‘FOOD, CLOTHING, and SHELTER’ once upon a time were considered as the basic needs of a human. But today, many other pointers have been added to this queue to make humans comfortable. Savings is undoubtedly one of the most valuable additions to this list. Every individual prefers saving some amount to keep themselves secure on their rainy days.
A few people prefer to manage their amount smartly by investing in multiple investment options, but a few people need this knowledge.
Hence, they are only able to make so much money from their existing money. Let’s delve into some exciting and magical points to know the importance of investing in mutual funds and its promising future benefits.
Table of Contents
Expounding Mutual Funds
A mutual fund is an investment option in which multiple investors invest their amount and distribute the returns on their investment accordingly. This corpus is managed by a professional termed as a fund manager or an experienced manager. The job of a fund manager involves studying the market and investing in the correct form of securities such as gold, stocks, bonds, and various other forms. The returns from the invested amount are distributed among the investors after deducting the necessary expenses and levies.
The Primacy of Investing in Mutual Funds
- Professional Aid- Imagine you wish to appear for UPSC exams to get into cream services. Now, you have two options: either you study by yourself or opt for professional coaching classes. In the first scenario, you can study the way you wish, but you may also get stuck in some complex concepts. In the second scenario, the professional coaching class will help you teach complicated concepts and provide you with essential tips and tricks to solve examination papers.
A similar scenario involves investing in mutual funds. You can invest in different types of securities based on your knowledge and inclination. Still, in the case of mutual funds, you will be provided with professional guidance for investing in different profitable options for enhanced returns.
- Higher Returns- Another beneficial point of investing in mutual funds is a higher rate of returns. The returns are more valuable and promising compared to other traditional investment options because the returns of mutual funds depend on the market’s performance. If the performance of the market is swift, like lightning speed, then returns are in the same boat.
Just as a coin has two sides, the returns scenario can work vice versa. In layperson’s language, if the market performs poorly, then the returns might not be as attractive as expected, as mutual funds are not covered with capital protection.
- Enhanced Safety- One more notable point of investing in mutual funds is improved safety. Mutual funds involve investing in multiple securities, unlike the traditional investment options involving investment in a single security. Hence, the chances of higher returns are enhanced and secure compared to other saving methods. It’s precisely similar to the family members of billionaires travelling separately rather than together for safety reasons.
8-4-3 Rule in Mutual Funds
The 8-4-3 rule of mutual funds is the USP of the investment option. The rule relates to the accumulated returns being reinvestment and compounding altogether for a higher profit. In layperson’s language, it can be termed as the earning returns from the capital amount, and then the earned returns are re-invested again for more returns. The power of compounding strengthens Year by Year, making the platform a reliable and profitable source of investment options. It is similar to kids who keep on saving money instead of spending it while receiving it from guests and relatives to buy something of their choice at the right time.
Deeper Understanding of the Concept
Let us understand a little bit of a tricky concept in an easy vanilla way:
For instance, if an individual invests Rs. 30,000 monthly and receives 12% of their annual return, then the 8-4-3 magic rule will work the following way:
- Initial 50 lakhs with a Patient Waiting Span of 8 Years
Though waiting for 8 years may seem a long and impatient waiting time, the invested amount accumulates to 50 lakh rupees after the mentioned period. Though this period may seem to be a considerable wait, if you keep the proper cool and show patience at its best, then the power of compounding is sure to show its magic in its true colors.
- Half the time for the Next Profitable Episode
The following 50 lakhs will enter your portfolio in half the time now, i.e., only 4 years of wait. It is where the fruits of patience and smart thinking reflect. The acceleration of the amount begins at a notable pace, allowing the investor to feel relieved about the right choice of investment platform.
- More Pace in the Third Episode
The following 50 lakhs will now enter your portfolio at a much higher pace, i.e., in 3 years. At this moment, the investor can experience and study the true power of compounding and its benefits for a secure future.
- The Big Bonus at the 20th Year
If you meditate regularly and have learned the art of keeping good patience, then the sweeter fruits of compounding are reflected from the 20th Year of investment. The amount nearly doubles every year, which can prove to be a huge financial help on rainy days or for unexpected and unfortunate events.
The example above clearly states the importance of compounding and its benefits. The scheme clearly states in bold letters, ‘LONGER THE INVESTMENT, HIGHER THE RETURNS.’ It is just like a growing child; just as a child is taught interesting skills in his initial years, the more a child learns proficiency in it, the more valuable the skill becomes for him at the right moment of his life.
Conclusion
Savings are a massive support for an individual, just like a family member. Hence, choosing the right platform for savings is essential to give you profitable returns and make you feel supported at the right time. The magical 8-4-3 compounding effect in mutual funds is the perfect investment option for people who wish to see their investment flourish the right way. The platform is ideal for people who can keep their patience and enjoy its fruits in its optimum way.
To learn more about mutual funds, contact us via Phone, WhatsApp, Email, or visit our Website. Additionally, you can download the Prodigy Pro app to start investing today!
Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related documents carefully before investing.
