Long-Term Mutual Fund Investment Strategy

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Investopedia defines Mutual Funds as “A type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.”

Mutual Funds are financial vehicles operated by professional fund managers who allocate the fund’s assets in a structured manner to generate returns.

Despite being subject to market risks, Mutual Funds are widely accepted as one of the most preferred avenues of investment. Mutual Funds enable investors to take advantage of professionally managed portfolios of bonds, equities, and other securities.

Here are a few strategies that may help you gain from Mutual Funds in the long run:-

1.   Study the track record of the Mutual Fund/Mutual Fund Scheme

The first step towards having a long-term strategy and to make the most out of mutual funds is to examine the track record of the mutual funds. Irrespective of the fact that the historical performance does not guarantee a bright future for the mutual fund, it is important to keep a track on the performance of the funds and check how the fund manager makes an investment.

This will also help an investor to simultaneously study the market trends, market cycle and the specific investment style of the fund manager which will in return enable investors to make a wise decision in the long-run.

2.   Choose SIP as the investment route

Another key takeaway for a long-term win in the mutual funds is to choose Systematic Investment Plan, more popularly called as SIP. As an investment route, it helps in making a regular and disciplined investment. Regular investments help in Rupee Cost Averaging and lowering the cost of investment because when the markets go down, you can get more number of units for the same price.

Hence, choosing an SIP is one of the wisest investment routes as it helps you to choose your time horizon. You can top up your investments when the market is correcting and vice-versa.

3.   Monitor your fund performance regularly

A periodical monitoring of your mutual fund investments allows you to track the fund’s performance in different market conditions. Compare the fund’s performance with its peers and analyze the aspects that need attention. This will enable you to make wise investments and get involved in goal-based mutual fund investing. It will also help you to identify top performing mutual funds and get a fair idea of mutual funds investment plans in India.

4.   Diversify your portfolio

 Diversifying your portfolio is another key component for long-term success. The key point to remember is that different mutual funds have varying risk thresholds and perform differently at different periods. Depending on your expertise, risk tolerance, risk-reward ratio, and diversification plan, you can choose to invest in same or different mutual fund schemes.

5.   Check the Taxation, Entry and Exit Load

Before investing in any mutual fund, particularly for the long term, it is critical to determine if the fund is tax-free and, if so, to what degree. This will influence the total impact of your returns as well as how much you may make.

 Similarly, entry and exit loads refer to the costs imposed on you when you enter the fund and when you sell your units respectively. As an investor, you must be thoroughly aware of these charges as they will affect your final return and help you decide whether you wish to stay invested in the long run.

6.   Study the opportunity cost

Opportunity cost basically refers to the benefit that you as an investor could have achieved if you had invested your funds in different avenues. Hence, before making a long-term investment decision, chalk out a financial plan and decide the amount of funds you wish to allocate to various avenues.

For further assistance on goal-based mutual fund investing, top performing mutual funds, mutual funds investment plans in India, visit us at www.mastertrust.co.in.

Our expert team will take you through the process and guide you to invest and make a long-term strategy in mutual funds.

Please note - Mutual Funds Investments are subject to market risks.