Finding the right investment plan to target your financial goals can be difficult. There are so many investment products out there that it makes the investment decision confusing, especially if you are a new investor. This is why financial planning is essential for anyone who wants to improve their current financial situation. The term financial planning may sound complicated, but it is the art of managing your money in a smart and sensible way. We all have some financial goals in our mind which we want to achieve in the near future. If you invest with these goals in mind, you are less likely to withdraw before achieving your investment objective. Because when you invest with a purpose, you also get emotionally attached to it and would like to make sure that you remain committed to your investments till you reach the desired corpus.

Investing has become very easy now in the digital age. Earlier people depended on agents to provide information about new financial schemes. Also, most of the individuals preferred to invest in traditional methods as they offered fixed interest rates. However, in the current scenario, the interest rates offered by these conservative avenues are low. Furthermore, many come with long lock-in periods, which means investors cannot liquidate these investments in case of an emergency.

However, mutual funds give investors the option to switch from a conservative investment path. Mutual funds invest in a diversified portfolio of securities and aim to generate income. These are professionally managed funds which are known to offer capital growth over the long term. If you do not want to risk your finances with only equity mutual funds with high risk/return ratio, you can diversify your investment portfolio with debt mutual funds.

Debt schemes are schemes that invest in fixed income securities and debt instruments. A debt fund can invest in various instruments such as Commercial Paper, Certificate of Deposits, G-Secs, Derivatives, Company Fixed Deposits and Corporate Bonds.

Consider loan plans to target your short term goals

If you are someone who is new to investing in mutual funds and have a low risk appetite, then you can consider investing in debt mutual fund schemes. Several debt schemes are also ideal for targeting one’s short term financial goals:

loan schemes There is an option of SIP and lumpsum investment

You can either invest a lump sum amount in your debt mutual funds or you can consider the option of starting monthly SIPs. Lump sum investment is generally made by the investor at the beginning of his investment cycle. Investors are allotted units along with the investment amount and in quantities based on the current Net Asset Value (NAV) of the fund. On the other hand, if you want to inculcate the discipline of savings, you can consider starting SIP in debt mutual funds. Systematic Investment Plan or SIP is an easy and convenient way to invest in Mutual Funds. Investors can also use SIP calculator, which is a free online tool, which can help them get a rough estimate on the capital appreciation they would be able to earn at the end of their investment journey based on assumptions like rate of return .

Loan plans are available as direct and regular plans

Direct debt fund schemes are easily available and can be bought directly from the fund house or AMC. In a direct plan, there is no involvement of an intermediary like a mutual fund distributor. The transaction takes place between the investor and the AMC. This is mainly the reason why the expense ratio of investing in direct plans is generally on the lower end. On the other hand, a regular debt fund plan can be brought through a mutual fund distributor, who can be a broker or an independent financial advisor. These aggregators charge commission from the AMC for selling their funds. In return, the AMC recovers these charges by charging a higher expense ratio on regular plans. Investors should decide whether they want to go with regular plan or direct plan before investing.

Loan plans offer multiple payment options

Investors can decide whether they want to choose a growth plan or a dividend plan based on their income needs. A growth plan is one where the capital appreciation earned by the plan is invested back into the fund. This type of scheme is ideal for anyone who wants to earn capital appreciation over the long term. A dividend plan can work in favor of individuals who seek regular income. However, the fund manager can distribute dividends only if the scheme is successful in generating profits.

All retail investors are advised to consult their financial advisor before investing in Debt Mutual Funds.

“This is an investor education and awareness initiative by Axis Mutual Fund. Investors need to complete a one-time KYC process. For more details visit www.axismf.com or contact us at Customerservice@axismf.com. Investors should only Should deal with registered Mutual Funds, details of which are available at www.sebi.gov.in – Intermediaries/Market Infrastructure Institutions section. For any grievance redressal, investors can call us at 1800 221 322 or write to us at customerservice@ axismf.com or register a complaint on SEBI Scores Portal https://scores.gov.in.

Mutual Fund investments are subject to market risks, read all scheme documents carefully.