Mutual Funds investor guide: How to achieve financial independence by investing in MFs? Expert answers

Be it office-goers, businessmen or housewives, financial independence is something that everyone craves. These days even after earning a decent income and having adequate savings, people cannot achieve their goal of financial independence for various reasons. And for this reason, experts say that it is important to understand the difference between income, saving and investing. Kashmira Kalwachwala, Head-Investor Services at Tata Asset Management, says that the goal of financial independence can be achieved through investing wisely and one of the best ways to start one’s journey of attaining financial independence is by investing in mutual funds. Here’s how that can be done —

Mutual Funds investment: Diversification

Investing in mutual funds provides one with an opportunity to invest in a wide variety of asset classes. “One can allocate funds across equity, debt, liquid, and commodity to reduce their concentration risk. The asset classes can be chosen as per the needs and requirements. Over time, changes can be made to the asset classes selected, in line with the changing goals and requirements,” Kashmira says.

Mutual Funds investment: Risk appetite

Mutual funds also offer products and different categories of schemes to suit various risk profiles. Kashmira avers that as the basket of mutual fund products ranges from low risk to very high-risk products it enables investors to select products based on their own risk appetite. As a result, mutual funds can help both beginners and experts alike in their investment journey towards wealth creation.


Mutual Funds investment: Small Steps

Big journeys begin with small steps. Similarly, the journey towards financial freedom can also start with a simple Systematic Investment Plan (SIP). She informs that mutual funds allow investors to begin investing with amounts as small as Rs 500, and as they move ahead in their investment journey, the invested amount can be increased as per the requirements. And the amount can also be redeemed to meet specific goals.

Mutual Funds investment: No lock in

Barring a few scheme categories, mutual funds provide options to withdraw investment whenever the need arises. The Head of Investor Services at Tata Asset Management says, “One can withdraw the amount required and have it credited to one’s bank account within T+1 to T+3 days. There is no cap on withdrawal. While most of the Funds do not have lock in periods, some funds in solution-oriented category like Children’s Fund and Retirement Funds have lock in periods and may not provide immediate exit. Equity linked Tax Saver Scheme (ELSS) Category also has statutory lock-in period of 3 years from date of each investment.”

Mutual Funds investment: Ease of transaction

Investing in mutual funds has been made easy over the years, and investors have various modes through which they can invest. Kashmira informs that Mutual Fund Distributors can help investors with the operational requirements and financial advisors can help set goals and review the financial journey to ensure that financial goals are met. On the flipside, investors also have the option to invest directly with mutual fund houses. 

From starting their financial journey to potentially growing their wealth, Kashmira says that mutual funds can play a significant role in helping investors — and all this while managing their risk and helping investors achieve financial goals over the long-term.

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