Want to invest in mutual funds? Know these things first
Here we are going to tell some important things for the new investors, which will help them to invest in the right mutual fund.
1. Do not invest in haste,
you can never make up for the time that has passed. In the matter of investment, do not take any step in haste. Many investors first invest in a mutual fund scheme and then ask people whether they have invested in a good scheme or not. This can be very costly for you. If you want to sell any such scheme, which is not suitable for you, then you may have to pay an exit load and capital gains tax. This results in depreciation of your invested capital. This is the reason why you should do your homework thoroughly before investing.
2. Ask the Right Questions
First of all ask yourself why do you want to invest? The next question is how much time do you have. The third question is how much risk can you take? Answering these three questions will help you make the right investment. You should choose a mutual fund based on these three factors.
3. Can you take high risk?
Many new investors believe that they can take extremely high risks. This is because they think they are young, so their risk tolerance is greater than others. It is true that young investors have enough time to cover their losses. However, this does not mean that everyone can see the loss of their investment. That’s why many so called youths lose their wealth. Therefore, before investing, fully assess your risk tolerance.
4. Returns , Don’t Run For Ranks
Many new investments make by choosing five star rated schemes or schemes that top the return chart. This is not the right way to choose equity mutual funds. You should always look at the long term performance of the scheme. You should see how the scheme has performed over the years. It is always beneficial to invest in consistently outperforming schemes.
5. Don’t Diversify Too Much
It is not necessary to get one scheme from every mutual fund category in the market. Select only one or two schemes that suit your risk profile and meet your long-term financial objectives. Multiple schemes and categories in a mutual fund portfolio can reduce your returns. Also, it becomes extremely difficult to keep track of the performance of multiple mutual fund schemes.
6. Get professional help
Many new investors insist on investing directly in mutual funds. However, we believe that one should invest directly in mutual funds only if one has good knowledge of mutual fund investment. Also, there is a need to pay attention to your investments from time to time and track its performance. If you cannot do this, then you should take the help of a professional. Always remember that taking care of your investments is better than saving 1% on commission.