Returns from investments in mutual funds are comparatively higher to other investment options such as fixed or recurring deposits. Investment in mutual funds can be made either through SIP or lumpsum.
Mutual funds have been gaining popularity over the recent years and have emerged as one of the most popular investment options. More people now understand that with investing in mutual funds they get the opportunity to earn more through the power of compounding over a period of time. These returns are comparatively higher compared to other investment options such as fixed or recurring deposits. Investment in mutual funds can be made either through SIP.
Mutual funds not only provide better returns but also diversification, and are also easily opt for and managed. Even though MFs are managed by professionals, investors should take some precautions while buying mutual funds. This way they will not end up buying funds which are not suitable for their portfolio and investment goals.
With the rise in investing in mutual funds, here are 5 factors to keep in mind;
Long tenure and patience with mutual fund investments is the key to earning higher returns. Having said that, investors investing in mutual for the short term can opt for short-term debt funds or liquid funds. With these options, the investor’s money will grow conservatively. For investors looking to invest with an investment horizon over three years, should opt for an equity mutual fund for best returns.
Before investing in mutual funds, create a goal for which you will be investing. Having a goal-oriented investment while investing in mutual funds would help you pick the right kind of fund. For instance, for long-term goals such as retirement equity-linked mutual funds are best suited. Additionally, do not try to time the market. Experts suggest both selling or buying mutual fund should not be based on a fund’s popularity or on a friend’s recommendation, but to meet your goals. To be on the safer side, take the help of a financial planner.
Fund selecting criteria
A fund should not be chosen based on one criteria, for instance, just with the ratings of a fund, do not invest in it, as the ratings of a fund fluctuate. To select a fund, find out about a fund’s long-term performance, along with their ratings and then go for the fund which suits you the best.
Direct Plan over Regular plans
If you are one of those investors who knows their way investments, then try to opt for a direct plan, instead of a regular plan. Direct plans mean you will have to buy the fund directly from the company’s website, without any middleman such as a broker. By invest through direct plans, investors get to enjoy a lower expense ratio and higher returns, as compared to regular plans. There are chances that you can make the mistake of choosing the wrong fund, hence, do your research properly before opting for a direct plan.
Read Fine Prints
When it comes to investing in MFs you should know and understand the fine prints, especially new investors. Being well versed with the fine prints will help you understand the charges, exit load and other fees to avoid making mistakes. Hence, experts suggest investors should do their research well before selecting their funds. You can also take the help of financial advisors or mutual fund aggregators to finalise a fund based on your need.