Investing in mutual funds is considered to be one of the best ways to build a corpus in the long term. Though investing in mutual funds is fairly simple, there are still a few pointers that one needs to pay attention to before starting the journey. Here are five things that you need to consider and know:
Plan it out
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Investing in mutual funds through a systematic investment plan or SIP is an important financial decision. Every month (or quarter) a certain amount will be deducted from your account and invested into the fund. Hence, it is important to plan out the expenses, and ensure that on a fixed date every month; there is sufficient balance in your account for the mutual fund instalment to be deducted.
The timing factor
So, when is the best time to invest in mutual funds, when the market is soaring or when it is sinking? Actually, it is both. Investing in mutual funds is all about discipline and practice. Irrespective of the market fluctuations, mutual funds tend to provide a decent growth over a period of time. Dubbed as Rupee cost averaging, it is quite proven that when you invest a fixed amount regularly, say in a SIP, the same investment buys more investment when prices are low and less when they are high. Thus, an investor, stay put irrespective of whether a bull is running amok or a bear is bringing the things down.
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NAV as the deciding factor
Quite a few investors look at the Net Asset Value or NAV as a key marker for making mutual fund investment. The idea is that a fund with lower NAV will give higher growth, while a one with high NAV will give lesser growth. Indeed, while the NAV does play a role, it should not be the deciding factor for investment. There are quite a few parameters that need to be paid attention to, like track record, fund management and volatility that determine the portfolio return (Investors are advised to read the Scheme Information Document, Key Information Memorandum and Statement of Additional Information before investing).
Taking advice
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Many times people are reluctant to take advice on financial matters, due to lack of trust or want of privacy. But, when it comes to mutual funds, it is always good to do background research and also take advice. There are many financial advisors that will readily help and guide you in formulating an investment strategy and making it work, do try to seek out professionals.
Ways to invest
Once you have decided to invest in mutual funds and planned things out, it is now time to put it in action. There are many ways to invest, you can buy it directly from fund houses, or purchase it from financial planners or distributors, or through banks.
In the end remember, investing in mutual funds is all about discipline and the time spent. Once, you have mastered the two factors, thanks to compounding, mutual funds can surely help you tide over any financial blues that might come your way in the future.
Disclaimer
This idea of Mutual Fund day has been conceptualised by Reliance Mutual Fund as an Investor Education Initiative.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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