Mutual funds are among the most popular investment options for Indian investors but knowing how to invest is just as important as deciding where to invest. Questions around right number of funds to tax benefits often leave investors confused, especially in the early years.
From understanding whether mutual funds can help save tax to figuring out how much to invest, whether to opt for joint holding or nomination, and how to plan for multiple life goals at once, these are practical concerns that impact real financial outcomes.
Here are answers to some of the most common mutual fund questions to help investors make informed, goal-aligned decisions whether they are just starting out or fine-tuning an existing portfolio.
How many funds should I invest in?
The ideal number of mutual funds varies based on your needs and goals. 5-7 schemes across categories like equity, debt, and gold can provide sufficient diversification without making tracking cumbersome.
Is there a better way to decide how much to invest in a mutual fund- lump sum or monthly?
The starting point should always be your financial goals. For each goal, factor in inflation, the time horizon, your risk appetite, and how much surplus you can invest comfortably. Once you know how much money you need and by when, it becomes easier to decide the investment amount and the right mix of instruments.
You can work with a financial advisor to create a detailed investment plan. Alternatively, online financial planning calculators available on personal finance platforms can offer a good starting estimate. These tools help you understand how much you need to invest, which can then be fine-tuned with expert guidance.
I have Rs 10,000 to invest now. Will that be enough?
The right investment amount depends on your goals, time horizon, risk appetite, and finances. If investing Rs 10,000 monthly, consider how long you can invest and ensure it's money you won't need for at least 5 years if going for equity funds. Fix a goal and invest regularly towards it.
Use online financial planning calculators or consult an advisor to determine how much to invest and in which instruments.
Do mutual funds help me save taxes?
Tax-saving mutual funds, also known as ELSS, are diversified equity funds that offer tax deductions under Section 80C, reducing your taxable income by up to Rs 1.5 lakh per financial year. This benefits is available only under old tax regime.
Do mutual funds allow single and joint holdings?
Investors can buy units of a mutual fund scheme in their personal capacities. They can also invest jointly. Typically, fund houses allow up to three joint holders in a mutual fund folio.
Also read | How to use SWP in mutual funds to create a steady retirement income
Can I plan for multiple goals at the same time? Like buying a car, home or a foreign holiday?
Yes, you can invest for multiple goals separately. Decide on the investment category - equity, debt, hybrid, gold, or asset allocation - and proportion based on each goal's timeline.
What is a nomination? Is this method better than joint holding?
A nomination lets you name a person to manage your investments if you pass away, acting as a custodian of your assets. Joint holding, however, means shared ownership of mutual fund units.
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