Whether you are a novice investor or believe yourself an accomplished market-player, you should park some or a big part of your investments in mutual funds. Mutual funds are managed by fund managers, who are expert and who know how to time and invest in the market and churn the stocks so that they decrease losses and increase returns on investment for the unit holders. Anyway, fund managers and therefore mutual funds are still subject to market downs and ups, so mutual funds can also outperform or underperform the markets.
You are putting in your finance so it is up to you to put your research in place as to which type of mutual fund is best for you. You cannot just blindly invest in any fund, no matter what the brand title linked to it. Firstly you have to select from a big range of mutual funds in India. These include closed-ended, open-ended, diversified, sectoral, debt, small-cap or mix-cap, index and many more. Then you have to plan the amount you want to invest and how many funds – this can depend a remarkable deal on your financial aims. Here are some dos and don’ts of investing in mutual funds.
- Regularly watch your mutual funds investments
- Diversify and keep money in different funds
- See the track record of the fun in the high term (if it is a fresh fund, check out the track record of the firm)
- Factor in all the money you have to put in including brokerage, fees and taxes
- Research various funds and tools before putting your money down and see the average returns the funds have produced.
- Focus only on little-term gains – often the additional expenses incurred will pare these gains considerably
- Be blind to market danger, specially in a explosive market
- Put all your money in 1 or 2 funds
- Try to time the market – if you purchase high you may have to sell low or your returns would not be as perfect
- Reject risks fully- check the top 3 and bad 3 months returns of any particular fund to get an idea of the type of potential risk-reward situation.
- Sell and buy your units often
It is vital that you have investment plans for any spare finance that you have, otherwise your finance will simply depreciate due to inflation. If you invest at the correct time and best amount in the correct funds, you can look forward to best returns on your investments.