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How to Use Mutual Fund Investment for Financial Planning

6 Mins 13 Nov 2021 0 COMMENT


Financial planning is fast becoming a cornerstone of modern family life. A family that invests together creates opportunities for wealth creation. Mutual Funds can play a critical role in financial planning.

Mutual funds and financial planning

Mutual funds enable you to invest in multiple asset classes like bonds , stocks , derivatives , and other financial securities. You can use them for financial planning in the following ways:

  • Mutual funds are meant for diversification. However, it is important while investing in them to make sure the diversification fills the long term needs as per one’s financial plans. Taking advantage of diversification is critical for leveraging mutual fund investments for long-term financial planning.

  • While building any long-term financial plan, it is essential to take notice of the highly liquid nature of mutual funds. This liquidity allows for minimal impact costs and is a crucial factor to consider in any emergency plans built into one’s long term financial plan.

  • The use of a systematic investment plan is essential for long term financial planning. It adds value to your investments over time, partly by reducing costs of holding over time. In essence, the longer you stay invested, the larger the benefit you reap. Despite its passive nature, a systematic investment plan makes a mutual funds scheme a large wealth generator.

  • Long term mutual funds, such as thematic funds, equity diversified mutual schemes, index funds, gold funds, and sector funds, are ideal for long term financial planning.

  • Use of dynamic plans wherein the mutual funds manager modifies an investor’s portfolio based on valuations, interest rates, market conditions, etc. That, however, makes the mutual fund riskier to the investor, as it may lead to less or over-diversification and the removal of safety nets present in traditional mutual funds.

  • Tailoring mutual funds to suit the nature of long-term financial needs is another important consideration. A mutual fund’s tenure and its amount and other clauses are ideally suited to meet specific financial needs.

  • Taking advantage of the tax efficiency of long-term mutual funds is also a consideration. Mutual fund schemes are liable for 10% of LTGR. However, in reality, the tax affects less than 10% of the returns, with advanced indexation benefits on long-term gains.


Mutual funds are an investment option that represents a handy tool for long-term financial goals if appropriately leveraged. Mutual funds offer a wide diversification of one’s investment portfolio and a host of other benefits. It is important, however, that one understands one’s specific long-term needs before investing in mutual funds, in order to be able to tailor the investment properly to reap the maximum benefits possible.


ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Mumbai - 400025, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  AMFI Regn. No.: ARN-0845.We are distributors for Mutual funds and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism.

Please note that Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. I-Sec does not assure that the fund's objectivewill be achieved. Please note. NAV of the schemes may go up or down depending upon the factors and forces affecting the securities markets.Information mentioned herein is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

The information provided is not intended to be used by investors as the sole basis for investment decisions, who must make their own investment decisions, based on their own investment objectives, financial positions andneeds of specific investor.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investors should make independent judgment with regard suitability, profitability, and fitness of any product or service offered herein above. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.