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Are Mutual Funds Suitable for Short or Long Term Investment?

Author: Shashank Pawar
by Shashank Pawar
Posted: Sep 02, 2019

Are mutual funds ideal for short term investments? Or, are they good for long term investment? What mutual fund returns can you expect over both short and long term? Also, what is the mutual fund minimum investment amount? This article aims to answer all the above questions.

Contradictory Advice You may have received conflicting reports on mutual funds suggesting that they are good for short term investments as well as over the long term. The right answer depends on your investment goals and the time period in which you are looking to achieve these objectives. Mutual funds are available for short term and long term investment, and also medium-term periods in between. Discuss your investment goals with your financial advisor and pick a suitable scheme for your needs.

Types of Funds

  1. Equity mutual funds are ideal for investment periods of five years and more.

  2. Go for short term bond funds if you want to invest for one to three years.

  3. For more than three years, opt for long term bond funds.

What is Mutual Fund Returns? What mutual fund returns can one expect? This general question is like asking at what speed vehicles run. The right answer obviously is different vehicles operate at different speeds. For instance, a racing car runs much faster compared to a domestic passenger car. Similarly, there are numerous types of mutual funds and they deliver different rates of returns depending on their category and risk profile.

Equity funds deliver higher returns but are more subject to market risks. Fixed-income funds are safer but their returns are also lower. Therefore, depending on your appetite for risk and financial goals, you can select a suitable scheme to attain your objective of earning ‘x’ amount of money in ‘x’ number of years.

What is Mutual Fund Minimum Investment? To get the answer to this question, you must first understand that mutual funds are not just an investment avenue but also a vehicle that allows you to access a range of investment avenues. You can compare mutual funds to a full meal thali at a restaurant which gives you a range of delicacies and food items. In contrast, individual items that you order are like bonds, stocks, etc. The advantage is just like a thali, mutual funds help to save money and time, and make the choice simple.

  1. Start Early- The key aspect of mutual fund investment is to start early and slowly increase the invested amount as you begin to earn more and grow in confidence. This will give you adequate time to earn as much as you want for your future needs as well as for retirement.

  2. Minimum Amounts Accepted- The bare minimum mutual fund investment amounts are Rs. 100 for SIP and Rs. 1,000 for lump sum investment. Fund houses accept these low amounts because they are stepping stones for risk-wary investors. Once investors gain more confidence, they are likely to place higher amounts and fund houses realize this.

Conclusion

To reiterate, start your mutual fund minimum investment with a small SIP amount and increase the monthly investment as your earnings increase. By starting early you’ll give yourself more time to reach your investment goals and be financially prepared for the future.

What is Mutual Fund Return?

  • first have to understand that mutual funds are not just an investment avenue but also a vehicle that allows you to access a range of investment avenues. Mutual funds are available for
short term and long term. Discuss your investment goals with your financial advisor and pick a suitable scheme for your needs.

About the Author

Here's a little bit about myself. I've done a Masters in Economics and teach the subject to high school students. I am 32 years old and married to an investment advisor. A Dhoni fan who loves to play football! I am a sports enthusiast and a firm beli

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Author: Shashank Pawar

Shashank Pawar

India

Member since: Dec 24, 2018
Published articles: 38

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