As the name suggests, Mutual Funds collect funds from investors with similar financial goals and invest them in a pool of assets with a clear and specific objective. There are different types of mutual fund schemes available in India and it can get confusing for investors to select the right scheme by themselves.
Here are the top practices followed by successful mutual fund investors which will help them in gaining higher returns by selecting the best mutual fund scheme possible: -
1. Conduct a Self-Study
One of the most important steps before making any successful investment is to conduct a self-study. As a new investor, one must always assess what are their financial goals, time horizon of investment and main purpose of investment. As a sound practice, one must list down the goals like retirement, children’s education, buying a property, travel etc.
Once you have all these answers with you, it becomes easy to decide which mutual fund scheme you should opt for and for how long you should stay invested. These answers play a massive role in determining the choice of your investments and thus, it is highly crucial to conduct a self-study and prepare well for your mutual funds investment journey.
2. Understand your Risk Appetite
Successful mutual fund investors understand that all kinds of investments come with a certain degree of risk. It is essential to have a clear idea about your risk tolerance in advance. Hence, one must understand their risk appetite and preferences to assess how much risk they are willing to take. The general rule of investment is higher risks = higher returns. So, one must decide the level of risk they can take and accordingly choose their mutual fund investment.
3. Build a Diversified Portfolio
If you wish to be successful in your mutual funds investment journey, you must have a strong and a well-diversified portfolio. As a prudent investor, you must invest in mutual funds with diversified portfolios. By diversifying across several sectors and asset classes to build a strong portfolio, you gain the maximum benefit because when one sector is not performing well, other sectors can result in reaping higher benefits. This reflects in your overall returns from mutual funds.
4. Know the Laws related to Taxation
Taxation is an important factor that affects your overall returns. Thus, it is important to be aware of various tax laws and how mutual fund schemes are taxed. This will give you a fair knowledge of how much tax liability may arise in the future, when you should redeem your investments etc. Hence, it is said that you must learn about tax implications before investing.
5. Periodic Monitoring
A periodic monitoring strategy helps the client keep their investment on track. Over a period of time, there may be some taxation changes, changes in your goals and objectives, changes in the objective of the scheme etc. All these changes may affect your mutual funds portfolio. Hence, a periodic review is a good habit and one of the most vital traits of successful mutual fund investors.
However, one must note that excessive tracking of portfolio on a daily basis is also undesirable and helps little in managing your portfolio.
6. Practice Patience
Patience is a must-have virtue if you want to be a successful mutual fund investor. Once you have made the right choice of investment, it is only a matter of time before your investment objective is achieved. It may happen that you may feel under-motivated due to the volatile market movements. You may also start questioning your own decision of investing in funds. However, successful investors keep patience in such scenarios and do not let the downward trend affect them.
Accordingly, with the passage of time, the volatility settles down and the funds are able to deliver the desired results. Thus, be patient and stay invested.
7. Seek financial advice
A knowledgeable and well-informed financial advisor plays a key role in your investment journey. They help one in managing the client’s investments as per his goals, suggest corrective action if any unusual situation arises, guides the clients when things are not progressing as expected, and instills financial discipline in clients.
Thus, one must appoint a financial advisor and trust their advice so that they do not end up making mistakes in their investment journey. There is no harm in seeking financial advice, if you feel the need to do so.
mastertrust has been enabling its clientele to make correct mutual fund investment by advising about the best mutual fund investment plans. Invest in the best mutual funds and gain optimum mutual funds returns online with us.