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If you are someone who is looking to start investing in mutual funds, you would have, at one point, googled where to start. When you hit ‘Enter’, you would have been bombarded with thousands of articles, explaining what mutual funds are and where you can invest. Being a first-time investor, all this information might be too daunting and difficult to understand.
That’s why we are here to help you. We have created a cheat sheet for you, which will help choose the right mutual fund and you don’t have to spend a lot of time on it. This is the only thing you need to kickstart your financial journey.
Getting Ready Investing
- Firstly, you have to understand your goals. It could be anything from saving taxes to buying a house to going on your dream vacation. Write down your goals in a paper because the kind of assets that will be chosen by you depends on this step.
- In the second step, write down how much risk you are willing to take. In investing, high risk brings high returns and low risk brings low returns. Keeping this in mind, write down how much risk you are open to take.
- The third step is finding out how much time you are planning to stay invested. It could be 5 years or 15 years or even 30 years. You should write down that number in the paper as well.
If we create a matrix for it, it might look like the table below.
| Goals | Risk Appetite | Investment Horizon |
| Saving for a down payment for a house | High | 7 years |
| Buying a car | Medium | 4 years |
| Going on a dream vacation | High | 5 years |
| Saving for retirement | Medium to High | 25 years |
Choosing The Products
There are so many different kinds of financial products in the market – Mutual Funds, Stocks, Smart Deposits, Bank Fixed Deposits, Pension Schemes, Digital Gold, ETFs and so on. But choosing the right ones will depend on your goals and your risk. Since we have already figured out your goals and risk, all you need to do is choose the products. But what if you don’t know about these products? Don’t worry, we have figured that out for you too.
| Financial Products | Risk | Return |
| Savings Account | Low | Low |
| Debt Funds / Smart Deposits | Low | Low |
| Corporate Bonds | Low | Low |
| Large Cap Mutual Funds | Low | Low |
| Public Provident Fund | Low | Low to Moderate |
| Digital Gold | Low | Low to Moderate |
| Multi Cap Mutual Funds | Medium | Moderate to High |
| Real Estate | Medium | Moderate |
| Equity & Small Cap Funds | High | High |
| Stocks | High | High |
| Cryptocurrencies | Very High | High |
Creating A Plan
We have our goals, risk appetite and the suitable products. Now, all we have to do is combine both. The combined table will look like below.
| Goals | Risk Appetite | Investment Horizon | Financial Products |
| Saving for a down payment for a house | High | 7 years | Small Cap FundsEquity Funds Stocks |
| Buying a car | Medium | 4 years | Mid Cap FundsMulti Cap Funds Real Estate |
| Going on a dream vacation | High | 5 years | Equity Funds Stocks Small Cap Funds |
| Saving for retirement | High to Medium | 25 years | PPF National Savings Certificate Mutual Funds Stocks |
You must have noticed how we have chosen multiple products for every goal. This is called Portfolio Diversification. Instead of relying on only one product to do the work, you can choose multiple products to earn higher returns even when one of the products is not performing well. For example, if the real estate market is down, you can rest easy knowing that you would still be making returns from stocks.
Asset Classes & Ideal Portfolios
We can better this portfolio by including various asset classes. Well, how does that work? Let’s say that you have invested only in high risk instruments, then it is better to include some low risk assets such as debt mutual funds, bonds, and fixed deposits to minimize the losses. Also, instruments such as equity mutual funds, and stocks lack liquidity. So, in order to include liquidity in your portfolio, you should also be putting some of your money in smart deposits, fixed deposits, savings bank accounts, etc.,
If your goal is to accumulate wealth without a particular time horizon, the table would look something like this.
| Goals | Risk Appetite | Investment Horizon | Ideal Portfolio |
| Wealth Accumulation | High | Ongoing | High Risk Stocks Equity Mutual Funds Small Cap Funds Low Risk Smart Deposits Bank Fixed Deposits |
| Tax Saving | Low to High | 15 years | High Risk ELSS Low Risk PPF National Savings Certificate Insurance Policies |
What To Do Now?
We have given you the financial products that will help you achieve your life goals. The next step is to choose a platform that will help you achieve your goals with ease. There are several online platforms that will aid you in this process, but the best platform would be the one that would automate your finances. We know a platform like that and that is Koshex!
Kosher would put your finances in auto-pilot mode, and if you input your goals and risk appetite, it will create a customized investment solution for you. So, you don’t have to worry about drawing tables and going through multiple product documents. We are here to save you time and hassle. Head to Koshex to create an account today and start your financial journey.
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