Knowledge Hub

Mutual funds come in the form of a wide range of investment options, such as equity funds, debt funds, hybrid funds, and solution-oriented funds. Each of these options is designed to suit the different needs of different investors. You may choose the mutual fund scheme that suits your risk appetite, financial goals and investment horizon.

It is advisable to maintain a contingency fund for any future emergencies. The quantum of such a contingency fund is relative to different individuals depending on their committed payments, lifestyle expenses, etc.

However, as a generic measure, one should maintain a contingency fund equivalent to cover expenses for the current lifestyle for at least six months to have a sufficient financial cushion. Most people park their emergency funds in savings accounts because of liquidity and nil market-linked risks, however, they may offer interest as low as less than 3%.

Exchange Traded Funds (ETFs) are financial products which provide direct investment exposure to benchmark indices and commodities. As per the SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index.  ETFs undertake passive investing, and the fund managers replicate the underlying index and implement changes in the investment portfolio as and when the changes happen in the index constitution.

Exchange Traded Funds (ETFs) are passive investment options that offer direct investment exposure to underlying indices or commodities like silver, gold etc. As per SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index.

Fund managers are mandated to track the specified index and implement changes in the investment portfolio as and when the changes happen in the index constitution. They cannot go beyond the index composition or their respective weights.

Advantages of Exchange Traded Funds

One may invest in mutual funds in two modes – lumpsum or staggered manner, i.e., through Systematic Investment Plans (SIPs)/Systematic Transfer Plans (STPs). When one invests in lumpsum, the investment is done in one go, while through SIP/ STP, one makes investments in instalments in a designated scheme.

When planning to invest in markets, investors often find themselves in a dilemma of choosing whether to invest in stocks directly, or through Exchange Traded Funds (ETFs). Some investors may find direct stock investments interesting and exciting since there is more control over investment decisions, and they can track the stock prices over stock exchanges.

<p>When investing in the market, opting for stocks with reasonable valuations and a higher margin of safety may provide a safety cushion. <strong>P/E Ratio </strong>(Price to Earnings Ratio) can help the investors gauge the valuation multiples for a given company or scheme, which can then be used to compare other companies or mutual fund schemes.</p>

<p><strong>What is P/E ratio?</strong></p>