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Some tips to follow while investing in mutual funds

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Some tips to follow while investing in mutual funds

Looking to invest in mutual funds? You should possess a thorough understanding of financial targets and your own appetite for risk, inclusive of the time required for achieve one’s goals. According to experts, one has to choose the right mutual fund within a particular category on the basis of aspects like its performance over a period of time, investment goal and the overall reputation of the fund management firm.

Here are some basics that you should keep in mind when you invest in mutual funds-

  • Patience- Mutual funds are great investment avenues and will deliver returns over a longer period of time. Some equity funds have provided 10% in returns over 10 years and this has gone up to 20% over periods of 20 years or more. You should be patient and in it for the long haul. The investment will grow with compounding over a longer time period and you will also get necessary tax savings. You will thus profit from remaining invested for a duration exceeding one year at least.
  • Choosing Growth- There are some mutual fund investment schemes which offer healthy returns/dividends which can be predicted to a large extent. They are, however, not assured in any particular frequency/amount. You should always choose the growth path, enabling your funds to be scaled up with compounding and this will give you the right investment benefits.
  • Check the Portfolio- Returns garnered by a particular equity mutual fund in the last year may seem attractive to you. However, this should not lead to you jumping in straight away for investments. Always go for a great portfolio instead of blindly going by past performance of specific funds.
  • Be Aware of Risks- You should naturally invest money in mutual funds that have proved to be winners overall. However, you should always invest with a clear idea of the risk that you can afford and your own targets. Diversify across schemes, asset classes and if possible, across multiple mutual fund houses/companies. This will help you reduce risks instead of keeping all your eggs in one basket.

These are some of the basics of mutual fund investing which will stand you in good stead. Always remember, that like any other field, mutual fund investing requires some knowledge and homework on your part as well. A fully informed and aware investor is one who can manage risks and earn good returns at the same time. Always take thorough guidance from an experienced adviser who can steer you in the right direction.

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