Why Mutual Funds for Wealth Creation?

How could you create wealth or build a huge corpus by investing in mutual funds? About 66% of the assets under management of mutual funds are in debt funds and only about 32% in equities. Also, these investments are managed by professional portfolio managers and this reduces the risks involved. Moreover, you can invest in equity, debt, and gold based on your risk appetite to create wealth in the long run. You can start investing in mutual funds with as low as Rs. 500 per month.

Mutual funds offer many choices for short-term and long-term financial goals that too with good liquidity. For example, one can lock money even for a weekend without any penalties for early withdrawal with liquid funds. Mutual funds provide an investment option similar to ‘recurring deposit’ called ‘Systematic Investment Plans’ or SIPs where you can invest on a monthly or quarterly basis. Your investments in mutual funds can beat inflation and are also tax-efficient in many ways.

For example, an investment of Rs.10000 over 20 years might generate a corpus of Rs.1 crore with average 12% returns. In 35 years, i.e. till retirement, one could create a wealth of about Rs.6.5 crore at the same interest rate. However, this is only a very minimal return calculation and chances of higher returns are always there.

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