Planning of making your first investment?

One of the first excitements after you start earning is to make your first investment. You are curious as to the ways you can make the investment and if you have to just start small and choose amongst the many options to take the plunge. Just like any other first time investor, you are bound to come across many ideas from friends, colleagues and well wishers and probably, one of them would be mutual fund investments.

What is mutual fund?

A mutual fund is an investment programme that is promoted or created by shareholders amongst diversified holdings and trading. This is professionally managed and you would have experts looking after your investment, giving you a massive benefit. The mutual fund definition itself means creating a portfolio among different companies so as to get a balanced return.

How to make an investment?

One of the first tips for investment in a mutual fund is to understand the kind of companies that are going to be a part of the portfolio and the period of investment. You can gauge an approximate of the growth thinking about the industry as well as the exit time horizon. You would know how long you would be participating in the mutual fund as a whole too. It is key to understand what the estimates are from the mutual fund investments and how you can get the best results from it.

The main idea would be to keep a close watch on the growth of the fund and since it is one of the first investments to make, you can choose similar funds in the future. It is important to notice that these predictions being made are by experts and that they would consider the past and present market conditions to determine the future growth of the mutual fund.

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Why You Should Invest in Mutual Funds in 2015?

Mutual Funds are some of the most sought after investment opportunities. They offer good returns and a great sense of security that most other investment opportunities cannot provide for their investors. At the start of the year, mutual funds faced a slump of sorts, but market analysts expect the year to be quite fruitful for those who have made the smart decision of investing their money in mutual funds. However, those who have predicted good returns from the market have also stated that these returns will depend on certain factors that will act as benchmarks for the market through the year. These benchmarks include the pricing of crude oil, which saw a slump last year, and a hike in the rates of the Central Bank.

Mutual Funds

The decrease in the crude oil prices hit the energy sector in a bad way. At the end of 2014, energy mutual funds were seen as the biggest losers, and these doesn’t seem to be any respite in sight for these funds. On the other hand, this slump in prices has been most beneficial for airlines, as airline stocks skyrocketed. Therefore, on the whole, the lowering of crude oil prices has benefitted the market.

After the financial crisis in 2008, the Federal Reserve System set up some aggressive measures in the form of rates being at an all-time low, and repurchasing assets. The central bank completed its 3 rounds of repurchases by October 2014, but they continued to keep their rates low. It is however expected that they will raise the rates during this year, which will have a positive effect on the market, as profit margins are expected to rise.

Based on the market expectation, market analysts have handpicked the T. Rowe Price Health Sciences Fund, the Fidelity Select Transportation Fund, and the T. Rowe Price Global Technology Fund as the three funds to have invested in this year. They feel that these funds are most likely to give you the best returns for your money. Always remember to check all fund documents before you finally decide where to invest your money.

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How to profit on your Mutual Fund investments

In India, saving money is always something we are taught to do from a young age. We are not a society that lives on credit. We firmly believe that being cautious with our money is the best route towards success. However, due to this nature, we are not prone to invest in financial products that do not provide a good measure of security. It is for this reason that mutual fund investments are a big part of the financial market in our country. They allow us to generate some income from the money we invest, while still providing a lower level of risk when compared to other investment products.

The reason for the success of mutual funds in India is that the risk to individual investors is lowered simply because he is not investing alone. The funds operate by obtaining capital from multiple investors and then investing the total amount into various equities and securities. The rate of return on the funds depends entirely on how the fund is managed and where the money is being invested. Usually funds that invest either entirely or mostly in equity, yield a higher rate of return but are also higher in risk due to the fact that they are affected by changes in the market. Meanwhile funds that invest in long term security, such as government bonds, offer a much lower risk but also offer much lower rates of returns to the investors.

In order to determine the rate of return for investors, mutual funds sell units within the fund to investors, based on the money they put in. The value of each unit is known as the net asset value or the mutual fund NAV. The more units an investor purchases, the higher are the returns he receives. The value of these units may fluctuate based on market conditions and on how well the fund is doing due to these conditions.

The funds also vary in terms of time-period. It is therefore very important for the investor to know before he invests how long he can invest his money for. Usually, most equity funds are of a shorter term than those that invest in long term securities. In fact, investors should take a lot of factors into consideration when investing, such as how much they are willing to invest in total, whether they can invest regularly in the fund, if they choose an SIP fund and also the amount of risk they are willing to take with their investments.

Mutual funds are usually managed by fund management companies or by fund managers, and they provide with a prospectus that contains all the details of the fund. The objective and goals of the funds are all mentioned in this document and it is important for an investor to understand every aspect of the document so that they know how the fund operates and how their money is being invested.

It is important for investors to get professional advice before investing in the funds because they are not as well versed with the market conditions as professionals. However, they should be aware that it is their financial objectives that are important and that it is their money that is being invested and so should insist on courses of action they best feel realises these goals.

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