You’ve heard from your friends and colleagues about the benefits of the Systematic Investment Plan. You were shocked when they mentioned the rates of return. And now you are roaring to invest in Mutual Funds. What’s the first question you ask: What can you tell me about Mutual Fund Investment Plans?
However, in effect, it’s a wrong question to ask!
Firstly, you need to understand how to shortlist a Mutual Fund as per your individual requirements. There’s no guarantee that investing in the same MF, as your colleagues, will generate the same amount of profits for you.
Follow these 4 steps:
1. Match your asset allocation to the Mutual Fund: How much risk can you take? What is your investment horizon? Don’t overstretch your finances in greed.
2. Check the consistency of past performance: Understand how good is the fund, or the fund manager with making profits over a long period of time. You don’t want some fund that makes great profits one year, and great losses in the next.
3. Calculate all costs of investment: While the rate of return may be attractive, fund costs might eat up most of your profit. Go through them carefully. Compare those with other funds in the same category.
4. Don’t put your eggs in one basket: If you diversify your investment in multiple funds, you can minimise the risk of your losses somewhat.
Now you can easily pick the mutual fund that fits your needs best.
However, in effect, it’s a wrong question to ask!
Firstly, you need to understand how to shortlist a Mutual Fund as per your individual requirements. There’s no guarantee that investing in the same MF, as your colleagues, will generate the same amount of profits for you.
Follow these 4 steps:
1. Match your asset allocation to the Mutual Fund: How much risk can you take? What is your investment horizon? Don’t overstretch your finances in greed.
2. Check the consistency of past performance: Understand how good is the fund, or the fund manager with making profits over a long period of time. You don’t want some fund that makes great profits one year, and great losses in the next.
3. Calculate all costs of investment: While the rate of return may be attractive, fund costs might eat up most of your profit. Go through them carefully. Compare those with other funds in the same category.
4. Don’t put your eggs in one basket: If you diversify your investment in multiple funds, you can minimise the risk of your losses somewhat.
Now you can easily pick the mutual fund that fits your needs best.
0 comments: