How To Make The Most of Your Mutual Fund Investment

by Karan Thapa Business And Marketing

Mutual Funds are professionally managed investment schemes for wealth creation. But before you invest your hard-earned money in them, you must gain sufficient knowledge about them.

Before we answer your query how much to invest in mutual funds, you need to choose the most suitable type of portfolio for you. For this, you have to choose the right asset allocation by choosing the type or class of security, i.e. equity, debt or money market, or a mix of these asset classes.

The asset allocation will differ in terms of the factors such as the investor’s age, occupation, and the number of dependants in the family. Usually, an elderly investor is likely to go for less risky investments, while a young person has an appetite for risk and the potentially higher returns.

Before you decide how much to invest in mutual funds, you need to pick the right fund/s, based on the following factors:

• Usually, the choice should be based upon consistency in terms of returns.

• You need to figure out which type of funds are appropriate for your needs and financial goals. While some investors invest for retirement, some aim at funding their child’s education, and some do it to augment their current income.

• Another factor that should determine your choice of fund/s is your time frame. The longer your time horizon, the better returns you may expect with a bit more risk. But if you don’t have much time at your disposal, your quantum of risk will increase.

• Make a fair assessment of your risk tolerance.

• In case you are not comfortable with a particular asset class, you can go for any or more of the options such as diversified equity funds; index funds; opportunity funds; mid-cap funds; equity-linked savings schemes; sector funds like Auto, Health Care, FMCG, IT, Banking etc.

• You can also go for balanced funds if you are not comfortable with 100% exposure to equity.

• If you are a long-term investor with the capacity to take risks, you can very well invest in equity funds.

• If you are a beginner, you should begin with a diversified fund and gradually have some exposure to the sector and specialty funds.

Apart from the above factors, simply making investments is not enough, you need to keep an eye on how your investments are performing. You should look for the best financial advisor in Delhi who can help you both in terms of making the right decision as well as measuring the fund’s performance.

You should ideally have a healthy mix of high-risk and low-risk components. The usual rule as the best financial advisor in Delhi will tell is a certain percentage of your investment should be allocated to low-risk debt.It should be your strategy even if your age permits you to invest in high-risk, high-return funds.