The new year is approaching and we have received lots of queries regarding which mutual fund is good, which will give more return in next year i.e. 2018.
The typical answer is that it depends on individual choices regarding taking on risk, asset allocation, financial goals & investment horizon (how long you intend to stay invested).
For a simple calculation, we are posting here with an example.
After deducting your expenses from your salary, decide on a small amount of money (Anything between Rs. 500 & Rs. 5000). This will be your monthly investment. This money should NOT be considered as your emergency fund. Make sure that you can do well without this money for at least 2 years (if not more). This is the monthly transaction amount for Systematic Investment Plan (SIP), which is nothing but a predetermined amount of money automatically transferred from your bank on a predetermined date every month.
If you are a taxpayer and haven’t availed the benefits of Section 80C already, choose a 4 or 5 star rated Tax Saver Fund. If you have availed the 80C benefits, then move on to next step.
Decide whether you want to take on low risk or if you are feeling a little adventurous.
Pick any 4 or 5 stars rated fund using Money Control or Value Research. If you choose to belong to the low-risk category, we will be choosing a Hybrid: Debt-oriented Conservative fund. If you want to take on more risk, choose a Balanced fund.
Keep in mind that the type of plan you need to buy is a Direct Growth Plan and not a regular growth or dividend plan.
Once you pick a fund of your choice, use ORO Wealth, Zerodha Coin or Invezta, All three are reputable services for investing in mutual funds right from home. There are tons of other means, but I chose these three for being idiot friendly, for having good customer service and for allowing transacting of direct mutual funds which are commission free. For the one time KYC procedure, you will need a PAN card and address proof. Then you need a bank account with the balance in it.
Start investing automatically every month through the SIP mechanism. Happy Investing & Happy New year.