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, 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 inflation over the long term. If you can 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.

Over time, your asset value may fluctuate between highs and lows but shall yield good returns 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 investing 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

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

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

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

In the Recurring Deposit, you will be investing 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 on SIP equity is 10% and in the RD investment is 7%.

In the 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.

Hence, if you are not eager to make a huge money then a 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 minimized by making mutual fund investments in a diversified portfolio at a lower cost.

Diversification is a process that reduces the risk of losing your securities and attaining good returns until you opt for the continuance of the mutual fund.