Kite flying lessons that mutual fund investors can use - Make Money Online

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Kite flying lessons that mutual fund investors can use

It’s the peak of winter; the sun’s soft. Thousands of people crowd the roofs, seemingly sunning themselves. That’s not the case though. Instead, their gaze is fixed at the steely-blue sky. Not because the sky is pristine as bullet, but because its foreground is adorned with colourful kites. 

Welcome to the month of January, the time of India’s harvest festival Makar Sankranti. The time when kites are flown with much pomp and fare. The time when people take kite flying as seriously as the happenings on a cricket field. For most people, this is a sport, not a leisure activity. It is a sport that requires skill and precision. In fact, kite flying can offer investment lessons to people. 

Preparing to take flight

The first step of buying a good kite is to choose the right string and spindle. There will be many options in the market, but you’d have to discern the best available. Similarly, you cannot pick an investment option on a whim, or mere hearsay. You have to analyse your risk appetite, the right investment plan and your long-term financial goals.

While picking stocks can be risky, debt investments may provide low returns. This is where mutual funds can step in. They fall somewhere in the middle. There are a variety of funds that can earn you high returns at less risk. 

Moreover, mutual funds are comparatively safer than equity, thanks to the power of diversification. Diversification is nothing but scattering your investment across various asset classes (equity, bond, gold etc.). Spreading your investment lessens risk because asset classes react differently to economic changes. For instance, if the stock market doesn’t perform well, your gold investment will. This means the return you get on gold can offset the loss you suffered in the stock market.

Get the pre-flight procedure right

Once you scout the right kite, you need to prepare the string by gumming, colouring and coating it with powdered glass. You then dry it before tying it onto the spindle. You can’t simply start flying the kite. 

It’s the same with investing. You cannot pick any mutual fund that you come across. You need to do some homework first. There are many kinds of mutual funds. Some of them are: 

·         Equity mutual fund
·         Debt mutual fund
·         Balanced fund

As the name suggests, equity funds invest in stocks. They are relatively safer than equity because your money is invested in several company stocks. But, aren’t they risky? No. That’s because of the power of diversification. For example, stock A’s losses can be eclipsed by stock B’s robust growth. Also, equity tends to become less risky if you invest in them for a longer period. Therefore, this fund is best suited to those who are not edge walkers, but risk-averse. Also, those who are in it for a longer time. The returns you get in the long run can be worth the patience.

Debt funds provide stable returns, though the returns may not be as high equity funds. However, the returns are generally higher than what other ‘stable’ investment options provide. For example, debt funds generally provide better returns than say, savings account, fixed deposit or a retirement fund.

Balanced fund, meanwhile, seems to fuse the best of both the aforementioned funds. They invest in equity and debt.

The strategy to stay afloat

Once your kite is ready to soar, you need to check the direction of the wind. You also need to maintain balance once the kite has attained a certain height and manoeuvre it accordingly to keep it at a safe distance from other kites. 

Ditto with selecting mutual funds. You need to look for a fund that suits your financial goals. Now that you know the profile of different funds, you need to check which one will fulfil your financial planning objectives. 

The key to success is patience

Finally, the most important lesson that flying a kite teaches you is patience. It is one of the most elaborate and time-consuming sport. It teaches you to soar with the direction of the wind. Fighting the wind can spell disaster and make your kite plummet in no time. Similarly, investing in mutual funds requires application. You need to be in it for some time to reap dividends. 

Also, you don’t need a lot of money to invest in them. You can start with as little as Rs 500 every month, thanks to systematic investment plan (SIP). Investing through SIP can protect you from volatility. This is because of rupee cost averaging. This means that you buy a greater number of units when markets are low and lesser units when markets are high, thus averaging out your costs and automatically insulating yourself from market volatility.

Now that you know the various lessons that kite flying carries for mutual funds, we hope that you will be able to put them to good use.
Kite flying lessons that mutual fund investors can use Kite flying lessons that mutual fund investors can use Reviewed by Parvesh Bravo on 1:30 AM Rating: 5