Considered as an efficient and safe investment vehicle by most of the investors, mutual funds have not only helped individuals park their money but also helped them create wealth by giving good returns. While knowing about the types of funds is just one part, picking the right mutual fund scheme is a different ball game altogether.
Usually, investors while selecting such an investment vehicle, knowingly/unknowingly get influenced by recent top performing funds and sharp sales charts of companies. By doing so, average investors tend to take impulsive decisions and jump into investing without proper research and knowledge. Most investors tend to pick funds to invest in by looking at past performance. However, financial experts believe that this is not necessarily the best way to make an investment decision.
But the challenge is how you will sift through the thousands of available options. Given the fact that there is a sea of investment vehicles around, it is highly important to pick the winner in order to get desired results. There are several factors that should be taken into consideration when you decide to invest your money.
- Do you really need a Mutual Fund: Now, when there are a lot of other efficient investment options available, you need to ask yourself do you really need a mutual fund? Before buying a fund, you decide whether you should actually go ahead or there are other options also which you can explore.
- Your Age: Apart from income and amount to invest, your age also is a vital factor when you think of buying a mutual fund. The younger you are, the more you should invest in equity.
- Compare fees: There are fees involved with all mutual funds. Some have more fees than others do. It is important to compare fees so that you get the best deal.|
- Your Risk Tolerance: Since risk is inherent with any mutual fund, you should choose funds based on your goals and how much risk you want to take. The levels of risks differ from mutual fund to mutual fund. While liquid funds are least risky, there are other funds like sector equity funds, which stand at the top of the risk level.
- Research the Risks: After identifying your risk tolerance level, do not miss to ensure you know the risks when you buy a fund. To assume that a fund that did well in the past will perform well in the future also is a something you need to avoid.
- Decide for how long you want to invest: While the above mentioned factors are the fundamentals of choosing a mutual fund, it is equally important to understand your investment duration as different funds have different maturity period.
Mutual Funds schemes can be your money partner for the rest of your life. So why not make your mutual fund investing safer and more profitable by spending a little more time to understand and research the various kinds of funds around you.
Disclaimer:
1. Views as are mentioned in the article are personal views of Author and nothing to link with Co., its Director and Employees.
2. All investments are subject to market risk and you need to consult your financial advisor/consultant before investment.
