Mutual fund investments are the way to go for modern day investors, as they are proven to be the most efficient and convenient sources. However, without proper examination and diligence of funds, these investments may get a bit tricky. Read through to learn a few crucial things to remember before making mutual fund investments.
Invest With A Definitive Purpose: Mutual fund investments are the best to create wealth from investing in the capital market. Especially, young investors in their 20s and 30s can make the maximum benefit with long term mutual fund schemes. So plan dedicated savings for the long-term financial goals. Invest in mutual funds with a definite purpose to yield maximum benefit. For example, invest towards financial goals like child education, wedding plan, retirement etc. Do not disturb the returns for anything other than the defined purpose.
Choose The Right Investment Mode: You can invest in two ways in mutual funds. One is the lump-sum mode and the other is the systematic investment planning (SIP) mode. Lump-sum investments require market timing, else opt SIP mode that allows regular investments. Experts believe SIP is the best, as it does not need market timing and helps maintain disciplined investments.
Also, know the holding duration of Mutual Fund categories before investing against financial goals. Every category comes with its own risk based on the holding period. Hence, it is important to make right decisions to make good wealth in the long run.
Understand The Power Of Compounding: The longer you invest in mutual funds, the better would be your yield and lesser would be the risk. Compound interest helps yield better returns when saved for the long term.
For example, you can accumulate more than 1 crore rupees by the age of 60, if you start investing INR 5,000 every month from the age of 25, assuming 10% return rate. If you start with the same investment amounts and assume the same return rate, but from the age of 40, the accumulated corpus would be relatively very less.
In conclusion, it is essential to consider every minute thing before going for mutual fund investments. Move ahead with a plan and purpose to receive better returns. Calculate your risk appetite and create a personalized portfolio before investing in mutual funds. For expert advice, approach online financial advisory like ArthaYantra. We help you with a holistic financial planning to secure your finances.
