The Importance of Mutual Fund With Respect to Financial Planning

Financial planning is the systematized process of meeting your financial objectives through appropriate investment avenues. Every investor harbours a different aim, in this regard. For some it is wealth creation for wealth’s sake, others aspire to buy a home (or several), whereas others wish to build their assets so that they may leave behind some financial security for their loved ones. However, to fulfil these dreams one must first analyse their current financial situations. Financial planning begins by looking at a person’s income, their savings and assets, their tax records, their expenses and debts, their appetite for taking financial risks and even their age, before laying down a tangible and realistic investment plan suited to these observations. Financial planning is ultimately the move one makes to take charge of their and their family’s long term financial security.

Mutual fund investments are relevant to financial planning as they are the epitome of all those financial products that allow us to achieve our financial goals. The ramifications of mutual fund investing, what they consist of and how they will contribute to our financial well being are pre-determined. Every fund has a different goal, which allows investors to invest only in those that will be advantageous to them. Equity mutual funds strengthen one’s finances in the long run, focusing on growth with short term risk. Thus, when engaged in planning your finances, try and figure out what your needs in the long term will be, taking into account old age, your children’s education, and inflationary prices and so on and so forth. Having calculated your potential requirements, invest in an appropriate equity mutual fund that, at the time of maturity will provide you with enough returns to meet your predicted needs. If they do not, then one can always reinvest the gathered returns.

This is a more convenient move than the painful process of building an equity portfolio in the stock market, one share after another. Mutual funds are highly beneficial in the process of planning your finances as they help you to focus your investments today based on your anticipated need for tomorrow in one swift move, rather than wasting your time with other more elaborate investment tools and duties that can be outsourced. For e.g., mutual fund investors are not required to have a keen knowledge of the market as executive decisions are all made by the fund manager.

The combined convenience of a mutual fund along with the experience of the manager as well as the lucrative nature of the medium itself results in a winning combination for anyone looking to invest with the view of long-term growth.

By Sara D Cooper