Don’t Let Your Money Go, Rather Let it Grow

Author: Shashank Pawar

One of the biggest desires of every working individual is to have a substantial corpus for his/her financial needs. These needs can be short-term as well as long-term, based on the nature of your requirement. No matter which profession you are in or what is your income level, there are certain pressing expenses that you have to care of. Moreover, after a certain age, you will stop working and will be looking forward to leading a comfortable retired life. To ensure your financial freedom, it is important that you know everything about how to grow money.

There are long and short term investments options available to help with your financial requirements. Whereas some offer you a stable income stream others provide you with a corpus for your retirement. But there is one investment option that fulfills both these requirements of yours and offers you much more as well. That investment option is Mutual Funds.

What are Mutual Funds

Mutual funds are investment programs wherein different companies invite investors to invest their money in the scheme. After pooling the investment from different investors, the mutual fund invests in various markets and instruments as per its mandate. Usually, a fund manager is appointed to take the investment decisions on behalf of the investors and charge an expense ratio as per the guidelines of SEBI.

Mutual fund investments do not have any maturity period and you are free to invest more money or withdraw money as per your convenience. But in some cases, such as with Equity linked savings scheme (ELSS), you have to stay put till the expiry of the lock-in period. There is a wide range of mutual funds available for investors to park their savings in. Mutual funds are categorized based on a number of factors such as sector, maturity period, risk factor, etc. One of the major factors that you must consider while investing your money in mutual funds is the time period for which you wish to stay invested, i.e., your investment horizon.

Investment Horizon and Mutual funds

Mutual funds are regarded as one of the best long-term investment because they offer you the benefits of compounded growth over a period of time. Although it is true that mutual funds are most suited for long-term investment plans, there are several mutual funds that are suitable for short term investment plans as well.

The investment horizon that you have is likely to have a significant impact on the returns you can generate from mutual funds. The longer you stay invested, higher are the probable returns from your investments.

Mutual fund short-term investments

When you invest in a mutual fund for a period of less than 3 years, it is known as a short term investment. But if you are looking for short term investments, you need to refrain from investing in equity-based funds because the market is volatile in the short-run. The best option in such a scenario should be opting for the following funds: -

  • Liquid Funds - These funds invest in debt instruments and bonds with a maturity of not more than 91 days.
  • Ultra short-term funds - These funds have a maturity period of up to one year with a proportionate representation of debt and other fixed income securities.
  • Short-term funds - These funds have a maturity period of up to three years and offer returns at par with those offered by term deposits.

    • Mutual fund long-term investments

    Mutual funds are best suited for long term investments because the markets are normalized over time and therefore offer stable returns that are more so than any other investment option. Long term investments ideally have a maturity period of more than 5 years and help in reducing the risk from investments. If you have a long term investment horizon, you must opt for mutual funds with a higher representation of equity as it will offer you the best returns in the long term.

    While the choice is entirely yours but investing in mutual funds for a long term is not only beneficial for you but also helps you fulfill all your financial liabilities in an effective manner.

    A mutual fund is the best answer to question "How to grow money?" There is long term investment as well as short term investment plans in mutual funds. It depends on you which plan you have to select to complete your financial goal in a soft manner.