"Someone is sitting in the shade today because someone planted a tree long time ago”

                                                                                                    -Warren Buffett.

A right Investment in an economic sense can be defined as knowledge which pays the best return. Sounds interesting right? But the reason why people are hanging on the fence is all because of greed and fear. This raises a question whether it’s worth investing in mutual funds in today's economy

Why can’t we turn our savings into investments?

Initially you may keep your savings in a savings account with a bank. Please be certain that your bank is providing you with a competitive interest rate. But remember, interest in a savings account is very low.

You can earn money for you, but make your money work harder and earn for you. Invest your savings in financial products and assets which provide better return. Prudent investing is necessary to achieve your financial goals.

Saving Vs investing:

Saving is putting money aside in a safe place where it stays until you want to access it in a few days, a few months, or even several years. It might earn a little interest depending on where you put it, and it will be there for you in case of an emergency or to achieve the goal you're saving for.

Investing is the process of putting your money to work for you. When it is done properly, it can typically make more money for you than the interest you might earn in a nice, safe savings account.

No more worries on investing:

Saving a small amount today will leads to a bigger amount. You realize how saving even small amounts during earlier years could have made your future comfortable. There is no harm in living life to the fullest. But by starting saving at an early age, no matter how small the amounts are, you can definitely take off the pressure when you are close to retirement.

Which is best?

One can get a doubt that which is best to invest either systematic investment plan (SIP) or Lumpsum investment. There is a difference between the cash flows – in case of lump sum investing, the investor has money in hand that can be invested. Whereas in case of SIP, the investor may not have lump sum in hand and may have regular surplus expected in future. If a person does not have lump sum money available to invest, there is no question of one investing at one go. Similarly, if there is a person whose future income is uncertain, SIP is out of question.

It is different from person to person

Salaried investor: A salaried person has a regular cash flow; hence, investing in SIP is a better approach. However, if you get a lump sum in the form of bonus etc. you may look to invest it in a lump sum though with some precautions.

New Investors: If you are investing for the first time, do take the SIP route. The markets are volatile and seeing the value of the investment going down can cause jitters for any investor and more so for a new investor who is not used to market volatilities.

Investing for Short Term: If you are investing for short term, say for 3 years to buy a car, then you should go for lump sum and get your money to work immediately. Also, since for short term goals debt funds are a better choice, lump sum will give you better returns than SIP.

Windfall gain: In case you get money as a windfall, for example a bonus, then you may use the STP (Systematic Transfer Plan) option look to invest it as a lump sum in a liquid fund and then transfer a fixed amount per month to an Equity Fund of your choice. Here are few of the main conclusions of SIP or lump sum which you can derive from this post.

  • SIP can reduce the market fluctuation risks by Rupee cost averaging.
  • Invest in the lump sum when the market is continuously rising.
  • Invest in SIP when the prices are falling/

Market situation and opportunity also drives the investment strategy from time to time.

Will I get profit every time if I invest in Mutual funds?

Before coming into the risk factor in mutual funds let me explain how Mutual funds functions in the market.

Risk Analysis:

It is not possible to avoid risk entirely when investor invests in market. However its worth and important to invest in mutual funds with means of effort, goal, knowledge, right decision, patience. If investor choose the right product should stick to the discipline even losses can be tolerable. Apart from this investor need to do is pick schemes that match their goals. Mutual Funds will help investors to create wealth for their long-term goals.

Now the biggest question is Will my Rs. 100 remain Rs. 100 if I invest in Mutual funds?

  • If you are talking about a day In case the stock market goes down the day after you invest, then your Rs. 100 will surely go down

  • If you are talking about a week - Incase the stock market is in a downtrend, like it is now currently since 1 week, then your Rs. 100 will surely go down.

  • If you are talking about a month - Incase it is the results season for the companies on the stock market and the results are bad, then your Rs. 100 will surely go down.

  • If you are talking about a year - There is no guarantee but the possibility of your Rs. 100 going up is very high.

  • If you are talking about long term period – Let’s say if you hold for more than 3 years the chances of getting profit is more and the returns are also high.
Equity Mutual Funds: Most retail investors invest in these funds but these are risky so there is possibility to lose money but returns expectation is high (15–20%)

Debt Mutual Funds: Corporates invest in it and they are safer, possibility to lose money is less and also returns are low (8–12%)