I am sure everyone must have seen the ads on the television sets of "Mutual Funds Sahi Hai". It is being promoted in a big way.
With the dip in the interest rates of Fixed Deposits, the only option for a person looking to making better returns on their investments is the stock market and mutual funds.
It kind of reminded me of my days when I wanted to take the plunge into it but was unaware how to go about it. I guess it has to be about somewhere around 8 years back.
The first thing that I did was to get a demat & trading account opened. Since I am a bit tech savy, I played with the online platform to understand how it works before making my first purchase. Post that I did ended up buying more shares of different companies.
How did I make my purchase of shares? It all came down to gut feeling. Its a wrong way to buy stocks in this manner. One should always study the company financials, stability, opportunities for growth before making a buy. Something I started to do later on.
Even though few of the stocks I owned did made a lot of sense to me predicating their growth. The management of those companies were though not that keen to be transparent to their shareholders. I ended up burning my hands by selling them at a loss.
At that point of time, I knew of mutual funds but did not knew how it worked out so never invested back then. Now I do and so invested in a couple of them.
The only point that I disagree with the ad that it forget to mention the risks involved which a majority of people would avoid to take. Even though the last line of the ad says "Mutual funds is subject to market risk...."
Yes, it does give better returns compared to other forms of investments. The only problem is that you need to time your exit to end up with a profit. Something that most of the advisors will not talk about.
One might keep their money locked for a year or maybe three. Chances are that even after three years, there is a possibility of not getting returns or seeing your principle in negative. This will happen when the market conditions are not right to make a exit. One needs to make a note of it.
Alas, there is a sure upright trend in more people opting for mutual funds/investment in shares. I just hope they don't have a twinkle in their eyes with the offering of moon in the sky when a pit below can drag you down.
Market is all about timing. When to enter and when to exit...
P.S.I share a fascination for personal finance. In fact had a blog too, which I shut down as I did not had the time nor an idea on how to go about it. Sharing here my two cents.