Which is the best mutual fund to invest in?
Is that even a right question to ask?
Is there any one best scheme for everyone?
How do you determine the best scheme for you?
In this episode, Anmol talks about factors on which best scheme for you depends upon.
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Disclaimer: This podcast is for educational purposes only. Anything said should not be construed as advice. Make your investments only after consulting your financial advisor. If you're interested in our financial planning service, visit us at: www.7prosper.com
Can a doctor tell you that which medicine is the best? No, right? This is because you are prescribed medicines on the basis of your illness and health conditions. And health conditions vary from person to person and on the basis of that, how many dosages you require also vary, right?
So there is no one best medicine for all the people.
Similarly, "Which mutual fund is the best?", is not the right question to ask because there are thousands of mutual fund schemes and most of them are good. But which mutual fund scheme is good for you depends on two factors.
First, what are you financial goals?
What is purpose of investing your money. If you want to purchase a car in 2 years, then it is considered as a short term goal. For short term goals, you can invest your money in fixed deposit, recurring deposit, or if you want to invest in mutual funds, you can go for debt mutual funds which are considered as safe mutual funds.
For short term goals, if we invest in equity mutual funds or those mutual funds that invest in stocks, then our money will be at risk.
If you want to purchase a house in 10 years, then 10 years is considered as long term. For long term goals, you can invest in equity mutual funds, or mutual funds that invest in stocks because investing in equity mutual funds for long term is less risky and there are chances of getting more returns.
Now if if you want to refine your question about which mutual fund is the best, then you can ask that which debt mutual mutual funds are good for short term goals and which equity mutual funds are good for long term goals.
The second important factor to decide the best mutual fund scheme for you is how much risk you are willing to take.
Risk taking ability depends on two things,
1. What is your psychological attitude? How comfortable are you to deal with volatility?
2. How stable is your financial condition?
The more stable your financial condition is, higher is the risk you will be able to absorb. Hence, if your risk taking ability is high, you can invest more in equity mutual funds and if your risk taking ability is low, then you will invest more in debt mutual funds.
So your financial goals and your risk taking ability decides that which mutual fund scheme is the best for you. There are thousands of schemes and most of them are good. But which mutual fund is the best for you depends on your condition.
To make it easier, every mutual fund scheme is given a specific category. Those categories can help you a lot in determining that whether a particular scheme is good for your conditions, goals and is according to you risk taking ability or not. And there are more than 30 categories of mutual funds and I will talk about all those categories in my upcoming episodes.
Hence, stay tuned.
I am your host Anmol Gupta for the show "Money Ki Baat".
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