Warning: If You Invest in Mutual Fund Then it is Subjected to Market Risk. Please Read Documents Before Investing.
If you’re searching about how to invest in Mutual Fund on the internet then, you may have heard or read this warning several times on advertisement. Indeed, investing in mutual funds is a little risk, but if you show a little smartness then you can reduce these risks.
In the last few years, the trend of investing in equities investment shares in the stock market has increased dramatically. Equity mutual funds have played an important role in accelerating this trend.
For small investors, it is better to invest in mutual funds rather than directly investing in shares, as it helps investors to reduce the risk associated with the stock market.
Investors of mutual funds make some mistakes inadvertently, which result in lower returns or negative returns. So here we are going to tell that 5 ways with which you can earn good money in the mutual fund.
1. Do not Ever Invest at the Time of Market Boom
Many times, small investors feel strongly at the market that they should invest in the market at the same time and should take advantage of the speed. But at times the market goes up and down, the faster it comes down.
Therefore, discipline and continues investment is very important in order to achieve good returns from the mutual fund.
In equity mutual fund brings discipline called Systematic Investment Plan (SIP). At the same time, the investment in the market’s booming environment increases your risk multiplied.
2. Be Patient With Your Investment
It is important to remember that there are good returns on investing in equity but it is not a guarantee that every year you will get a return like a bank fixed deposit. You may get a higher return from your investment in any year and it may also be that in any given year the bank is less than the balance of savings account.
Therefore, the financial expert recommends that if you can invest for 5 to 7 years, then you should move towards the stock market.
Shares of the stock market say one thing that we should definitely remember and that it is better to do the time of the stock market than to have time to invest in the stock market. If you look at the performance of the market for the last few years, you will know that in the last 2 years 30% return and 60% return in 5 years have been received.
3. Don’t Invest in Dividend Options of Equity Mutual Fund
Growth options for equity mutual funds should be chosen for Wealth Creation and not the dividend option. The dividend available in any mutual fund is given from the NAV’s of the fund and it reduces the NAV of your funds.
The result is that due to the reduction in the value of your fund for reinvestment and you lose to take full advantage of the power of compounding. This reduces the return from your fund during the long term, and in this case, you can miss the financial goals.
4. Don’t Over-Invest In Fund Scheme
Many times when investors do not have quick profits, then they start investing in another fund similar to that. As a result, your portfolio is filled with similar investments which make it unbalanced.
You should remember that the portfolio does not exceed 4 or 5 fund schemes. Otherwise, you will not be able to gain the benefit of diversification in portfolios. Choose good mutual fund schemes and make sure that your portfolio has the right balance of large-cap, mid-cap, small-cap, and hybrid schemes.
If you feel that your portfolio has become too big for you to handle, then consult a financial expert and create a balance in your portfolio by setting up financial goals for your investment.
5. Don’t Invest Based On NAV
Small investors sometimes feel that investing in a scheme with smaller NAV is more beneficial than investing in a company with a higher NAV. This is not true. NAV of a mutual fund scheme isn’t the only parameter to judge its performance.
So, with Net Asset Value, also see how the past performance of that scheme is, what is the track record of the fund management company and who is the benchmark index of that fund scheme?
If you’re confused about the right mutual fund schemes then do consult a certified financial advisor.