Why duration of mutual fund investment should be long

India is developing at about 7% GDP growth and has 4% government inflation. So in such a sort of scenario when you base deposit rate of bank i.e 7 – 8% which is just similar to GDP ratio, all different features including inflation is continuing to come to your help in the stock market. The mutual fund investment duration should be long as just because of the volatile market conditions and portfolio investments.

What is the investment duration?

Investment Duration is a measure of the sensitivity of the price of a bond or other mutual fund instrument to a shift in interest rates. Duration is non-linear measures of years and stimulates as a time to maturity decreases.

Investors only see at the history, current and nearby future of their investments. So for them, if the investments are for the longer duration they expect the high returns with a low-interest rate and risk-free market. Timing the market only takes care of your heartfelt needs. But your actual valid wealth creation requirements are the best meet by simply staying put in the stock market, by investing time in the market. Mutual Fund refers to a pool of money secured by various investors who plan to save and earn money by their investment. Usually, the investors invest in equities for the long term profits and earning from mutual funds.

How to measure long-term investment duration?

  The revenue department of the Government of India measures the long term investment duration by :

  • Calculating your tax liability
  • Investments in registered stocks and equity mutual funds are supposed to long term if the holding period is one year.

For other investments, the frontier is 3 years. This may be the law for taxation, but it doesn’t fit when it appears to invest. 1 year is a very short-term period for equity.

Which mutual funds provide have long investment duration?

Mutual funds that spend in stock markets are a must-have for long-term investors. These long term investment plans vary overstocks and sectors to assure they get the greatest of developing drifts in stock markets.

  • Go for well-managed and diversified equity funds with long-term track records over market circles. Join the fund with a duration of at least 5 years to support the investors to earn long-term profits.
  • If you are viewing for tax profits, go for tax-saving mutual funds named ELSS. These mutual funds serve like regular equity funds.
  • One can invest in equity funds with respect to SIP and lump-sum investment.

They are named as Long term investments for a reason, you invest and neglect about the money till the time it matures. Hold a check on your savings from time-to-time so that you have an approach of your investments.

But still, the question arises which time is called a long term and why should invest to be done in equity funds only?

The simple to this question is volatility. In equity mutual funds the returns are great, but the variability is huge. During any particular short period, you could suffer poor returns or even losses. Those are compensated for only by the occasional great phase.
Let’s look at it from a diverse view. The equity markets move in cycles, and often, it needs 5-7 years to go by a full cycle of a sharp rise, accompanied by a drop and stagnation. To receive the best level of returns, we want to continue investing completely the whole cycle. That won’t result in a year or even 2.

Factors define the best investment duration to invest in Mutual Funds

We now know that rather than waiting for a perfect duration to invest, it is better, to begin with, long term mutual fund schemes. Investing today will guarantee to give good returns tomorrow. However, there is the next step in this process – searching out the proper funds. This depends on various factors, which add your individual goals as well. These are:

  • Risk Appetite

Some common funds are risk-free for investors who need safe returns. For higher and regular returns the investment duration needs to be long-term. Equity funds back the most notable risk, which is recognised as market risk. The equity funds are influenced by the changes of an underlying benchmark like Nifty or Sensex. The overall growth and collapse in the index lead to the variations in the value of equity funds. Such volatility is greater than that undergone by debt funds or money market funds. That’s how the equity fund market is developing.

  • Market Positioning

For low-risk investors, when the market change takes place 10 to15%, it is good time to invest, but for investors who are ready to take a risk, an investment can be done any time in a lump sum or SIP or equity. They are for longer durations and keeps providing a good amount of returns.

  • Return on Investment

For high return-seeking, investors who look out for equity-driven mutual funds may receive SIP at any provided point in time and don’t expect for the market to collapse. They prefer some mutual funds, which give a huge return over the long-term i.e.more than five years.

  •  Tax Saving Under Section 80C

Many funds offer schemes that are run with the precise goal of tax-efficiency such as ELSS schemes. Investors looking out for tax saving may invest in ELSS schemes by SIP or a lump sum amount to assets in the tax deduction.

 Long-term or Short-term investment duration

Your investment horizon is the duration for which you are ready to stay invested. Long-term investments generate great returns, but you require to be patient for this. Indifference, short-term investments can get you immediate returns. But they may not be as high as the option of Long investments like equity.

If the investment range is of 5 years or more, then any time is the best time to invest your lump sum amount in equity mutual funds for a better return and most of the safe investment. Overall, there are many motives for why investing in mutual funds makes a good return. Proper care and research can provide a safe return and a secure investment for an investor. Mutual fund investment is all about picking the right fund with SIP, irrespective of the period at which an investor is spending.

Conclusion

Long term investments durations give higher returns whenever it matures. This sort of investments is satisfied well for your child, as you can prepare financially for his/her future – education, marriage and lifestyle. There are various long term investment choices open and you must pick one carefully depending on your financial goals and the risk portions connected to the investment plans in India.

Mutual Fund is a great idea of investment which supports the savings and invests in various sectors also diverse markets in such a way that investment gets the biggest return. This return will be paid back to the Unitholder if keeps his investment duration long. An Equity Fund makes full justice along with investment duration by providing higher returns with tax-saving factor. This is a Mutual Fund Scheme that presents predominantly in shares/stocks of companies.

If you are looking for investments in mutual funds, our company offers various services and help in the maximization of profits over investments. Join us today at Wealthbucket. Services like liquid mutual funds, debt mutual funds, equity mutual funds, and income funds turn out to be the best investment schemes for you. You can call us at +91 8750005655 or mail is at l contact@wealthbucket.in  

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By |2019-09-17T06:22:21+00:00August 24th, 2019|mutual funds|0 Comments

About the Author:

This article has been posted by Pulkit Jain - the founder of WealthBucket - To raise awareness about Mutual Funds Investments. WealthBucket has made investing in Mutual Funds an easy, quick and welcome process, in India. An interactive online platform providing Trustworthy and sincere services to all its clients.

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