Can You Achieve Your Financial Goals Without Investing In Mutual Funds? Know Here…
Apr 09, 2018

Author: PersonalFN Content & Research Team

Financial Goals

Schools and colleges will soon close for summer vacations.

Aren’t you planning to take a break from your busy schedule and take your family on a week-long holiday?

So what’s on your mind this year? Shimla or Switzerland?

Cities will temporarily become less crowded and holiday destinations will start receiving visitors.

The funny fact is, while you enter ‘vacation mode’, the entire tourism industry gears up for the peak season.

Do you know when they (people working in the tourism industry) start planning for it?
Soon after the season ends…
Yes, you read it right.

Depending on the response of visitors and their feedback about the property and quality of services, hotel owners start chalking out plans for the next season right away.

After all, there’s a cost associated with introducing new services or improving the hotel infrastructure. Similarly, tour operators estimate response to their various packages and start bargaining with other service providers—hoteliers, fleet owners, and people working with them in the contract for multiple services.

Because you take a rest, they work; and because they work, you can relax a bit and enjoy.

By the way…

When do you start planning for your vacation?


If you plan it well in time, you will get good deals every time. Be it domestic or overseas, leisure travel is never cheap.

Unless you save for it in advance, a week-long holiday with your family at famous summer destinations will cost you a pretty penny.

And if you aren’t prepared for it, you might even have to make a last-minute arrangement of funds or else have to dig into the investments you made for some other purpose.

A detailed financial plan that takes into account all your financial goals—long-term, short-term both—and also considers your risk appetite. Based on other factors such as your age, the time horizon you set to accomplish your goal, and your existing financial circumstance, you may create a personalised asset allocation plan for you.

Thereafter, you just need to follow it meticulously. Every single Rupee you invest to fulfill your financial goals must be in accordance with your personalised asset allocation plan.

Role of mutual funds in financial planning

Whichever asset class you want to invest in—equity, debt, gold, or others—mutual funds is the right option for you.

Can you skip all these asset classes and still think of making the money you need to satisfy your financial goals?


Mutual funds is the simplest way to invest across asset classes.

What is diversification? Why do you need it?

(Note: This video is for educative purposes only)

Here’re some of the benefits of investing in mutual funds…

  • Professional management – A professional fund manager and his/her team manages your money. Hence, in case of equity-oriented funds, ascertaining the prospect of the companies is not your prerogative, and the fund manager takes care of portfolio churning (if required). Similarly, in the case of debt funds, the fund manager evaluates the credit opportunities available and invests in debt instruments issued by various entities. In other words, once you invest in mutual funds, you are relieved from the duty of taking portfolio decisions.

  • Low transaction costs – If you make all the investments yourself, without going via mutual fund houses, transaction costs involved will be high due to lower volumes. Compared to that, the transaction volume of the smallest mutual fund is also higher than that of an individual investor or a small pool of individual investors. Naturally, mutual fund houses enjoy the economies of scale. They pass on the benefits to investors as well, in the form of lower expense ratios.

  • Start with a minimal amount – Mutual fund houses allow you to invest as low as Rs 5,000 in most of the schemes, while a few schemes even accept Rs 1,000 as well. Unless otherwise restricted by the mandate, equity and debt schemes spread their portfolios across investment instruments.

    For example, an equity diversified mutual fund invests at least in 20-30 stocks and an income scheme too diversifies across various debt instruments, based on scheme objectives. Such diversification isn’t practically possible for an individual investor investing a negligible amount independently in stocks or debt instruments. How many shares would you be able to buy with just Rs 1,000, if you think of managing money yourself?

  • A variety of available options – Asset Management Companies (AMCs) offer you the flexibility to invest in mutual funds. Depending on the type of scheme, your investment horizon, and the amount available with you at the time of investing, you may either invest in a lump sum or opt for SIP (Systematic Investment Plan) / STP (Systematic Transfer Plan). Moreover, depending on your cash flow requirements you may choose any of these options: dividend, dividend reinvestment, and growth depending on your cash-flow requirements.  Choose direct plan or regular plan depending on your requirements.

    Similarly, at the time of withdrawing money, you may either withdraw any sum as and when you want or may opt for SWPs (Systematic Withdrawal Plans).

  • Liquidity–As you might be aware, open-ended mutual fund schemes declare Net Asset Values (NAVs) on a daily basis, except on holidays. If you submit your request within a stipulated time, you can buy and sell units for the NAV as on a particular day. So invest in any asset class — equity, debt, or gold; you can liquidate your investments any time.

    However, to discourage premature withdrawals from the products meant for the long term such as income funds and diversified equity funds, mutual fund houses charge an exit load.

So what’s your objective of investing in mutual funds?

  • Growth

  • Income

  • Protection against inflation

  • Peace of mind

  • Preservation of capital and

  • Tax saving

If you are young and earning, the growth of capital, tax saving, and protection against inflation would be your objectives.

If you are retired or approaching retirement, peace of mind and preservation of money would be your investment goals.

In case, you are investing for long-term objectives such as retirement, higher education of your children and their marriage, you may start a SIP in diversified mutual funds that have a proven track record.


Benefits of SIPs are:

  1. SIPs are light on the wallet

  2. SIPs make market timing irrelevant

  3. SIPs enable Rupee-cost averaging

  4. SIPs benefit from the power of compounding; and

  5. SIPs are effective medium for goal planning

You might have realised, you can still draw-up a successful financial plan without investing in mutual funds, but the journey wouldn’t be peaceful.

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