Every worker wants to be able to provide for their financial needs. These requirements can be both short-term and long-term depending on what your need is. You need to take care of certain urgent expenses, regardless of your profession or income. After a certain age you will retire and stop working. It is essential that you are knowledgeable about how to make money in order to ensure financial freedom.
You have many options to meet your financial needs, including long-term and short-term investments . Some offer a steady income stream while others give you a retirement fund. There is an investment option that can meet both of these needs and more. Mutual Funds are a great investment option.
What is Mutual Funds?
Mutual funds are investment schemes where different companies invite investors. The mutual fund pools the investments from various investors and invests in different markets and instruments according to its mandate. A fund manager is usually appointed to make investment decisions for investors. They also charge an expense ratio according to the guidelines of SEBI.
Mutual funds investments don’t have a maturity period. You can withdraw or invest more money as you like. In some cases, like Equity-linked savings scheme (ELSS), however, you must stay put until the end of the lock in period. Investors have a variety of mutual funds to store their savings. Mutual funds can be classified based on several factors, such as maturity period, risk factor and sector. When investing in mutual funds, one of the most important factors to consider is the length of time you want to keep your money invested.
Investment Horizon and Mutual Funds
Because mutual funds offer compounded growth over time, they are considered to be one of the best investments for long-term. While mutual funds are best suited for long-term investments, there are many mutual funds that can be used for short-term investments.
Your investment horizon will have an impact on how much mutual fund returns you can earn. Your investment horizon will determine how long you invest. The potential returns on your investments will be higher the longer you stay invested.
Short-term investments in mutual funds
A mutual fund that you invest in for less than three years is called a short-term investment. You should avoid investing in equity-based funds if you’re looking for short-term investments. The market is volatile in short-term. In such situations, the best choice is to choose one of these funds:
- These funds invest in bonds and debt instruments with a maturity of no more than 91 calendar days.
- Ultra-short-term funds These funds can mature up to one year and have a proportionate representation debt or fixed income securities.
- Short-term Funds – These funds can mature up to three years, and offer returns comparable to term deposits.
Mutual fund long-term investments
Because mutual funds can be used for long-term investments, the markets are normally normalized and offer stable returns that are greater than any other investment option. Long-term investments should have a maturity of at least 5 years. This will help to reduce the risk associated with investments. You should choose mutual funds that have a greater equity representation if you are looking for long-term investment returns.
You have the freedom to invest in mutual funds over time. However, it is not only beneficial but also helps you meet all of your financial obligations.
