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AxisDirect-O-Nomics
Jul 29, 2019 | Source: www.financialexpress.com
Women today are more independent, confident and aware in terms of making their own investment decisions. With the awareness surrounding mutual funds steadily on rise, an increasing number of women across various age groups and income levels are making mutual fund investments. While mutual funds are a suitable investment tool for making short as well as long-term investments, there are certain factors every prospective women investor must be well versed with.
Identify and prioritise your financial goals
Before you start investing in mutual funds, be sure to identify and prioritize your financial goals. Your mutual fund investment must be linked to specific financial goal to ensure better direction to your investment. For woman, financial goals and their priorities differ basis her age, financial condition, number of dependents etc. For example, for an unmarried woman, the financial goal of building a corpus for marriage may be of greater importance while for a mother, accumulating corpus for her child’s higher education would be of priority, since with the rising education cost, her spouse’s savings may not be adequate.
Avoid basing your fund’s selection on NAVs
When selecting a fund, some investors are attracted by lower NAV, since it is cheaper than the fund priced at higher NAV. NAV is per unit price of a fund, which depends upon the AUM and total outstanding units of the fund. For instance, if you invest Rs 10,000 each in 2 funds having NAV of Rs 20 (fund X) and Rs 50 (fund Y), respectively, the different NAVs imply that you hold 500 units of X and 200 units of Y, total value of both being the same, i.e. Rs. 10,000. So, whether NAV of a fund is high or low, it would only change the number of units owned by the investor and is never an indicator of the performance or status of the fund, and therefore should not affect your viewpoint while choosing a fund to build your portfolio. Instead, when evaluating a fund, look at the returns and portfolio of the fund over various time period and then compare it to the benchmark indices and peer funds.
Pick a fund based on your risk profile, investment horizon & expected returns
The choice of funds, whether debt or equity, primarily depends on the investor’s risk appetite, investment horizon and expected returns. If you have a low-risk appetite and are looking to invest to attain short- term goals (1 to 3 years), then short-term debt funds would be an appropriate choice. However, if you have moderate to high-risk appetite, equity mutual fund is a prudent choice to fulfil your long-term goals (5 years and above). This is because equities have the potential to outperform fixed income instruments and inflation by a wide margin in the long run.
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