, SIPs make the volatility in the
market work in favour of an investor and help average out the cost. More units
are purchased when a scheme’s net asset value (NAV) is low and fewer units are
bought when the NAV is high.
When the two situations are analysed
together, the cost is averaged out and, the longer the time-frame of the
investment, the larger will be the benefits of averaging.
2. Risky direct investment..!
If you are directly investing in stock market
it can be a risky proposition. Suppose you bet on 10 different companies
stocks, out of them you will get an average success in 3 to 4 stocks, but if
the same thing is done by expert than the accuracy can be much more.
If you are an active investor and having some
risk appetite than go for equity mutual fund and you are passive investor with
less risk appetite than invest in debt or balanced mutual fund.
There are different types of mutual funds
scheme available in the market. Investing in equity-linked savings schemes will
get you tax benefit, too.
About the author..
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