In recent times, Mutual Funds have become quite popular. The reason for this lies in their safety and reliability. They hold good market potentiality and hence, offer relatively high returns. Besides, their simplistic approach makes investing easy.
But to enjoy the benefits of a Mutual Fund Investment, picking the right kind is imperative. It helps you maximise your invested wealth. It also lets you dodge unanticipated risks effectively. So, here is a list of practical tips to follow to make an appropriate pick:
1. Know your investment objectives
Before diving into any investment, you must assess your investment goals. You must have a clear understanding of their longevity. This implies knowing if they are short or long-termed objectives. It would help if you considered factors like your budget, ultimate financial plan, retirement plan, etc. If you feel overwhelmed, fret not. You can always seek a financial advisor before you invest in a Mutual Fund. They hold extensive knowledge and experience in the investment realm.
2. Learn about different schemes
Mutual Fund schemes are classified based on various factors. These include asset class, investment objectives, structure, etc. For instance, Equity Funds fall under asset class. Similarly, Growth Funds are categorised based on investment objectives. It is wise to educate yourself on these classifications. Doing so guides you in quickly picking the right online Mutual Fund Investment.
3. Mind your risk capacity
Every investor has a different level of risk tolerance. Hence, you should assess yours by reviewing the following aspects:
- The number of financially dependent members in your family
- The number of earning members in your family
- Your age
- Your employment status
- Your capital base
- Your market expertise
Analysing these factors will help you determine your risk-bearing capability. For example, you have moderate knowledge and experience in investing. You also have sufficient disposable income to invest. In this case, you should consider yourself a moderate-risk investor. You could opt for options like Equity Mutual Funds.
4. Tax liability
Almost every Mutual Fund Investment is subject to tax liability. Thus, it would help if you considered the tax liability of each scheme. For this, go through the tax laws. This way, you will know how much will be deducted from your investments. For detailed information, you can always rely on your Mutual Fund app. Banks usually provide relevant information on such avenues.
5. Consider investing in a Systematic Investment Plan
If you are a first-time investor, consider schemes like Systematic Investment Plans. They are the most basic yet rewarding investment schemes. The investor needs to deposit a small amount at fixed intervals. The deposit amount could be as little as Rs. 500, or even Rs. 100 in some cases. Also, it allows investors to change the amount quickly. They have the liberty to increase or decrease the amount at their convenience. This gives them unmatched flexibility.
