Investments club - Just ask us!

This is a thread for all investments-related Q&A, discussions, and more!

Ask away :slight_smile:

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Hi,
Should I look at highest returning mutual funds and invest? Or there are some other factors too?

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You should just not consider returns, in isolation. Set your context (short-term, medium-term, long-term) and look for MFs (or any asset for that matter) accordingly. Consider factors where you are likely to pay from your pocket for closing the position (exit load) or maintaining funds (expense ratio). As a yardstick, you should minimise these costs - more so the expense ratio for a long-term MF because it’s a recurring cost you are going to pay annually.

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Hey Prasoon!

Apart from the factors that Aniket has mentioned (context, charges and exit loads), one more thing to look at is risk :zap:. Returns alone only give you half the picture!

Two popular ways of measuring risk are to look at standard deviation (the higher the number, the wilder the up and down swings in the fund) and Sharpe ratio (a higher number means that you get higher returns for the risk you take).

Look at the chart below - both funds have the same return i.e. 40%. Which one would you rather hold!


Chart source

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Hey,

I just wanted to ask about the starting point. I have some savings and I can also put aside some money every month for SIP, but how do I decide which funds to invest in? There are more than 1000 options in Mutual Funds.

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Thank you for asking the question @vidyut.

Investing can be confusing sometimes since there are 1000+ mutual funds options.

This is the reason why the Investments team made a feature called “Start with Rs 100”.

So, if your goal is to grow wealth for the future, you can invest in an Index Fund. With higher risk comes higher returns (something a Hero in a movie might say :wink: )

But, if you want to save your money for a few months and want very less risk then debt funds like “Low Duration” funds are good.

Start small, see how funds work, increase the amount with time, and see how your money grows day by day.

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Hi team, I have two questions:

  1. How should I invest in US-based stocks i.e. via Mutual funds or directly invest in US Stocks?
  2. Should I continue to invest in Index Funds given the market volatility?
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Hi, I am curious to know

  1. What is the risk of investing in Mutual Funds?
  2. Timing the Market vs Time in the Market: What Should I Do?
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Hey @Ankit_Singh!

Thanks for the questions - both on very relevant topics for the markets right now.

  1. For US stocks, both direct stocks or mutual funds are feasible options to invest in the US markets - but if you’re just starting off in US markets and don’t have strong views on single stocks, you can start with international mutual funds which don’t need any special account or set-up.
    If you’re looking for specific funds, do search for ‘international’ equity funds on your Jupiter app - there are many options between sectors and countries even beyond the US.

  2. Definitely, if you’re a long term investor. Trying to time the market is sometimes like trying to look into a crystal ball :crystal_ball:!
    In fact, you can take advantage of the market volatility, by setting up your investments through SIPs to get the benefit of investing across market levels.
    SIPs have a superpower called ‘rupee cost averaging’ which simply means that you invest a fixed amount every month - when markets fall, you get more units of the same fund.

Hope this helps!

Hi @syed_shabbir

Thank you for asking the question.

  1. Most commons risks are :
  • Market Risk: Mutual Funds invest in financial markets which go up or down. Most investors look at the returns and invest their money. After some time, when the market goes down, they will see mutual fund invested money going down, panic and take out the money. Hence, they book a loss in profits and confidence in investing. Markets can go up and down due to which the investment horizon is said to be more than 5 years for equity funds. Since, for a longer period of time, the ups and down get balanced out. But if you want to keep the cash for less duration due to your dreams/goals, you can invest in assets like debts which are less volatile.

  • Investing in Mutual Funds with lock-in. When there is a lock like in tax saving, retirement funds users cannot take out their money before the lock-in period expires hence one needs to be careful not to invest their expenses or emergency cash in such funds.

And remember if a fund has done well in the previous year, it’s not necessary it will do well in the future too.

  1. In stocks major emphasis is given to timing the market since they’re highly volatile. In the day stock might jump 10%-20%+ or go down. But since mutual funds invest in a large collection of stocks out of which some can go down and others can go up, the volatility is lesser. Due to the lesser jump in price on day-to-day basis timing the market isn’t really rewarding as time in the market is. Your money grows every day and you get interested over time in the growing money too.