"If you have the stomach for stocks but neither the time nor the enthusiasm to do the homework, invest in equity mutual funds," says Peter Lynch, a well-known American investor, mutual fund manager, and philanthropist. Simply expressed, it means that those who want to invest in stocks but donʹt have the time to sit back and evaluate which stocks are solid can opt for mutual funds instead.
What are Mutual Funds and How Do They Work? Letʹs look at an example to assist us to comprehend this. Consider the case of someone named Amit. Amit now believes that TCSʹs market share will expand significantly. The issue is that Amit only has Rs. 500/- with him, while the current price of a single TCS share is roughly Rs. 1500/-. Amit now has a pal named Vijay. Vijay too believes that TCSʹ stock would rise, but he too only has Rs. 500/- with him. Satish is a third friend that they both have. Satish supports their belief that TCSʹs stock would continue to rise. However, he, too, only has Rs. 500/- with him. Now, if all three of them join together and decide to invest in TCS, they can do so and then divide the profits evenly amongst themselves. This philosophy of them coming together and investing is known as Mutual Fund.
If you want to invest in mutual funds, you have two options: the Direct Plan and the Regular Plan. Letʹs look at what the differences are between the two: Now, if you invest in mutual funds through an advisor, this is known as a Regular Plan, and here the cost is high as well. However, if you choose the Direct Plan, then the expense ratio here is low, and you save on commission as well, so you can earn better returns. Now how to invest in the direct plan? Once you have chosen the fund you wish to invest in, you can go to the Asset Management company’s website and choose the fund you wish to invest in.
The world’s most successful investor Mr. Warren Buffet has already announced that after his demise where all his funds will be invested. The answer is Index Funds. What are Index Funds and what are Mr. Buffet’s thoughts about Index funds? If you want to know more about this, do check out our previous blogs, we have already discussed it.
Mr. Warren Buffet, the worldʹs most successful investor, has previously said where all of his funds will be put after his death. Index funds are the answer. What are Index Funds, and what does Warren Buffet think about them? If you want to learn more about this, go back and read some of our previous blogs; weʹve already covered it (check the link in the description below).
If one must invest in Mutual Funds in the United States, Mr. Buffetʹs recommendation is a Low-Cost Index Fund. When Mr. Warren Buffet was asked which actively managed Mutual Fund he would want to invest in if he had to invest in a developing country like India, he replied, "If I had to invest in a developing country like India, or any country, for that matter, my choice is fixed and that is Low-Cost Index Funds." If you are a no-nothing investor, you can opt for an Index fund via SIP and receive good long-term returns if the Indian share growth continues.
Well, India is a growth story, and there will be huge growth here in the future, and if the Indian indexes Sensex and Nifty represent this growth, and if they grow in tandem with it, then one should invest here. What is the best way to invest in Sensex – Nifty? You can invest here through Index Funds. Since a common investor would have to invest a lot of money if he tried to invest in each of the 50 firms in the Nifty individually, however, by selecting a monthly SIP with mutual funds, one may invest here with less money. Thus, the best mutual funds to invest in 2022 are low-cost index funds.
Until next time…
Happy Trading, Happy Investing!!!
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