Turning Dream into Reality

The mutual fund segment in India has come a long way since its inception in 1963 with the establishment of Unit Trust of India (UTI). This was an initiative by Government of India and Reserve Bank of India to encourage savings and investment.But now MF has moved beyond a tool to just save and invest; it has become a vehicle that will help you to turn your dream into reality. All you have to do is to follow these five steps in the same sequence. Start with establishing your financial goals, evaluate your current position, develop a plan, implement that plan, and finally review and monitor it regularly and take corrective action if required.

The same process can also be used to finance your dream home. Investing in a mutual fund through systematic investment plan (SIP) can help you first finance your down payment for buying your home. Once you have purchased the house, SIPs can also be used to make pre-payment as well as foreclosure of your home loan. The reason SIP works well is because it helps you to be a disciplined investor and if you start early it gives you the power of compounding. Return on returns start forming a bigger part in your total investment returns as years of investment increases.

Our cover story of this issue gives you details on how you can use SIPs to arrange for the upfront payment required to buy your home. Besides, buying a house through mutual funds can also be used for planning your retirement. When you are following a simple buy and hold strategy, the sequence of returns doesn’t matter and your final investment value remains the same. Nevertheless, if you are using it as a retirement pot, the sequence of returns has a great impact on the duration for which it will sustain your retirement expenses. Our special report on sequence of returns will help you to know more on how to mitigate those risks.

SHASHIKANT