Posted On Saturday, Sep 19, 2020
Do you know what could be one of the most popular financial goals, when it comes to investing via mutual funds?
While many of you would say - retirement, we would like to let you know that its actually wealth creation.
In this article, we discuss how to create wealth by investing in mutual funds.
All you have to do is follow 2 rules.
1. Invest first, spend later
2. Invest wisely
While rule #1 is self-explanatory, rule #2 is also quite easy to implement.
"But what is 'wisely' exactly?", we hear you asking.
If you don't find a way to make money while you sleep,
you will work until you die.
- Great words by Warren Buffett
You see, the key to investing wisely is to make sure your money grows even while you are sleeping.
And a good way to do that is to invest in mutual funds.
Of course, mutual fund investments are subject to market risks (rings a bell, right?!). But aren't most of your traditional investment avenues subject to some kind of risk too?
Yes, mutual funds could be your sahi way to invest, as AMFI says.
It gives your money the professional fund management experience.
It makes wealth creation easy.
To generate wealth one can invest in diversified equity mutual funds.
Equity mutual funds have the potential to give you higher returns with higher risk. Investing for long term will help you generate risk adjusted returns.
Keep it simple.
Understand, too many funds can dampen your overall portfolio return.
To make it hassle free, invest in an equity fund of funds.
Equity fund of funds is basically a single fund that in turn invests your money in a basket of best equity funds based on its investment strategy. The Fund manager uses their expert skills and creates a portfolio of equity funds that he/she thinks has the potential to generate returns over the long term.
Other than equity fund of funds, you can also consider investing in value based equity funds.
Given the economic uncertainty we are in already at a global level, the value based equity funds aim to deliver risk adjusted returns.
Fun Fact - An equity fund manager following a value based strategy believes risk is the likelihood of permanent loss of capital. (Thus they always strive to achieve returns but at the same time also control risk)
Any better way to further explain value investing?
The roots of value investing can be traced back to Warren Buffett's mentor Benjamin Graham, who laid them out most accessibly nearly 70 years ago in his book The Intelligent Investor (to which Mr. Buffett has referred as "by far the best book on investing ever written"). In it, Mr. Graham advocates the value investing philosophy as diligently buying out-of-favor stocks.
Moving ahead, there is more...
There is yet another considerably novel style of equity investing in India.
The ESG funds. These are great way towards sustainable investing while aiming to build wealth.
Recently our senior fund manager, Chirag Mehta, explained how ESG investing is one of the fastest growing investment opportunity globally.
Investment as per ESG methodology helps to enhance returns. This is perhaps the most noteworthy investment idea of 2020 and beyond. A closer look at the ESG index gives us some clear insights.
The below table shows how Nifty 100 ESG Index has indeed majority of times have outperformed the Nifty 100 Index.
|Calendar Year||Nifty 100 ESG Index||Nifty 100 Index||+/-|
Source: NSE India, July 2020 - Past Performance may or may not be sustained in future.
But considering that ESG is a relatively new concept, it's advisable that investors completely understand it. Investors can start with allocating 20% of their equity portfolio to ESG funds considering his / her long term goals and risk profile.
A portfolio with a mix of all these equity funds could have the potential to generate risk adjusted returns over the long term.
Please understand, you don't need a huge pay cheque to lead the life of your dreams and fulfil your financial goals.
What you do need however is a prudent mutual fund investment strategy.
To dream big, you could just start small.
Systematic Investment Plan (SIP) is one of the most preferred ways to invest in a mutual fund wherein you pay a set amount for a set tenure.
Mutual Funds allow us to invest very small amounts (starting from Rs. 500/-) in SIP.
This makes investing easier as it does not strain our finances.
SIP, therefore, becomes one of the ideal ways to invest for a small investment in equity markets through mutual funds.
Go ahead, start building wealth via SIP.
Remember, building wealth takes time. Markets will continue to rise and fall.
Not even the best analyst can accurately predict the ebb and flow of the stock markets. There will be times when your fund won’t do well.
Do not be swayed by short term views and opinions which keep changing with the hour.
You will definitely reach your financial goals.
Editor's Note: To know more about how you can create wealth by investing in mutual funds write to us at [email protected] Or give us a missed call at +91-22-68293807 and we will call you back.
The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
Please visit – www.QuantumAMC.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.
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