As an investor, you may pay close attention to the stock markets and find it difficult to understand why markets are so volatile. You may ask many questions like “Will markets achieve a new high tomorrow or has the time arrived for deep correction?” “Is this a good time to invest?” We don’t know what the future holds. As a long term investor, it is important not to spend time dwelling on such questions rather, remain invested in the long-run.
Markets act differently in short term and long term situations. You need to compare return on investments over a 10 year performance and not for a month or for a year before you decide to invest in equities.
In the short term, markets are volatile; however, investors who hold long term financial goals should not worry about volatility and should remain invested.
Benefits of investing with a long term horizon:
• Long term investments carry specific financial goals and give options to investors to invest small amounts at regular intervals like per month which has a potential to deliver healthy returns in the long term. SIP is one of the best investment vehicles.
• Rate of returns are likely to fluctuate and remain volatile on short term investments however long term investments are comparatively less volatile and hold potential to give stable returns.
• Tax benefits are available for all long term investments including investments in mutual funds.
Investments in Mutual Funds – Investments in mutual funds are advisable for all types of investors whether you have a short term financial goal or a long term investment objective. Broadly equity, debt and gold funds are available for investments and you can invest in those funds as per your financial goal.
Benefits of investing in mutual funds
Professional investment management – The Mutual Fund industry is managed by professionals and qualified investment fund management teams with inputs from solid research backed by experience.
Diversification – Another benefit is diversification. You can invest in equity funds, debt funds, gold funds as per your preference, income, age, risk taking ability etc.
Transparent and regulated industry – Above all, the mutual fund industry is regulated by the Securities and Exchange Board of India (SEBI) which ensures a smooth and transparent functioning of the mutual fund industry.
Mutual funds are a one-stop shop for all your investment needs. Needs can range from wanting to purchase a car in the next one or two years to saving for your child’s future and education in the next 10 years, saving up for your retirement, or saving tax on your regular income. Investors ideally look for diversification, low costs, ease and flexibility of withdrawal, better tax efficiency etc. Investors can achieve all their short term and long term financial goals through investments in Mutual Funds.