Open a Demat Account and Use a SIP Calculator to Choose the Right Mutual Fund
Investing in a mutual fund is today's most popular way of building wealth during the last few decades. But intelligent investment decisions require intelligent planning and suitable tools. Two essential steps in doing so are getting a Demat account and using calculation tools for assessing your investment choice in an appropriate manner.
● Understanding the Importance of a Demat Account
If you choose to open demat account, you are basically opening a virtual locker for your securities. Your mutual fund units, shares, and other financial assets are kept in the virtual account and hence certificates become unnecessary. The entire process has become very simple with fewer documentation and verification processes that can even be executed online.
A Demat account is your ticket to the investment world. It allows you to invest in, sell, and monitor your mutual fund investments easily. With the account, you are directly provided with your portfolio statement, transaction statement, and dividend payments, hence it is convenient and easy to track your investment.
● The Power of SIP Investments
Systematic Investment Plans is a systematic investment in mutual funds. You do not invest money all at once as a lump sum but invest a fixed amount at fixed intervals, say monthly. This method eliminates the effect of volatility in the market through rupee cost averaging, wherein you purchase more units at lower prices and less at higher prices.
SIPs encourage disciplined savings habit and offer the chance to invest to all income classes. You can start investing a mere five hundred rupees per month, which you can proportionately increase with your income.
● Taking Well-Informed Decisions Using Calculation Tools
Before investing in any SIP, using a mutual fund SIP calculator is necessary to make appropriate decisions. Online sip calculators make it possible for you to understand how your systematic investments will become large amounts of money in a span of time with regards to different situations and prevailing returns. By providing the details of your monthly investment, investment tenure, and expected yearly return, you can view the possible future value of your investments.
These calculators also help you determine what investment is needed on a monthly basis in order to achieve certain financial goals. You are saving for retirement, a child's college education, or a home; these calculators give you an idea of the investment requirements.
● Choosing the Best Mutual Fund
Selecting the right mutual funds is a matter of prudent consideration of several factors. Large-cap funds tend to reflect stability, whereas mid-cap and small-cap funds provide scope for higher growth at higher risk.
Diversification across different funds will equalize risk and returns. Invest a mix of debt and equity funds based on your age and risk capacity. Young investors can invest in proportionally higher schemes of equity, while investors near retirement age can invest in debt schemes.
Conclusion
Remember that investments in a mutual fund involve market risk and history of a mutual fund's performance does not guarantee future performance.
The combination of a good Demat account and sound investment decisions by using proper calculation tools provides a stable ground for mutual fund investments-based wealth generation.
