Mutual Fund is a new-age investment option which suits the investment needs of different types of investors. Known for their high return yielding capability, this market linked instrument comes in various shapes and sizes.
No matter what your financial goals are, including at least one fund in your portfolio can help you realize the desired investment returns. If you're a first time investor, it helps to get a few tips before beginning the investment journey.
Lets begin with learning more about how Mutual Funds work followed by a section that will help you in making it a successful deal.
Since investing in Mutual Funds is a mid-long term deal, the term chosen should sync with your financial goals so that funds are available for access just before the event.
Let's say, you've planned to buy a house 4-5 years down the line, staying invested into the fund for the same duration will help you in being nearly self- sufficient.
There is a plethora of fund options available in the market today. Right from the ones which invest heavily in blue chip companies to exclusive options which invest in specific segments of the industry such as Banking.
An AMC may also offer you a mix of debt vs equity and give you the flexibility to rejig the allocation as per your needs. It's paramount to choose the fund carefully after due consideration of the risks involved.
Investing in an MF involves considerable amount of money and therefore, a good amount of research should go into carefully choosing the fund.
To aid this purpose, you may choose one of the umpteen resources available online to study the performance and yield over the last couple of years.
The best and the most recommended way to start your investment journey would be through a SIP. Here, it works just like a loan where you pay a fixed amount each month into the fund in exchange for a certain number of units, depending on the NAV.
The only difference is that you're clearing a debt in the loan whereas in MFs you're building an asset over a fixed term. The most pleasing part of SIP is that it comes with a lock- in period which ensures financial discipline.
Once invested, they keep yielding returns over a period of time and do not require routine monitoring.
On the flipside, it makes sense to monitor the performance once a month or so to gauge the sellability of the units held. Routine monitoring can help you sell/redeem when the value is high.
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