Do you find it hard to grasp the concept of mutual funds and how an SIP works? These terms may seem as big and scary as King Kong, but in actuality, they aren’t. And to simplify things further, we found the one thing that has served as a nation unifier and a national time-pass for decades – cricket.
We all love cricket, so here’s a comparison between the game and mutual funds that will help you understand the latter better.
Take a cue from cricket and learn to invest in mutual funds
Lesson number 1: Selection is key
Ever wondered why player auctions are such a big deal? Getting the right players can make or break the team. The same is essential for mutual funds. Picking the right types of mutual funds is very important, and this can be done on the basis of your goals and risk appetite. The funds you choose should be able to perform in alignment with your investment budget, risk appetite, future needs, taxes, and more.
For instance, a small-cap fund can offer exponential growth and exposure to quality small size companies. Alternatively, some mid-cap funds invest in mid and small companies and avoid large cap companies. You can pick anything based on your needs.
Lesson number 2: Diversification is important
A team of only bowlers will likely fail at batting. But a team of bowlers, fielders, and batters can give a tough competition. The same is true with mutual fund investments. When investing in mutual funds, it is important to keep a diversified mix of different asset classes like equity, debt, hybrid, etc. This gives you a well-rounded performance and helps you balance risks and returns.
Lesson number 3: Small contributions matter
To win a match, you don’t necessarily need fours and sixes. Sometimes, steady singles and doubles also bring home the trophy. Playing consistently with ones and twos and staying on the field till the end is far better than hitting a couple of good shots and getting out early.
Consistency is the backbone of mutual fund investing too and it can be achieved through long-term SIPs. A Systematic Investment Plan refers to small, regular investments in a mutual fund, such as weekly, monthly, etc. You may be investing small amounts when you invest in a mutual fund scheme through an SIP online or offline, but these smaller instalments can help you amass a sizeable corpus over time.
There are several benefits of SIPs, such as ease of investing, less burden on your budget, rupee cost averaging, where you get more units when the prices are low and vice versa, so your investment cost is averaged out, and more.
Lesson number 4:Performance reviews are a must
Players huddle during breaks to review their performance and act accordingly. Likewise, you must review your mutual fund portfolio at regular intervals. This activity will help you ensure that your investments are in line with your financial goals. Portfolio reviews can be monthly, quarterly, half-yearly or even annually depending on your situation.
Lesson number 5: Expert guidance can’t be ignored
A game is won not only by a good team but also by a good coach and mentor. The same is true for investments. A financial advisor can help you navigate the investment world. They can help you chart out an effective investment plan that can, in turn, help you meet your investment goals.
Conclusion
If you want to learn to invest in mutual funds, you can safely turn to cricket for inspiration. After all, it teaches the importance of balance, consistency, reviews, guidance and other important aspects of investing.
An investor education initiative by Edelweiss Mutual Fund
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS,
READ ALL SCHEME RELATED DOCUMENTS CAREFULLY
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
