Who Should not Invest in Mutual Funds?

A thumb rule in investments like mutual funds, and stock markets is that never risk your hard earned money into stock businesses. Are you getting retired soon? Then follow the lines to understand ‘who should not invest in mutual funds?’

Mutual fund schemes have emerged as a simple and effective financial tool for creating wealth over the long term. Among the different kinds of MF schemes, such as equity funds, debt funds or a mix of them, the equity mutual funds are suited for long term goals.

Remember it is in the long term, but it is not advisable if you are about to retire.

Best Tool to Beat Inflation: Mutual Funds

Mutual funds are right for those wanting to generate income to beat the inflation over the long term.

If you are able to invest in mutual funds for a long term, say 7 to 10 years in a systematic investment plan then there is nothing better than mutual funds.

In course of time, your asset value may fluctuate between highs and lows but shall yield good return in the long run.

Nearing the Retirement Age: Protect your Corpus Fund

You must be mindful and never entertain buying mutual funds when you want to protect your corpus fund.

You will never be advised to purchase a mutual fund while you are due for retirement, or making an investment in a high risk profile zone.

In such a condition, you must preserve your capital and try to obtain a fixed income investment.

Retirees: Play Cautiously

1. Another option left is to invest into hybrid funds that can help you beat inflation in times of the retirement years and fixed income investments yield low returns and are also subjected to taxation.

Make an Investment in RD if Mutual Fund Doesn’t Interests You:

RD may not truly produce a high dividend on the investment over the long but is certainly a safer place to run. Let us check with the below example.

In Recurring Deposit, you will be making investment quarterly, half-yearly or yearly basis. And, in the SIP in equity funds, you may begin to invest every month, an amount of INR 10,000/-.

The expected annual return in SIP equity is 10% and in the RD investment is 7%.

In case of SIP, the investment value after 30 years will be  INR  2.28 crore and the investment in RD after the same period will become INR 1.22 crore.

a. Hence, if you are not eager in making huge money then recurring deposit can be the best option.

Retirees Can Take a Calculated Risk:

Although you may not want to invest in mutual funds as it incurs huge losses, they can be still minimised by making mutual fund investments in a diversified portfolio at a lower cost.

The diversification  is a process in which it reduces the risk of losing your securities and attain good returns until you opt the continuance of the mutual fund.