Every investor holds a certain amount of shares which represent their holdings in the collective fund. Mutual funds are available in different types and under varying tenures. Here we talk in brief about the benefits of long-term mutual funds and the factors which you must consider before a certain long-term mutual fund.
While mutual funds are available in schemes of multiple terms, long term mutual funds hold a special advantage of compounding. So, what is compounding? To put in simple terms, compounding is the process when the interest that you have earned is re-invested back into the fund. In the long term, this can be greatly beneficial as this re-investing of interest will allow your originally invested capital to grow and help you accumulate wealth in a systematic manner.
For even better understanding, compounding can be compared to the likeness of a snowball effect. Just like a snowball gathers more snow as it rolls, growing bigger in size, similarly, with compounding, the your wealth also grows as the investment proceeds.
Before you invest in a long term mutual fund, there are some points which you must consider.
Mutual Fund Expenses
The fees which you pay have to pay towards investing in a mutual fund can make a considerable difference to the returns even on the best-performing fund. Before you invest, take stock of the fees which you will be required to pay. You must consider the sales load and the expense ratio which accompanies the fund. If you have purchased a mutual fund from a broker or advisor, you will often be charged a load fee, which is basically a commission charged by the advisor or broker towards their expertise and time which they have spent in order to choose the right fund for you based on your financial goals. Some of the other expenses which are associated with mutual funds include: a
Active Management vs Passive Management
Investors have the option of choosing between long term mutual funds which are actively managed or passively managed. Here are some characteristics of both the types.
Actively managed Funds
Passively Managed Funds
Disclaimer
Mutual Fund investments will be subject to market risks. Any mutual fund listed in the document does not guarantee fund performance or its underlying creditworthiness. Do read the mutual fund document thoroughly before investing. Specific investment needs and other factors have to be taken into account while designing a mutual fund portfolio.
GST rate of 18% applicable for all financial services effective July 1, 2017.
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.