Do’s and Don’ts of Investing in Mutual Funds

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Whether you are a novice investor or consider yourself to be an accomplished market player, you should place some or a large portion of your investments in mutual funds. Mutual funds are managed by fund managers, who are professional and know how to time and invest in markets and destabilize stocks to minimize losses and maximize returns on investment for unitholders. However, fund managers and therefore mutual funds are always subject to market fluctuations, so mutual funds can also underperform or outperform the markets.

You invest your money, so it's up to you to do your research on what kind of mutual fund is right for you. You can't just blindly invest in a fund, regardless of the brand associated with it. First of all, you need to choose from the wide range of mutual funds in India. These include open-end, closed-end, equity, debt, sector, diversified, index, mixed or small-cap companies, tax savings and many more. Next, you need to decide how much you want to invest and how many funds – this can largely depend on your financial goals. Here are some dos and don'ts of investing in mutual funds

Do it

• Research various funds and instruments before you deposit your money and see the average returns generated by the funds.

• Take into account all the money you need to invest, including fees, brokerage, and taxes.

• View the fund & # 39; s long term performance history (if this is a new fund, view the history of the company).

• Diversify and keep money in different funds.

• Use a systemic investment plan for mutual fund shares.

• Monitor your mutual fund investments regularly.

Things not to do

• Put all of your money in one or two funds.

• Be blind to market risk, especially in a volatile market.

• Focus only on short-term gains – often the additional expenses incurred will significantly reduce those gains.

• Ignore risks completely – check out the top three and worst three-month returns for a particular fund to get a feel for the type of potential risk-reward situation.

• Try to time the market – if you buy high you may have to sell low or your returns will not be as good.

• Buy and sell your units often.

It is essential that you have investment plans for all the money available, otherwise your money will depreciate simply due to inflation. If you invest at the right time and the right amount in the right funds, you can expect good returns on your investments.


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