Five Strategies for Savvy Investors to Invest in Mutual Funds in India

by Raghav M. Marketing

With the rising equity markets, many of the new investors in India are blindly picking mutual funds solely on the basis of their recent performance. It is important to know that the fund selected based on their recent performance might not continue to deliver similar results in future. To take the best advantage of mutual fund investment, you need to have a solid strategy in place.

Thankfully, you do not need years of investment experience to create and use effective strategies. We’ve created a list of five simple yet highly beneficial tips for mutual fund investment.

1.       Do not panic when the market falls

If you are looking at investing in a mutual fund in India, the first thing to know is they are of many different types. Equity funds are highly preferred by the investors as they offer higher returns than other types of funds. However, a common mistake committed by most new investors is getting panicky and even redeeming the units when the markets start to fall.

A fall is unavoidable after a rise, and the fall often prolongs its stay. This is completely normal and nothing to worry about. As a matter of fact, seasoned investors look for sharp falls to buy more units at a discounted price. You too can do the same after gaining some experience in the market.

2.       Follow a step-up investment approach

While SIPs provide you with the freedom to start investing in mutual funds with as little as Rs. 1,000, you should increase the amount every year by at least 5%-10%. This is known as a step-up investment approach and would make it easier for you to achieve your financial objectives sooner.

But make sure that you do not invest in only a particular fund or a particular type of fund once you are investing a considerable amount. Keep your portfolio diversified.

3.       Avoid checking the performance of the fund every day

While the internet has made it easier for the investors to invest in mutual funds online, a lot of new investors check the performance of the fund every day and get stressed or elated when things fall or rise. Once you have carefully selected the funds, avoid checking its performance every other day as it might encourage you to take a wrong decision.

Check it once every 3-4 months and make adjustments annually. Give a fund at least 12 months before you decide it is not good enough for you.

4.       Have a goal in mind

Goal-based investing is known to be the best. When you have a goal in mind, you know how much you need to invest and for how long you need to remain invested. Once your goal is achieved, you can then sell the units and withdraw your money. Without a proper goal, you’ll not know how much you need to invest and how long you should remain invested or continue investing.

So, before you invest your money make sure that you first understand your financial objectives and have a solid plan in place to achieve it.

5.       Do not pick funds based on Just the Recent Performance

Recent point-to-point training returns are not the correct way to select a mutual fund. It is easy for a fund to perform when markets are high. Instead, look for funds that have continued to deliver even in the falling market.

Rather than focusing on the performance of a fund in last 1 to 3 months, check the returns over disconnected periods. For instance, check the annual returns of the fund over 3 to 5 years. Also, check the performance of the fund in bull phase as well as bear phase.

These are a few very simple but still very powerful strategies that you can use for mutual fund investment and be a savvy investor. With time, you’ll understand mutual funds and the markets better, and would be able to create excellent strategies that work for you. But for starters, these tips are the best.

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Created on Feb 16th 2018 00:38. Viewed 853 times.

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