Things to keep in mind while investing in equity mutual funds

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August 04, 2021 7:00 PM

Thoughtful planning paired with farsighted investment in mutual funds can help an investor to build a sizeable corpus, be it for any near financial goals or retirement.

Mutual fund, MF, mutual fund investment, mutual fund portfolio, large cap fund, mid cap fund, multi cap fund, small cap fund, equity funds, number of funds to holdIt is a very simple process to build a retirement corpus and portfolio with equity mutual funds and starting at the earliest is highly recommended.

Mutual Funds recently have acclaimed the tag of emerging asset classes to build funds for several financial objectives or aims, one of them being retirement. More people are opting to invest in mutual funds, be it for their short term or long term goals.

Ankit Agarwal, Managing Director, Alankit, says, “Thoughtful planning paired with farsighted investment in mutual funds can help an investor to build a sizeable corpus, be it for any near financial goals or retirement.”

While investing in mutual funds, there are several factors that come into play, such as risk capacity of the investor, investment horizon, liquidity requirements, tax implications, existing assets and liability evaluation, etc.

Here are certain things one should keep a note of while investing in equity mutual funds.

Investment Objective – An investor’s choice to invest in any particular mutual fund scheme, experts say must be considered by scrutinizing the relevance of the scheme as per the requirement of the person opting for it. The investment objective becomes the deciding factor for the level and type of returns in the fund as well as the risk involved.

Units – The units derived from the amount invested in mutual funds represent the investor’s holding individually. While liquidating the fund, based on the number of units held by the investor and the current NAV, the total value is calculated.

Net Assets – The assets of a mutual fund scheme means the current value of the portfolio of securities held by it. There may be few current assets such as cash and receivables that together form the scheme’s total assets.

Net Asset Value (NAV) – The NAV is the method or process by which the net asset per unit of a scheme is calculated as net assets/number of outstanding units of the scheme is the NAV. The NAV of the scheme is considered to change with every change in the net assets of the scheme.

Mark to Market – The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV. For instance, if the portfolio was to be liquidated, this would be the value realised and distributed to the investors.

Agarwal, of Alankit, says “It is a very simple process to build a retirement corpus and portfolio with equity mutual funds and starting at the earliest is highly recommended. It will give an investor ample time for their money to sink in roots and grow, along with helping them figure out the right path to pursue financially in case they need to modify or change things in the mutual funds.”

He further adds, “it is important to have funds only for the maximum period of 3-4 years to monitor one’s portfolio while concentrating on returns.”

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