Align your goals with the objective of mutual funds to make the most of them. This assures that your money is working towards your goal even as you sleep
By Sandeep Bhosle
We often come across terms such as ‘world’s best performing’ and ‘highest returns’ when selecting investment avenues and mutual funds. It’s easy to get swayed by them, as we all want to buy the best performing mutual funds.
Here are five pointers to help you decide where to invest.
Set your goals
Everything that you do for your investments depends on your goals. Your goals could be getting a higher return than your bank savings, planning well in advance for a wealthy retirement, saving taxes, children’s wedding or education abroad, etc.
Ignore market noise
You may see and hear various things, but don’t fall for big words or follow the herd blindly. Consider all risks before investing. Remember, your goals are different from that of other investors.
Match MFs to your goals
You have to align your goals with the objective of these funds to make the most of them. This assures that your money is working towards your goal even as you sleep. And for that, you need to be very clear about what your goal is. Check whether the mutual fund aligns with duration (long term/short term); asset class (where do you want to invest in equity, debt or gold); diversification (investing styles/ concentration across segments/market cap, etc). It then becomes simple to track how your finances are moving in terms of your predetermined goals.
Look beyond short term performance
Now, we are not saying that you should not look at the past performance; of course, you should. It gives a fair idea where the fund has performed and where it faltered. But don’t base your investment decision entirely on that. More than the recent performance of a fund, what is important is the fundamentals of the fund.
Know your risk appetite
There is a risk in every type of investment. Mutual funds are also subject to market risks. So consider all the risk factors before you jump into mutual funds. Risk appetite is the level of risk you as an investor are willing to accept while pursuing your financial goals.
The writer is AVP, Customer Interaction, Quantum AMC