Mutual Funds – Wealth Creator

We all have heard the quote “The richest 1% now has as much wealth as the rest of the world combined, according to Oxfam.” If we look at the top 1% we know that they are successful business owners. Trying to replicate them to success is a long drawn battle, whereas investing in their business as a shareholder is the easiest way to accumulate wealth. This brings us to world of Stock Market and Money Managers. Not everyone can be a successful investor as it needs time and patience, but the one with the interest can learn the ropes by starting with Mutual Funds.

What is a Mutual Fund?

A Mutual fund is an investment product created by professionals by pooling in money from different investors and investing in stocks, Debts, Gold and other security products. This provides the investor with the option of a diversified product in which they can invest in.

What is the Indian Market scenario in Mutual Funds?

The size of the Mutual Fund is evaluated by the Asset Under Management(AUM). In India the AUM has grown from 17.3 Trillion in 2017 to 38.01 Trillion as on Jan 2022. The growth has been more than 100% in span of 5 years.(Source: AMFI India)

The phenomenal growth shows us the investor confidence in Mutual Funds Product. The number of Accounts as on January 2022stands at 12.31 cr.

Rules to create wealth using Mutual Funds.

The process of wealth creation is a long process and is not a task that can be achieved in days, weeks or months. Patience and Time is the key – We have Mr.Warren Buffet as our living example, The most wealthy man in the universe started investing at the age of 10 and is still invested.

• Start as early as possible –The example in our daily life is a pre-cursor to start early. If we plan on driving a long distance we tend to start early in the day, Similarly if our goals are to achieve maximum wealth we need to start early with the habit of investment as we know the principle of Compounding helps us in reaching our target on-time.
• Have Long term View – Have your priorities right. Plan your needs as per short-term investments and Long-Term investments. Invest towards them accordingly. Your short-terms needs are to achieve your goals planned for the next 3 – 5 years. Your Long-term goal has to be the wealth accumulation.
• Look at a Diversified portfolio – We all know the proverb “Never keep all your eggs in one Basket” Similarly in the world of finance always look at portfolios which are diversified and invested across equities, debt, commodities etc. This will help in balancing your investments through the investment cycle.
• Know the fund & the fund manager – Age is just a number. Invest time to know the available funds in the market. Loog at the AAUM of the Fund, Look at the track record of the fund manager, Know the sectors the funds are invested into, Look at a performance of more than 5 years this will give you a idea how the fund manager has managed the fund during critical times. Look at the performance and then decide. Read the prospectus carefully.
• Know the charges – It is very important to know the charges levied by the funds for managing the money, The charges have moved from 1.5% to 2.5% over the last decade. Know the charges for switching the funds, Re-balancing, early cash out etc.

All the above pointers helps the investor to understand the performance and the risk appetite of the fund manager and the fund. Compare your risk appetite with that of the fund and make an informed decision to invest into the fund. Finally always track your funds and compare them with the reports distributed by the fund managers from time to time.