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Mutual funds are good investment vehicles because they spread market risks by diversifying & pooling resources…

It is said to be prudent to buy when the stock market is falling. I have understood the logic to buy low and sell high. I am not comfortable with direct stock investing. I wish to know if have to invest some money in stock market today since they are falling? Or should I invest in large-cap mutual funds or small cap funds? Please advice.
- M Kishan

Your observation is valid however; there is no way one can be sure when the market has hit the bottom to start investing. Moreover, stock selection is tricky, which is which is why mutual funds are a better investment vehicle because they spread the risk, diversify, pool resources and enable you to have proportional part ownership in several stocks instead of a few for the same sum that you can invest. In fact the systematic investment plan offered by mutual funds is a great tool to regularly invest small sums through market cycles to average your acquisition cost. The regular investment gains from averaging, power of compounding and the benefits of long-term investing and helps in wealth creation over time.
You should not invest blindly because the markets are falling; you should invest towards financial goals such as accumulating Rs 1 crore in 20 years towards your retirement and invest accordingly. The other advantage when investing in mutual funds is the choice of funds that you can invest in, there is broadly equity, debt and hybrid funds that further have variants which offers immense choice to match your investment objective and risk profile. As you are new to investing, you should start SIP investments in a balanced fund such as HDFC Balanced or HDFC Prudence and observe the way your investments progress before diversifying your portfolio. Remember, the key to successful mutual fund investing is to be regular, systematic and disciplined with investments and assessing their progress regularly.



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