Investment: Now is the right time

We need to start our investments as early as possible. Now is the right time to start the investments if we are earning.

We should create a diversified portfolio to minimize the risk involved in investing. We can invest in Fixed deposits, recurring deposits, gold, government bonds, mutual funds and stock or any combinations to create wealth.

Once we have created a portfolio, it will start generating incomes in the forms of interests, dividends and capital appreciation. The financial portfolio will reach to a stage of it being working hard for us to cover our monthly expenses too.  

Investment: Debt funds

In mutual funds, we have the option to select equity fund, index fund, sectorial fund and debt fund.

Debt fund is the fund that invest bonds and non-existant convertible debentures (NCD). It is better to invest in a fund that invests in government bonds and NCD of high rated companies.

Some may feel it safe to start a SIP in a equity fund and later start a STP to a debt fund from the equity fund. 

Selecting the right funds become the backbone of the mutual funds investments.

Investment: An asset

Is investment an asset?
Yes,  if we are investing for a long time. If it is not consumed too early, our investments are the assets. Like land and house are hold for a long time.

Investments like shares, mutual funds, gold,  bonds, retirement savings are assets. These assets can be held for the longer time. The ownership of these assets can be transferred from generation to generation till they are sold to change the ownership.

These assets are such that if one does not own it,  another will own it.

So we must hold our investments as long as we can and enjoy the growth our assets. 

Investment: SIP & Lumpsum

We have two modes of investment.
1) SIP
2) Lumpsum

SIP or Systematic investment plan is investing a certain amount for a period of time. If we invest Rs. 1000 for 40 years @ 13%, we can expect the investment value above 1 crore. Here the invested amount is Rs. 480000.

Lumpsum is one time investment for a period of time. If we invest Rs. 100000 for 40 years @ 13%, our investments will grow above 1 Crore. Here the investment amount remains the same - Rs. 1 lakh.

In the investment type where the return is uncertain, SIP mode will be the best option to invest. ln mutual fund we can buy more units when the market is not performing well.

Investment: Growth and dividend

Investing in mutual fund has two options:
1. Growth
2. Dividend

Growth mutual funds are the funds that invest in growing companies. Growth option is accumulating of SIP amounts till the investor decides to redeem the amount or withdraw in the form of SWP. In this growth fund investments, investors enjoy the benefits similar to compound interest.

Investors can choose for monthly, quarterly or yearly payout of dividends. The dividend payout is not fixed. Here investors enjoy the benefits of investing in the companies that declare dividends.

Investment: SIP, SWP, STP & Switch

We all know we can start a systematic investment plan (SIP) in mutual fund and shares where we invest a certain amount for a long period.

After accumulation of wealth, we have the option of systematic withdrawal plan (SWP) where we can plan our withdrawal of a certain amount monthly, quarterly or yearly.

When we near our retirement, we can transfer our accumulated wealth from a equity fund to a debt fund. Systematic transfer plan (STP)  is the process to transfer the money monthly, quarterly or yearly.

If we want to change from one fund to another,  we can switch it partially or wholly. 

Investment: Diversification

Do not put all the eggs in a basket.  It means do not put all the money in a single investment. Here comes the diversification of investments.

Investing is as important as its diversifying. Plan the combination of four or five types of risky and non risky investments first and invest.

Young investors can take more risk than elderly investors. Young investors can invest majority of their investments in mutual funds and share market while elderly investors can take less risk concentrating more in investment plans with fixed return.

Investment: Gold

Investing in gold is a safe investment. Commonly, we invest in gold in the form of jewellery. Gold in jewellery form has the issue of storage. Banks provide storage facility which is chargeable. There is also making charge in case of jewellery.

We can start a Systematic Investment Plan (SIP)  in the gold funds from mutual funds. Mutual funds save us from storage and making charges.

Additionally, we can invest in ETFs. We must open a trading and demat account with a SEBI registered broker to invest in a gold ETF.

Government issues gold bonds for the investors who are looking for a long term investments. In sovereign gold bond,  investors get a declared interest in return per year till the maturity of the bond along with the maturity value. 

Investment: Types of Mutual funds

There is a lot of mutual funds for the investors to choose from. Investors can choose from the lot ranging from low risk to high risk funds.

Investors have the option to select any of the funds or diversify their portfolio with more than one fund. Once invested, the fund manager takes the job of investing the money in the stocks alloted for the fund.

Large cap fund is the least risky fund while small cap fund is the most risky one. Mid cap fund is also available for investors who are not willing to take too much risk. Multi cap fund is the combination of large, mid and small cap stocks, in addition to the fund with combination of investing in shares and debt instruments.

Apart from the above funds,  index funds, sectorial and thematic funds, liquid and debt funds are also available for investors to invest their money. 

Investment: Mutual Fund

After investing a certain amount which has immediate requirement in safe deposits, investors can move up to some risky options available to us like mutual funds and stock market.

A mutual fund pools investments from many investors to buy securities.

Investing in mutual is riskier than fixed and recurring bank and post office deposits, EPF and PPF.

They are subject to market risk. Investors who have no knowledge to invest in stock market directly, can invest in mutual funds. The selection of right funds is essential to create wealth in long term.