Investment Strategy: 7 Tips to Get Better Results in Mutual Fund Investment
September 19, 2019
It takes much more than just buying a top-performing fund if you want to earn high returns from your Mutual Fund investment. Read this post to know seven tips that can help you get better results from your investments in Mutual Funds.
Thanks to the internet, you can easily find the list of funds that have delivered the highest returns in the past year. But a common mistake among new Mutual Fund investors is believing that such top performers would continue to deliver impressive returns in the future too.
Earning high returns from Mutual Fund investment takes much more than simply investing in a top fund. You need to work on a strategy after considering several factors to earn high returns. Some tips that can help you build a strategy are as follows:
1. Understand Your Risk Appetite
Different types of Mutual Fund investment plans are for different types of investors and risk appetites. Investing in a fund which does not suit your risk appetite can make you exit the fund sooner than you should, resulting in lower returns or even losses.
2. Keep Your Age in Mind
Your age also plays a crucial role in your Mutual Fund investment strategy. Younger people have fewer financial obligations and can take more risk as they have more time to recover from losses if any. Equity funds are an excellent choice for someone in their 20s and 30s while people above 40 should invest most of their money in safer funds like debt funds.
3. Diversify Your Mutual Fund Portfolio
Rather than relying on a particular type of Mutual Fund, keep your portfolio diversified with at least a few different types of funds. If at all, a specific market segment starts underperforming, funds from other market segments can balance the portfolio and still help you earn decent returns.
4. Know Your Investment Objective
One of the most important investment strategies in Mutual Funds is to know your investment objective clearly. For instance, someone aiming for retirement planning or other long-term goals can consider equity funds while someone looking for tax saving can invest in Equity-Linked Savings Scheme (ELSS) funds.
5. Go the SIP Way
This allows you to invest as little as Rs <1,000> per month (or even lesser) in the fund of your choice. Over time, small Systematic Investment Plan (SIP) investments can help you create a considerable portfolio and benefit you through rupee-cost averaging and compounding.
6. Prefer Funds with Lower Expense Ratio
Expense ratio is an annual fee that investors pay to the fund house. The lower the expense ratio will be, the higher will be your returns. So, if you are looking to learn Mutual Fund performance analysis, give special attention to the expense ratio of the funds.
7. Track and Adjust
Once you have invested in Mutual Funds, make sure that you check the performance of your investment regularly. Give adequate time for the investment to grow, but do re-adjust the portfolio if the performance of the funds is below your expectations.
Earning Better Returns from Mutual Fund Investments
Look for Mutual Fund investment guide on the internet, and you will come across millions of results. However, the best way to earn high returns from your investments is first to understand your investment goal and risk appetite.
There are now different types of funds to suit every investor and knowing your personal profile will enable you to select funds that suit you and have excellent returns potential.
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