Objectives to invest in mutual funds:

After writing more than 165 posts on Mutual funds, here we are returning to basics: What are mutual funds & objectives to invest in funds.

Any one who knows mutual funds can have its own definition.Mutual fund can be defined as a pool of money created by individuals having Common Objective & same is managed by professional company known as Asset management company.

Here Common Objective is very important consideration.

Common objective may be :

Objective of better Risk management over individual stocks.
Objective to save for retirement.
Objective to save for child’s education
Objective to achieve higher returns.
Objective to invest in growth / momentum stocks:
Objective to invest in value stocks.
Objective to invest in any sector like pharma,banking,FMCG,energy or Infrastructure.
Objective to invest in arbitrage opportunities for tax free gains.
Objective to invest in long term Govt securities offered by Govt.
Objective to invest in short term Govt securities.
Objective to invest in Certificate of Deposits by banks.
Objective to park money for very short term like few days.
Objective to park money for few months.
Objective to create emergency fund.
Objective to invest in corporate bonds.

So objective can be any thing from above.

Have you understood risk associated with your objective:

Along with objective, investor need to aware about risk associated with it.

If objective is to invest in stocks then investors should also prepared for equal degree of downside risk.Same thing for other objectives.while investing in corporate bonds,my objective may be 2-3% higher returns over other low risk fixed income instruments…but at the same time I should also aware about default risks.

so,ask few questions to self to check whether you are on right path or not