A mutual fund, as the name implies, collects money from multiple investors and invests it in shares of publicly traded companies, government bonds, corporate bonds, short-term money-market instruments, and other securities.
As an investor, you share a mutual fund scheme’s profits or losses in proportion to your investments.
Mutual Fund houses (also known as Asset Management Companies) typically offer a variety of schemes that are launched regularly with varying investment objectives. Schemes could be either open-ended or closed-ended.
The following are five advantages of making axis mutual fund:
- Potentially higher returns – With a longer investment horizon, the power of compounding will work in your favor, and the interim volatility will be evened out. Consider the friendship of Raju and Sanju. Raju, 30, and Sanju, 35, both began a monthly SIP of Rs 10,000 in large-cap equity mutual funds. Both continued to contribute to their SIPs until they retired at the age of 60. Raju was able to build a corpus of approximately Rs 1.90 crore in 25 years with a longer investment tenure of 30 years, whereas Sanju was able to build a corpus of approximately Rs 3.53 crore with a longer investment tenure of 30 years.It is not always possible to amass enormous wealth in a short time. As a result, you must allow enough time for your investments to grow. And, even if you’ve had good results in the past, don’t expect the same results in the future.
- Aid in risk mitigation – When you have a short investment horizon, there is a risk of capital erosion due to negative undercurrents at work. However, with favorable tailwinds and macroeconomic conditions, in the long run, your market-linked investments may have the potential to grow.
- Allows you to correct mistakes – The long-term investment strategy allows us to learn from our mistakes and seek a course correction. This does not imply that you should abandon the investment if it does not perform well in the short or medium term. If the underlying fundamentals do not justify keeping the investment, correct the error. If you own fundamentally sound investments, hold them for the long term and you may be rewarded.
- Aids in the control of emotions – Over the last year and a half, equity market investors have experienced a roller coaster of emotions, ranging from fear and panic at the start of the COVID-19 pandemic to market euphoria, which reached an all-time high this year. Downturns can be terrifying, but the key is to manage your negative emotions well, and you should consider buying at such corrections.
Similarly, if you make good gains during an upturn, don’t be swayed. Instead, take the prudent approach of booking profits and shifting the gains to other suitable classes, such as debt and gold. The key to long-term investing is to re-align your long-term asset allocation based on your risk profile by buying or selling at market lows or highs.
The stock market is notoriously volatile. Don’t base your investment decisions on your emotional state. Pay attention to fundamentals, choose funds based on your risk tolerance, and concentrate on achieving your financial objectives.
- Provides tax benefits – When you make buy and sell investment decisions on a regular basis, there are tax implications.
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