Different Mutual Funds for Different Goals

Once you know your own risk profile and the risk profile of different funds, it is time to select a mutual fund for each goal.

Now, where would you invest for a short-term goal like buying a scooter?

You would want to invest in something that has lesser risk, right?

This is because your need to convert it into cash will come soon (in one year).

Therefore, you can invest in a debt-based mutual fund because it will give stable returns in the short run. Debt investments also are considered stable in the short run because their returns are fixed.

Therefore, mutual fund investment in a debt mutual fund for one year can be better for short-term goals like buying a scooter.

Mutual funds are suitable for goal-based investing. Keep reading to know which mutual funds are suitable for specific goals.

Emergency planning – Liquid Funds

Investing in a liquid fund is just like keeping money in a savings bank account. Liquid funds can be withdrawn at any point in time. That is why they can be good for emergencies.
Tax Saving – Equity Linked Savings Scheme

The Equity Linked Savings Scheme (ELSS) can help you save taxes on up to ₹1.5 lakh per financial year under Section 80C of the Income Tax Act.

If you don’t make investments for saving taxes, you will end up paying more from your hard-earned money.
Long-term Goals like Retirement Planning – Hybrid Equity Mutual Funds

Equity or share investments can give higher returns in the long run. These returns can be much higher than that achieved through debt mutual funds.
Medium-term Goals like Higher Education of your Children – Solution-based Mutual Funds

There are a few solution-based mutual funds available for goals like investing for your kid’s education. These funds, generally, invest in a mix of shares and debt.
Post Retirement Fixed Income – Ultra Short Debt Funds and Liquid Funds

After retirement, your previous earnings are your income. Therefore, this should be easily convertible into cash at short notice. You can keep some amount of the funds in ultra-short debt funds of an 11-month maturity and the remaining amount in liquid funds, where you can easily redeem them.

Mutual funds are good for goal-based investing
Debt mutual funds can be better for short-term goals
Share-based or equity mutual funds can be better for long-term goals
Liquid funds can be withdrawn at any point in time. That is why they can be good for emergencies

Let's look into the next section to know about what is Net Asset Value of mutual funds