Mutual fund popularity among investors is increasing rapidly. In such a situation, if you are also planning to invest in it, then it is very important for you to understand some of its things before investing. If you are going to invest in a mutual fund through an agent, then it may not give you complete information. It is often seen that the new investor has incomplete information about it. There are some important things to keep in mind to invest in mutual funds and get better returns.
1. Decide where to invest money
The investor should first prepare the investment list where and how much money he has to invest. This process is called asset allocation. Asset allocation is the method that determines how you can invest your money in different investments that have the right mix of all classes of assets. There are some rules of asset allocation that tell you how much money to raise at what age. For example- If an investor is 25 years old, he should invest 25% of his investment in debt instrument and the rest in equity.
2. Benefit as much as the risk
The reality is that every person’s circumstances and financial condition are different. To understand asset allocation, you should have information like age, occupation, number of family members dependent on you, etc. The younger you are, the riskier you can invest, which can give you better returns.
3. Choose the right fund
You choose the fund that suits your needs. For this, first, decide your financial goal. Invest accordingly. Before investing, you should decide which fund to invest in. All types of funds are good for investment. It is necessary to keep information about them.
4. Investing is not right
Many times it is seen that people withdraw money from the scheme in opposite times or other fluctuating times like corona period. But investors should not be decided on the basis of fear and greed. For this, investors should follow the path of Asset Allocation or Balanced Advantage category of mutual funds. A Balanced Advantage Fund is a scheme of mutual funds that invests in equity, debt and arbitrage.
5. Keep track of how your investment is doing?
After investing, do not be careless like sitting at home and forgetting it. For this, it is important to keep track of how your investment is doing. For such information, mutual funds publish monthly and quarterly fact sheets and newsletters containing reports on portfolio information, schemes managed by the fund manager, and their performance data. Apart from this, the performance data, daily NAV (net asset value), fund fact sheet, quarterly newsletter and press clippings are available on the mutual fund’s website. Apart from this, there is also a website of Mutual Fund Association (AMFI) in India which contains information about daily and historical NAV and other schemes.
6. Diversity in the portfolio is important
A portfolio should include multiple asset classes. Diversity protects you from the ill effects of the poor performance of an investment. Sometimes the performance of a company or sector is worse than the rest of the market. In such a situation, if you have not invested all your money in it, then it is definitely helpful for you. However, investing in more types of funds is also not right.
7. Safe investment is also necessary
Investing money in mutual funds can be risky. In such a situation, apart from investing in it, it is important to keep investing in a place where there is no risk. For such investments, you can invest in Public Provident Fund (PPF), Fixed Deposit (FD) or Recurring Account (RD). If you lose in the stock market due to this, then you will continue to get returns from these schemes.