RBI Issues Circular On Levying Unfair Interest Charges On Customers

Volatility in the market, generally scares people but its an important trend that determines the return for investors. If you are an existing mutual fund investor or looking to invest through them then we will tell you three strategies. If you keep them in mind then you can reduce the risk on investment while increasing your return. Let’s look at those:

It stands for Systematic Transfer Plan and it allows you to transfer your capital from existing mutual funds scheme to new scheme. As per investor’s choice, money can be transferred on daily, weekly or monthly basis from one scheme to another. Simply put, you can transfer money from one scheme to another.

The Decision to transfer the funds should be made on the basis of investor’s age and goals among other factors. For example, If an investor is 60 years old and has 3 crore rupees in the corpus then amidst volatile market, for more balanced return the fund can be transferred from equity mutual fund to debt mutual fund.

Similarly young investors, in times of volatile market can earn higher return by transferring funds from debt schemes to equity schemes. In a systematic transfer plan, you don’t transfer the complete amount in one go from one scheme to another scheme. Instead, you break it down in pieces and invest gradually. This allows you to earn higher returns during market volatility.

The second term is SWP, which stands for Systematic Withdrawal Plan. Through this, investors can systematically withdraw money from an investment made in a mutual fund scheme, meaning they can withdraw funds regularly. Under this plan, investors can withdraw money on a monthly, quarterly, or annual basis.

A Systematic Withdrawal Plan is a good option for regular income after retirement. If you regularly invest before your retirement and accumulate a substantial corpus or fund, you can start SWP at the time of retirement. This way, you will continue to receive returns on your investment and maintain a regular income stream during retirement.

The third and most crucial strategy is SIP, which stands for Systematic Investment Plan. This is the most popular method of investing in mutual funds. Even individuals with lower incomes can invest in mutual funds through this approach. You can start a SIP with as little as 500 rupees per month or even less.

For those aiming at goal wealth creation, i.e., building a substantial corpus, SIP is a good option for long-term wealth accumulation. It benefits from compounding, where the returns on your investment are reinvested, and the next set of returns is generated on the new principal amount. This way, you can build a significant corpus over an extended period. Equity mutual funds are estimated to provide an annual return of around 12%, although this return can vary.

After understanding strategies related to investment and withdrawal in mutual funds, we will now provide you with some practical tips that will assist you in your investment journey. First, align your mutual fund investments with your financial goals, such as buying a car, a house, funding a wedding, or planning for retirement. Second, consider investing in equity mutual funds for the long term, meaning more than 5 years. Third, do not prematurely withdraw your investments before achieving your financial goals and last, regularly review your mutual fund portfolio to make informed decisions.