There are so many mutual fund categories that sometimes it might get a bit confusing while making an investment decision. This is why most mutual fund experts ask aspiring investors to first determine their financial goal. One single unit of a mutual fund is a combination of multiple stocks and other money market instruments. Mutual funds give investors an opportunity to invest in multiple markets which otherwise would not have been possible. Mutual funds are a pool of professionally managed funds that offer active risk management.

What fund houses do is that they collect money from investors sharing a common investment objective and invest this pool of funds across various asset classes. Depending on its scheme and nature a mutual fund may invest in equity, debt, corporate bonds, government securities, certificates of deposits, call money, etc. There are two ways to make an investment in mutual funds. Investors can make a one time lump sum investment in a mutual fund scheme. This is the traditional way to invest in mutual funds and investors are allotted units in large quantities in quantum with the investment amount. On the other hand, since you invest in one go, you are exposing your entire investment amount to the market’s volatile nature. The other way to invest in mutual funds is through a systematic investment plan. SIP is an easy and hassle free way to invest small fixed amounts at regular intervals till your investment objective is achieved. If you do not know how much you need to invest regularly to achieve your life’s monetary goals, you can use SIP return calculator which is easily available online. Not only will this calculator help you understand how much money you need to invest, it will also give you an estimate of your potential capital gains through these investments.

If you are someone who is seeking capital appreciation through long term investment in a market linked scheme and carry a moderately high risk appetite, then you can consider investing in hybrid mutual funds.

What are hybrid funds?

While equity mutual funds invest predominantly in stocks and equity related instruments and debt funds predominantly invest in fixed income securities that generate regular income, hybrid funds are a mutual fund product category that invest in both equity and debt related instruments. Since these two funds invest in two of the most popular asset classes, they are referred to as balanced funds. The equity element of a hybrid fund gives the portfolio an aggressive touch and an opportunity to seek capital appreciation while the debt element offers cushion when the markets become volatile.

Now whether a hybrid fund will invest more in equity or debt may totally depend on the nature of the scheme and its investment objective. For example, an aggressive hybrid fund carries a portfolio where it allocates a minimum of 65 to 80 percent of its total assets to equity related instruments. On the other hand, a conservative hybrid fund is more debt oriented. Hence this fund invests more in debt securities and the rest in equity.

Hybrid funds are being considered by several individuals especially because of the kind of a balanced portfolio that they carry. However, investors should remember that investments made in mutual funds do not guarantee any returns. This is why one should always determine their risk appetite before investing in any type of scheme. Also, investors are expected to do a little background check about the fund. Check the fund’s past performance, whether it is performing better than its peers. They also need to check if the fund’s expense ratio isn’t too high as it can affect their long term capital gains at the time of redemption. If they feel that they need further assistance in making an investment decision, they can always consult a financial advisor.

Planning for your sunset years is essential. Retirement planning and financial planning go hand in hand. When you are making a financial plan and prioritizing your short term and long term goals, retirement planning should top the list of your long term goals. That’s because when you are young, you do not need that much money to survive. But when you retire, you are living on a fixed budget. Your only source of income will mostly be from a pension scheme and whatever money you accumulated through Employee Provident Fund (EPF). But will this much money actually be enough for you to remain financially independent during your post retirement life?

Here’s why we feel retirement planning is essential to attain financial freedom:

Savings is more important than wealth

If you feel that you are wealthy enough at this point of time in your life and do not have to worry about the future, you may have to reconsider that opinion. Financial freedom is far more important than wealth. That’s because there are no restrictions when it comes to spending money. Today you have a crore in your bank account, tomorrow you may only have a few lakhs and a week later, a few thousands. Wealth is only temporary and if you really want to attain financial stability and freedom, you may have to start saving more often. If your outflows are superseding your inflow or your income, then we have some serious problems to address.

You need to take care of your and your family’s health expenses

Of course you children will be all grown up and independent by the time you retire. You might not have to take care of them, but you have to take care of your as well as your spouse’s expenses. And the biggest expense during old age is healthcare. Healthcare related expenses have been on the rise. So just imagine how much an occasional visit to the hospital would cost twenty years from now. If your employer doesn’t offer reimbursement for its retired employees and if you do not have a solid health plan, you need to have a wealthy retirement corpus to take care of all your medical expenses. For this, attaining financial stability is of utmost importance.

Continue with the same standard of living

At this point of time, you and your family might have gotten used to a specific standard of living. You can afford to live this way and enjoy the luxuries of life because you are earning and have a decent job. But have you thought about what you are going to do when you retire? With no salary incoming, how are you planning to manage to continue to live the way you do now? You have to get used to living on a fixed budget. Is your family willing to do that? If you want to make sure that you continue living the way you do even after you retire, you need to make sure that you build a wealthy retirement corpus.

Now that you realize the importance of financial freedom, have you thought of how you are going to achieve it? One way to go is investing in solution oriented mutual funds. Mutual funds can be one of the ways to systematically invest. Thanks to a powerful investment tool like Systematic Investment Plan (SIP), one can now invest small fixed amounts at systematic intervals and continue doing so till their investment objective is achieved. If you do not know how much money you need to invest regularly in order to attain financial freedom, you can take the help of an online SIP calculator. However, mutual fund investments do not guarantee returns. So investors are expected to determine their risk appetite before making the final investment decision.

Mutual fund investments are subject to market risks, read all scheme related documents carefully