MF Investment: 5 ways millennials can boost portfolio returns with mutual funds

The best mutual funds for you are the ones that make an appropriate allocation considering your long-term financial goals and risk tolerance.

MF Investment: 5 ways millennials can boost portfolio returns with mutual funds
The New Fund Offer (NFO) of the Scheme opens on 27th November 2020 and closes on 11th December 2020.

Millennials are constantly pestered by their parents and older relatives to save more. But socking away money is not easy when social opprobrium and peer pressure lure you to spend more than you save for tomorrow. However, this is the best age to start planning for financial security and, therefore, invest more diligently. When talking about investments, mutual funds are perhaps the best option even if you are a beginner. They offer you an opportunity for a diversified portfolio, stable returns, liquidity and low costs.

Whether one wants to save for a short-term goal or a long-term target, mutual funds can fulfil both the purpose. With the ease of investment and low ticket size, one can start with any little amount. However, what often bothers millennials is how to get the best returns out of mutual fund investments? Well, there are a handful of timeless investing tips and rules to maximize performance. Millennial investors can follow these five strategies to maximize returns.

1. Use Index Funds

The time is ripe for adding more to your investment portfolio provided your asset allocation plan allows it.

The methods of surviving a market crash of any kind are the same. Some investment options are safe and at the same time, have a chance to give you good returns in the future. Index funds are one of the few ways to beat the market. Additionally, their lower relative market risk and low costs make them a better choice for better long-term performance. These funds track a popular stock market index such as the SENSEX and Nifty 50. It replicates the investments within companies included in the main indices with the same weights. These funds are a great investment option no matter what the market conditions are.

2. Keep Investing Even if the Market Seems Hard

Keep your Systematic Investment Plans (SIPs) and do not worry about the operational part of mutual funds unless you wish to take up new investments, switch or make profile or account related changes. Mutual funds are one of the best investment options regardless of market conditions. Redeeming your investments due to huge market volatility is not a good decision as continuing SIPs will help you balance your average cost of investments. So, use your asset allocation strategy and top up your investment in SIPs.

3. Stay Safe from Redemption Pressure

There have been multiple market falls in the past as well but there is always a recovery. So, it is significant to keep calm and not redeem your investments in panic. It is also important to not go overboard with investing. Ups and downs of the market are part of the investment journey and as an investor, you must refrain from panic actions.

4. Periodic Review

Ensure that you take the periodic review of your investment portfolio and your financial goals to modify your portfolio according to changes in the market, risk appetite, your age and financial goals. This keeps your investments active as per the market conditions which contribute to a decent return on your overall portfolio throughout the investment tenure. When the market is fluctuating, you may need to adjust your investment amount based on market conditions and your risk appetite.

5. Diversify Your Investment

Building a diversified portfolio incorporating multiple asset classes is the best way to generate optimum risk-adjusted returns from various asset classes. While it is true that fund selection and asset allocation should be done on the basis of your investment horizon, financial goals, and risk appetite; it is also important to avoid investing in too many funds as it might not to possible to track their performances.

Summing Up

The best mutual funds for you are the ones that make an appropriate allocation considering your long-term financial goals and risk tolerance.

Existing investors should refrain from looking at point-to-point returns as most of the losses will be recovered over time. The novel coronavirus has gut-punched the global market, but we will get through this.

(By Jashan Arora, Director, Master Capital Services)

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