Investing in Mutual Funds is not investing in Equities

You ask any person these days to invest in Mutual funds and they will tell you the market is high, what has the market got to do with Mutual Funds. It has a lots to do, but only if you are invested in Equity mutual funds. This has happened because of the high amount of advertisement about returns in Equity Mutual Funds as well as the wrong selling by mutual fund distributors. Commissions to distributors was high in case of Equity Mutual Funds, hence they used to sell equity mutual funds. But Mutual Funds is not just Equity, there are different types of funds for different goals and also based on your investment timeframe.

If people have money lying with them and they would like to use it for the contingency purposes, then people usually keep the money in Savings bank account or fixed deposits. This money could also be kept in Liquid funds as there is no entry or exit load and the returns are better than the savings interest rate. You might say then I could keep in fixed deposits, this is one option, but when you withdraw prematurely you lose on the interest. So effectively liquid funds are better.

Investors are also scared because of the volatility of the market and would like to keep their investments safe, in such cases investors could go for Debt mutual funds. If your goal is to buy gold for your child’s wedding,   then go for gold ETF’s. This way you would slowly start accumulating gold in paper form and when you need to buy, just redeem the investment and buy the gold. This is safer than buying physical gold. Remember the designs also will keep changing so it is better to keep the money aside and buy actually when required. This also takes care of the rise or fall in the cost of gold.

In some time we would have real estate funds. So as you can see, you can invest in mutual funds depending on your goal and risk appetite. Equity in not the only option in mutual funds. In equity too, you have options, depending on your risk appetite, aggressive or conservative. In debt too you could go for hybrid funds, where you capital is kept safe and equity is used for returns. As mentioned above, mutual fund investment in not just equity investment. You can do investments in mutual funds depending on various factors. Depending on your risk appetite and investment horizon choose your fund. Don’t just go for equity mutual funds just because they give you good returns. Remember Equity mutual funds are for those whose investment horizon is minimum 7 to 10 years.