Best Mutual Funds for Students: How to Invest Smartly for your Future
The world of mutual funds can be overwhelming, especially for students. There are many misconceptions that prevent students from investing, such as the belief that investments are only for the wealthy or for older adults. The truth is, mutual funds are accessible and beneficial for students who want to start saving and investing early.
Understanding Mutual Funds
Mutual funds are a popular way to invest in the stock market. They are managed by professional fund managers who invest in a diverse portfolio of assets, such as stocks, bonds, and other securities. These funds provide an opportunity for individuals, even with limited resources, to invest and potentially grow their wealth.
Benefits of Investing in Mutual Funds as a Student
The benefits of investing in mutual funds as a student are numerous. Whether it’s for your higher education, purchasing a two-wheeler, or enjoying a vacation, these funds can help you achieve your financial objectives. Here are some key benefits:
Meeting Your Financial Objectives
Investing in mutual funds allows you to set and achieve financial goals. Whether it's for buying a car, funding your education, or saving for a vacation, mutual funds can provide the necessary financial support.
Time and Peace of Mind
Investing as a student can also provide peace of mind, knowing that your financial future is being secured. With systematic investment plans, you can invest small amounts regularly, making it easier to save and achieve your long-term goals.
Healthy Investment Habits
Getting into the habit of regular investing early on can have a positive impact on your financial life. By starting with small amounts, you can build valuable financial skills and create a foundation for long-term success.
Do Student Investments in Mutual Funds Really Benefit?
The power of compounding is one of the most powerful tools in financial success. By starting to invest early, even with a small amount, you can build a significant wealth over time. Let's look at an example to understand this better.
Real-Life Example
Imagine a student starts investing Rs.100 per week in mutual funds during their first month of college. Over the course of a year, this adds up to Rs.5200, which translates to Rs.433 per month. If the returns on this investment are 7% per year, the total investment over three years (36 months) would be Rs.15588. Adding the rate of returns, the student would have Rs.17873 by the time they finish college, earning a profit of Rs.2285 in three years with an amount as low as Rs.100 per week.
Now, let’s extend this to a longer period. If the student continues to invest Rs.100 per week until they turn 60 years old, assuming a 7% rate of return, their investment would grow to Rs.1588669. This underscores the importance of starting to invest early and consistently.
Selecting the Right Mutual Funds for Your Goals
There are different types of mutual funds suited for various financial goals—short-term, mid-term, and long-term. Here are some recommendations for students based on their financial ambitions:
Mutual Funds for Long-Term Financial Goals
Axis Bluechip Fund SBI Bluechip FundMutual Funds for Mid-term Financial Goals
ICICI Prudential Equity and Debt Fund Principal Hybrid Equity FundMutual Funds for Short-term Financial Goals
For students who wish to invest in mutual funds for the short term, the Franklin India Low Duration Fund is highly recommended.
As a debt fund, it allows investors to remain invested for just a few weeks if needed. Its risk profile is low, with returns of 9.63% since its launch. Two-thirds of the corpus is invested in debt instruments, while the remainder is in cash, making it safe and beneficial for short-term investments. The 1-year returns offered by the scheme stand at 7.60%, the 3-year returns at 9.20%, and the 5-year returns at 9.80%.
How to Start Investing in Mutual Funds
Investing in mutual funds is simpler than you might think. Here are the steps:
Research the documents and processes required to start investing. Choose a mutual fund scheme that aligns with your financial objectives. Set up a systematic investment plan if you plan to invest regularly. Monitor the performance of your investment periodically.By taking these steps, you can start investing in mutual funds and pave your way to a secure financial future.