Mutual Funds Sahi Hai!!! Itna Easy bhi Nahi hai

‘Mutual Fund Sahi Hai’ campaign launched in March 2017 by AMFI. The campaign promotes exactly what it states, ‘mutual funds are the right choice.’ The aim of the campaign was to promote mutual funds and educate investors. Mutual Funds Sahi Hai !!! campaign is being run on the televisions frequently well endorsed by youth icons and cricket legends like Sachin Tendulkar, MSD and Rohit Sharma to spread the awareness and expand the outreach. However, it only promotes mutual fund investments making people aware of investments but not helping in next step i.e. Where to invest.

Once an investor has decided to invest in Mutual Funds, he has to make a decision of which scheme to invest in– Fixed Income Fund, Equity Fund or Balanced and which Asset Management Company (AMC) to invest with? The basics of the mutual fund we have already covered under post : https://financethatmatters.blogspot.com/2024/09/mutual-funds-fundamentals.html

Apart from the basics of mutual funds mentioned in the above linked post, the mutual funds can be broadly classified under two different schemes namely actively managed funds where the returns are based on the expertise of fund manager and the passively managed funds like index funds.

Actively managed Mutual Funds: In actively managed Mutual Funds, an investment professional or a team of portfolio managers handpick investments with the goal of outperforming a stock market benchmark. These funds often come with higher fees due to the active management involved.

Passively managed Mutual Funds: Passively managed Mutual Funds, on the other hand, aim to mimic the performance of market indices. They do this through automated or mostly hands-off systems, which results in lower management fees. For many Mutual Fund investors, particularly those saving for retirement or other long-term goals, passively managed funds are an attractive choice due to their broad diversification.

Just 26% of all actively managed funds beat the returns of their index-fund rivals over the decade through December 2021, according to a separate report published by Morningstar. hence it is crucial to know which funds to choose to invest your money. 

Long-term investors seeking broad market exposure and consistent returns are often drawn to index funds. Investors who prioritize low costs, simplicity and a buy-and-hold approach also favor these funds. Inexperienced investors who lack the knowledge to evaluate and select active managers may feel comfortable with an index fund that simply tracks the market.

Investors who seek returns that out-pace the market frequently choose actively managed funds for their potential to generate an extra return from skill stock selection. These investors are willing to pay higher fees as well as put more time into monitoring the performance of the fund and its managers. Seasoned investors who enjoy researching investments and appreciate the skill and reputation of a specific fund manager may be attracted to these funds.

My personal take on which funds to invest is both the mix of index funds and actively mutual funds appropriately to gain for short term as well as building corpus for long term.

As usual, kindly make sure you consult your financial advisor before taking any decision about finances as FINANCE MATTERS and it matters for everyone😇.

-- SACHIN GOSWAMI.