Investing your money is crucial. One of the most compelling reasons for individuals to invest is the prospect of having a financially secured life. You can make money in two ways – by working really hard, and/or making your money work for you. While a majority of individuals often undertakes the former option, not a lot of people go with the latter. That’s what makes you stand out as a financially independent person. One such example of making your assets work for you can be investments in mutual funds.
Investing in mutual funds is considered as one of the best ways to generate wealth in the long run.Though it’s fairly simple to invest in mutual funds, there are a few pointers that a beginner should pay heed to before starting their investment journey. Following are some of the things you should know as an investor before you decide toinvest in mutual funds online:
- Why should you invest in mutual funds?
Mutual funds have the potential to offer significantly higher returns than any other traditional investment options. Mutual funds are like a basket of different types of investment that helps to create a diversified investment portfolio needed to fulfil your financial goals. Mutual fund investments also help to impart financial discipline among investors by investing in mutual funds via SIP (systematic investment plan)
- SIP or lumpsum?
Lump-sum is a one-time investment. If an investor has a substantial disposable amount, then he may opt for making a lump sum investment. However, one should note that only an investor with a higher risk profile should do that. Regular investors are, therefore, advised to invest through an SIP. SIPs help to diversify over time and meet the risk of timing cost. Benefits of rupee cost averaging, and the power of compounding also kicks in some time.
- Selecting the right mutual fund for your portfolio
When opting for mutual fund investments, an investor should consider risk-adjusted returns than focusing on maximum returns, as the latter could result in undertaking significant risks. One should take into account the scheme’s performance against the benchmark, consistent returns, your fund’s total expense ratio, its fund history and the risk-adjusted returns, to name a few. One must also consider the fund manager’s expertise and experience.
- Considering your own needs
Investments do not follow the concept of ‘one shoe size, fit all’. And, mutual funds are no exception.With different types of mutual funds available to an investor, you should choose one that is unique and tailored as per your investment needs. Ensure that your mutual fund investments should be in line with your investment portfolio, financial goals, and risk appetite. An investor should not shy away from seeking professional help from an expert who can guide them through the entire investment process.
Now that you are clear with the basics of investing in mutual funds, what are you waiting for? Invest in mutual funds today and let your money work for you. Happy investing!