First time investment can be a risky bet for pretty much anyone and what should be the first time investment for anyone can be a tough question for many. If you are also pondering over the same, there are different criteria that need to be taken care of before investing, including your age, risk taking capacity, financial goals and more. Let’s think about mutual funds for your investment.
Do you know mutual funds is the money collected from large number of investors and later that money is invested into real estate stocks and bonds . It doesn’t matter how much amount of money you invest into funds, you are sure to get a part amount from the money invested. Investing in mutual funds will bring the risks to almost zero. In case you collect some amount of money for sure you will have something to invest in a unique stock, while funds accumulate money from large number of investors and thus lower the risk by investing in variety of instruments and stocks.
The truth is that mutual funds are actually not for every person. Multiple schemes are offered by AMCs (Asset Management Companies) with varying combinations related to risk returns, exposure, investment horizon, tax treatment and asset classes. However, it is essential to make the right decision.
To ensure selecting the best mutual funds schemes, you need undertake some thorough research on the web, especially if you are a first time investor and are not clear with all the conditions pertaining to the mutual funds. There are five crucial mantras that you need to follow. Only then can you enjoy getting better returns from your investments.
List of Categories
If you are willing to know about the best mutual fund categories, check below the complete list with benefits mentioned against each and how you can gain from them.
- Balanced Funds :- A combination of funds, popularly known as ‘hybrid funds’ put the investment both in debt and equity. Taxes are not levied on long term balanced funds. However, if you go for short term funds in case of balanced funds, you will be taxed. Dividends are tax free.
- Equity linked saving schemes :- The investment done with ELSS gives you tax benefit under Section 80C of Income Tax. Most of the first time mutual investors opt for these as ELSS have a lock in period of three years. This lock in period helps the first time investors to check the market fluctuations and not make changes instantly without understanding more about the market. You can invest any amount in ELSS there is no upper limit, but Tax benefit you will get only upto 1.5 lakh through the equity linked savings scheme.
- Large Cap Funds :- The large cap funds are only of the top 100 companies, which makes the first time investor feels safer. Large cap funds are more stable since large company shares offer lesser fluctuation compared to the small companies and medium size companies, making these a better investment option for the first time investors.
- MIP – Monthly Income Plans :- Another hybrid scheme, MIPs invest a larger share of your money in debt, keeping a smaller percentage for equity. Although the returns through an equity will be higher than what even most bank fixed deposits provide, but they are also risky. But, they seem to be a good option for the first time investor as they provide dividends in the form of monthly or quarterly income. Income gains through MIPs will be taxed for every individual, whether it is short term or long term.
- Index Funds :- The index funds are tracked through nifty or sensex. These are also a good option for the first time investors due to their lesser volatility. In case of Index funds, these are neither raised nor decreased, keeping the risks at minimum for the holder
These mutual fund schemes are some of the best options for a safer investment for the first time investors. If you are also planning to gain some monetary benefits from the mutual funds, but hesitant about which fund to select from, the above will give you some tips. You can also seek professional help from brokerage firms or brokers who will assist you with the right kind of first time mutual investment that will be beneficial for you for the first time.