\r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n You can invest little amount per month via Systematic Investment Plan (SIP) in mutual funds because,<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n In order to make perfect financial planning, you must have a clear view and a good understanding of the expenses that will be required to live even after your retirement. Many persons just start investing in mutual funds, just because it gives a better yield in the long term than the bank FDs. They are not aware of the risk associated with an investment in the stock market. On the other hand, mutual funds carry less risk. It is seen that mutual funds provide a satisfactory return after a long period.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Let\u2019s make it clear with the following example,<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Suppose you are of 30 years and you have got one daughter and a son and taken a home loan of Rs. 20 lakh which is to be repaid in the upcoming 20 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Home loan = Rs. 40 Lakh<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Education cost of children after 15 years = 30 Lakh<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Marriage cost of Daughter after 20 years = 40 Lakh<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your total cost in the upcoming 20 years = 40 + 30+ 40 = Rs. 1 Crore and 10 Lakh.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now let\u2019s calculate the desired corpus you need to accumulate when you retire at the age of 60 years if you have started your professional career at the age of 25 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your yearly salary \u2013 Rs.3, 00,000\/-, assuming Rs. 25,000\/- a month.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your yearly Household Expenses \u2013 Rs. 1, 80,000\/-, assuming Rs. 15,000\/- a month.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Term insurance premium \u2013 Rs. 7,000\/- assuming assured sum of Rs. 1 crore for a term of 35 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Health insurance premium \u2013 Rs. 8,000\/-, assuming a cover up to Rs. 5 lakh\/ year for a term of 35 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Expenses on festive seasons = Rs. 25,000\/-<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, your expected expenses throughout a year is = Rs. 1, 80,000\/- + Rs. 7,000\/- + Rs. 8,000\/- = Rs. 25,000\/- = Rs. 2, 20,000\/-.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Then, the expenses at the age of 60 years assuming a current inflation rate of 7% will be = Rs. 21 lakh. [excluded term insurance premium and health insurance premium since they are fixed at the time of buying].<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, you have to accumulate a corpus of [Rs. 21 Lakh \u00d7 20 years = Rs. 4.2 Crore] at the age of 60 years assuming you will live at least 80 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now, you need to consider the perfect asset allocation strategy and investment route to make an early retirement if want so.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n The asset allocation in different buckets enables you to manage or diversify the risk. Equity is such an asset class that has some moderate risk than the other asset class like a bond, debt securities. But historically, equity yields more returns over a long period of time. So, what will be your asset allocation irrespective of your age? A generally accepted trick is that you have to subtract your age from 100 to determine the percentage of your investment to the equity asset class.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Total value = 100<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your age = 30.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, you may invest [100-30] = 70% of your fund or capital in equities or stock market. The remaining 30% of your fund can be divided between corporate bonds and debt securities. If your risk appetite is high, for better returns over a long period of time you can make your 90% investment into equity or stock market before or on attaining the age of 30. Since you are young you can afford to wait and see for a long time. Therefore, any correction in the stock market may be a buying opportunity. Basically, the equity asset class has a record to yield more returns than any other asset class i.e., debt instruments over a long period of time.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n In order to pick the best Mutual funds for consistent returns, you should check out the following parameters of a fund before investing in it.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Usually, risk and returns are directly proportionate. The higher is the return the higher will be the risk involvement. Before making an investment you should consider your goals and then invest accordingly. Suppose you have a long time horizon of 20 years or above, you can consider the small-cap or mid-cap oriented mutual funds for investment. If you are a salaried person and will retire after 30 years then you can make a portfolio of small-cap or mid-cap mutual funds. Small-cap and mid-cap mutual funds have the potential to give you better returns, but they are more volatile as compared to the large-cap mutual funds.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n On the other hand, if you have a short time span of 5 years or less then you can invest in large-cap oriented mutual funds. Large caps are less volatile and can give you steady returns over the years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n If you want a long term capital appreciation you can opt for equity-oriented mutual funds. But to generate regular income with low risk, you can select income funds since these funds invest in govt. Securities, corporate bonds, debt instruments, etc. There are instances when investors cannot assume the risk. Therefore, a balanced fund is the best option to choose in this situation. Balanced funds invest your money in both equity and debt securities.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now, you need to analyze in which sectors the mutual funds make the investment. You need to consider the future potential of the sector, competitive advantage, whether the demand for the sectors or products will remain constant in the near future, the growth possibility, if the industry or the sector has any strong entry barrier, etc.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n We can take examples of mining and utility products. They have delivered better returns in the recent past, but now they are not able to deliver a satisfactory return and their future possibility is also less. So, as a smart investor, you need to choose such mutual funds that make the investment in such sectors that have an untapped market opportunity and a strong growth opportunity in the future. We are now going to discuss some sectors which have the following entry barriers.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n If you are\u00a0confused\u00a0how to analyse any sector, you may read the article\u00a0Top 10 best sectors to invest in India for long term<\/a><\/span><\/span><\/p>\r\n<\/blockquote>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Here are the top 11 sectors which fulfill the above-mentioned points.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\nWhy should you invest in Mutual Funds?<\/strong><\/span><\/h6>\r\n
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Set up a realistic corpus you need in the future by proper financial planning<\/strong><\/span><\/h6>\r\n
![\"Financial](\"http:\/\/capitalante.com\/wp-content\/uploads\/2020\/03\/Financial-Planning.png\")
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Retirement Planning<\/strong><\/span><\/h6>\r\n
Make a roadmap to reach your desired corpus<\/strong><\/span><\/h4>\r\n
<\/a><\/p>\r\nLet\u2019s illustrate,<\/strong><\/span><\/h6>\r\n
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How to Pick best Mutual Fund<\/strong><\/span><\/h6>\r\n
Identify the goal and risk tolerance<\/strong><\/span><\/h6>\r\n
Style & Fund type<\/strong><\/span><\/h6>\r\n
In which sectors the mutual funds invest the money from the retail investors?<\/strong><\/span><\/h6>\r\n
For Example,<\/strong><\/span><\/h6>\r\n
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Sectors to Invest<\/strong><\/span><\/h6>\r\n
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