What are the Objectives of Investing in Mutual Funds?

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What are the Objectives of Investing in Mutual
Funds?
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Since past two decades,  the growth percentage of
mutual fund industry has seen a noticeable hike.
This growth is the result of increased education
levels which has penetrated through individuals
mind about understanding their financial
requirements.
What are those financial requirements? Individual
s have their own financial needs and those are
called as their objectives or financial goals.
1. Retirement corpus 2. Fund for education 3.
Planning for childrens school fees 4. Fund for
Childs marriage 5. Emergency corpus 6. Fund to
buy a house 7. Fund to buy personal vehicle
(maybe a car or a two-wheeler etc.)
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These objectives are the reasons why a person
starts investing his/her money in order to earn
the extra return on his savings within the
desired period. Most individuals choose mutual
funds to cater to these goals but on questions
like, which mutual fund is right for me? And how
to invest in mutual funds? people still need
clarity.
How mutual fund categories do accompany these
individual goals?   Mutual fund Investments
cater these objectives on the basis of their
tenure or categorizing them on the basis of their
term. Short-term goals less than 5 years (e.g.
buying a car) Medium-term goals 5-7 years
(e.g. buying own house) Long-term goals above 7
years (e.g. retirement plan, child education
etc.) Different types of mutual funds cater to
different financial goals based on the
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How mutual fund categories do accompany these
individual goals?   Mutual fund Investments
cater these objectives on the basis of their
tenure or categorizing them on the basis of their
term. Short-term goals less than 5 years (e.g.
buying a car) Medium-term goals 5-7 years
(e.g. buying own house) Long-term goals above 7
years (e.g. retirement plan, child education
etc.) Different types of mutual funds cater to
different financial goals based on the
above-required tenures.
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• Equity Funds
• -Invests in stocks.
• -High-risk investment.
• -Best funds as anyone can start SIP with a
  minimum amount of Rs. 500 and earn benefits of
  higher returns from equity.
• -There is a reduced risk of losing his principal
  amount also if one invests into equity through
  SIP.
• -Returns become tax-free in case of holding the
  investment for more than a year.
• -Ideal for investors having higher risk-appetite
  
• Due to investment in growth stocks, these are
  ideally preferable in case of investors who are
  at the young age and having long-term goals due
  to investment in growth stocks.
• Those who are unmarried, usually have less number
  of liabilities, they can bear the risk.
  Ultimately, equity is going to get them higher
  returns as an add-on benefit.
• Ideally, one can start a SIP at the early stage,
  and keep on adding 10-15 every year to the SIP.
  Say after 8-9 years it comes with quite a good
  amount that can better serve goals like childs
  higher education, retirement plan etc.  

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2. Balanced Funds -As the name suggests, in
order to maintain the balance, money is invested
partly in stocks and partly in fixed income
securities. -Ideal for long-term
investments. -Investors enjoy growth and regular
income, higher returns than debt. -For investors
who have Moderate-high risk appetite. -The ratio
is normally 60-70 in equity and rests in
debt. -Investors follow a myth that the returns
from balanced funds are meant for balancing the
risk and they invest for the short-term purpose.
Whereas, Balanced funds are for those who would
need corpus after the long period so that the
market high-lows wont affect their final corpus
to the higher extent. -Equity-oriented balanced
funds are prone to tax-free returns if held for
more than a year. -Debt-oriented balanced funds
are less volatile, so attracts fewer returns. In
case holding period exceeds more than three
years, the returns are taxed _at_20. If holding
period is less than 3 years, tax implication is
as per your tax bracket.
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3. Debt Funds - Invests in Bonds and Deposits of
various kinds - Have negligible risk. - Ideal for
investors who expects steady income as the
returns from debt funds is irrespective
of market high-lows. - There is no possibility
that investor will have the capital loss at any
point in time during the investment period. -
Investors can choose dividend payout option and
enjoy the regular income. - Debt funds also act
as a launching pad for investors who have a large
sum in hand, through STP option they can first
invest in debt to regularize the income and then
shift to equity. STP is a systematic transfer
plan. -Those who expect monthly flow of income
from their return, they can invest in debt funds
via SWP option so as to withdraw periodically.
SWP has a reverse pattern to SIP. -Preferable
over FDs since FDs interest puts you in tax
liability as per tax bracket of your income,
maybe 20 or 30. -Debt funds if kept for more
than a year they are taxed at 10. -In case of
investment period of less than one year, it is
recommended to opt for dividend reinvestment
option, then the tax rates applicable on dividend
will be 13.5.
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4. Gilt funds -These invest in medium and
long-term government securities, bonds but
different from Bond funds as they invest in
corporate bonds. -Their functioning is riskier
as similar to above categories of mutual funds
but their nature is safe due to the money is
invested in public sector companies. - Very less
volatile or very low risk. - Ideally meant in two
cases For individuals who are about to reach
their retirement. Hence, they can not afford to
take a risk because they know that they may
require the fund to treat health
problems. Individuals who are senior citizens,
having enough corpus but their investment purpose
is just to invest their money in order to
increase their fund with less risk.
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