Investing over the long term not only helps generate attractive returns, but also significantly reduces risk. This is especially true in case of investments in equity. The ideal way to invest for the long term (whether in equity funds, debt funds or hybrid funds) is through mutual funds.
Mutual Funds can be classified as long-term and short-term funds:
Long-term mutual funds: These are funds which can help you create wealth over a long period of time so that you can easily meet your financial goals. Usually they are equity-oriented funds. This is because equities can help you generate the returns required to build the kitty required for your goals. Such funds may be volatile over brief periods. However, over the long term, they have the potential to outperform all other modes of investment.
Short-term mutual funds: Short-term funds are those comparable to fixed deposits. They are less volatile than equities. Usually they are Liquid Funds or Short Term Debt Funds which invest in debt papers of below six months. Ideally such funds may be used for parking your liquid money before it is deployed for a specific purpose.
Investing in equity-oriented funds for the long term (5 years and above) has the potential to offer attractive returns. Besides, the longer you stay invested, lower is the investment risk. The key to successful long term investing in selecting the right equity-oriented funds and remaining invested for a long period of time. Here are some pointers for picking long-term mutual funds:
In order to be a successful long-term investor, it is very important to maintain the discipline of investing irrespective of market conditions. The day-to-day news flows makes investors nervous and they tend to pull out of equities. Such investors miss out on the long-term benefits of equity investing.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.