I am a low-risk investor looking for a regular income. Given that the market is high compared to last year and there is a fear of global war, is it a good time to foray into mutual funds right now? — Vidhi M
Reply by Rajiv Bajaj, Chairman & MD, BajajCapital:
Whether you’re a seasoned investor or just embarking on your investment journey, mutual funds stand out as a viable avenue to deploy your hard-earned money. Key advantages of investing in mutual funds include:
i) Risk Diversification: Mutual funds spread investments across various assets, minimizing the impact of poor performance in any single investment.
ii) Disciplined Investing: The structured approach of mutual fund investing, particularly through systematic investment plans (SIPs), encourages consistent and disciplined contributions over time.
iii) Liquidity: Mutual funds provide ease of entry and exit, allowing investors to convert their holdings into cash relatively quickly.
iv) Transparency: Investors can easily access information about their holdings, fund performance, and associated costs, promoting transparency in the investment process.
v) Tax Advantage: Certain mutual fund investments offer tax benefits, enhancing the overall post-tax returns for investors.
For those with a conservative risk appetite, exploring options like Balanced Advantage Funds/Dynamic Asset Allocation Funds or Multi Asset Allocation Funds in the Hybrid category could be prudent. Dynamic Asset Allocation Funds adjust their equity and debt allocations based on valuation metrics, alleviating concerns about equity valuations during investment. Meanwhile, Multi Asset Allocation Funds diversify across equity, debt, and commodities, providing a broader exposure to different asset classes.
Moreover, mutual funds offer a systematic withdrawal plan (SWP), enabling investors to secure a regular income stream as needed. This flexibility enhances the attractiveness of mutual funds as a versatile investment tool catering to various financial objectives.
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)