Is there anything wrong if I put all my savings in mutual fund for 15-20 years? - Maxiom Wealth Askguru (2024)

FAQs

Should I put all my savings in mutual funds? ›

Given how high the risk is with these mutual funds, it is best to limit yourself to a limited number of small cap mutual funds. Also, avoid putting in a great percentage of your total mutual fund investment in small cap mutual funds. Debt Funds: Ideally 1, but 2 is also good.

Mutual fund investments when used right can lead to good returns, keeping risk at a minimum, especially when compared with individual stocks or bonds. These are especially great for people who are not experts in stock market dynamics as these are run by experienced fund managers.

For a 15-year investment horizon, equity mutual funds or a combination of equity and hybrid funds may be suitable options. These funds typically aim for capital appreciation and have the potential to generate higher returns over the long term, albeit with higher risk.

While mutual funds are popular and attractive investments because they provide exposure to a number of stocks in a single investment vehicle, too much of a good thing can be a bad idea. The addition of too many funds simply creates an expensive index fund.

Saving is generally seen as preferable for investors with short-term financial goals, a low risk tolerance, or those in need of an emergency fund. Investing may be the best option for people who already have a rainy-day fund and are focused on longer-term financial goals or those who have a higher risk tolerance.

Short-term savings goals: less than 2 years

Before you start investing for longer-term goals, it's important to have an emergency fund with around three to six months' worth of expenses. Keeping these in a checking, savings, or MMA is best because these accounts are liquid.

Generally, mutual funds carry risk, including the risk of loss of principal. However, diversified mutual funds with a long-term investment horizon tend to mitigate risk. It's important to research and understand the risks associated with any mutual fund investment before committing your principal amount.

The rule of thumb is five years. If it's a riskier type of fund, such as a small-cap one, then I would say, seven years. But a better approach would be to link your equity fund to a long-term goal, such as your retirement and children's higher education.

In the case of a Mutual Fund company shutting down, either the trustees of the fund have to approach SEBI for approval to close or SEBI by itself can direct a fund to shut. In such cases, all investors are returned their funds based on the last available net asset value, before winding up.

Long-term investment

As mentioned earlier, longer the tenure, the higher the returns. What if the SIP were continued for a decade i.e., 10 years? Then the investment would have grown to ₹30.32 lakh. And in 15 years' time, the investment would have swelled to ₹69.37 lakh by making an investment of ₹18 lakh via SIPs.

What if I invest $1,000 a month in mutual funds for 20 years? ›

Mid Cap Mutual Fund:- If you invest Rs 1000/per month for 20 yrs in Mid cap mutual fund, Assuming that 15–16 % interest rate. You will have approx 15–16 lakhs.In long term all mutual funds are safe.

By investing 20,000 per month, in one year your invested amount will be approx. 2,40,000 and in 5 years your invested amount will be 1,200,000. So, during in this 5years if we expect the rate of return of 12%, estimated returns what we get is approx. 4,49,727.

Are mutual funds safe? All investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. Since they hold many company stocks within one investment, they offer more diversification than owning one or two individual stocks.

Disadvantages include high fees, tax inefficiency, poor trade execution, and the potential for management abuses.

If you're wondering, “Is mutual funds safe?” or “Is mutual funds safe to invest in?”, it is good to know that these are generally considered a safe way to grow your investments due to professional management and diversification.

Holding cash in a bank chequing or savings account over time won't increase much in value. If it does, it rarely keeps up with inflation. A better option to consider might be to put your money in a market-based GIC or Mutual Fund—where returns can be potentially higher.

A widely accepted guideline is the 50/30/20 rule. Allocate 50% of your income to necessities, 30% to discretionary spending, and reserve 20% for savings and investments. Within this 20%, your mutual fund allocation can be further optimised based on your risk tolerance and investment goals.

If you think you will need the money in the near-term (less than two to three years), avoid investing it because of the additional risk you take on by putting your money in the market. Instead, put this cash into a savings account that offers more security.

If you want to put your money in a high-yield account for a short-term savings goal, money market accounts have many benefits. If you want to withdraw money frequently or save for long-term goals like retirement, a checking account and investment account or high-yield savings account would be better options.