1. Why a mutual fund is ideal for a first-time equity investor

Why a mutual fund is ideal for a first-time equity investor

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.

Updated: May 29, 2017 4:56 AM
mutual fund, equity investor, Mutual fund investment, Stock market, Stock market in India, indian stock market, Mutual fund route, Systematic Investment Plans, SEBI, Risky direct investment On the other hand, stock market professions make money from the market because they research about the fundamentals of stocks. (Image: IE)

Kaushlendra Singh Sengar

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.

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.

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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 3-4 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.

The writer is founder & CEO, Advisorymandi.com

  1. sarvesh gupta
    Jun 2, 2017 at 11:32 pm
    dear sir need FIIs investment of rs 2 crore $ to my start up company sir in India under feral policy and promotions sir
    Reply

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