If you are a beginner to mutual fund investment, then the first and the most important thing you should do is to understand what mutual funds actually mean. Mutual funds are investment platforms for investors who want to invest their income and achieve financial goals through investing in various assets such an Equity fund, Hybrid fund, Debt funds and gain reward for the same. Registered with SEBI (Securities and Exchange Boards of India), mutual funds collect money from investors and then invest it further with a set of investors. Being a beginner, you should research as much as possible to decide where should you invest. Here are some useful tips to consider before investing in mutual funds for the first time
When it comes to the financial investment, they should always make sense with your financial goals, situations and ability to handle the risks.
You need to start with the overall research into each category and criteria so that you can create a specific strategy and goal. Get deeper into MF schemes and decide what you want to achieve with the investment.
Once you know your objective, another thing you should always be prepared for is the uncertainty of such investment and risks associated. Mutual funds are designed for investors who can ask questions to themselves and take risks keeping all the valid things in mind.
While investing in mutual funds, it is essential that you focus on the turnover rate percentage of a mutual fund, which is bought and sold every year. Skip mutual funds with high turnover ratios. Make sure you are starting with a mutual fund that has a turnover percentage of less than 100.
Performance is a confusing word when we talk about investments. Many of the investors go with past high performing funds, which does not necessarily result in profit always.
However, you can consider researching a little more, and make a list of 3 to 4 consistently performing options.
For instance, you can cut the names of poor performing and high turnover funds, or funds with excessive fluctuation in the graph. Once the options are narrowed, you can go with the option that at least has been performing around 12 to 20 per cent per year CAGR.
- 4. Read the documents carefully
Whether you have hired a professional to help you in the process, or if you are doing it on your own, never invest in any scheme without reading the offer and terms document properly. This may seem shallow, but most of the people take it for granted and regret later.
All the information, details and statements provided by the offer document should be double checked with the AMFI (Association of Mutual Funds in India) website so that you avoid the risks of getting trapped into a financial blunder.
The AMFI provides information and sets standards to organise mutual funds and investments market in India. If you do not fully understand the terms or conditions, consult AU Small Finance Bank for expert opinion and framing a Mutual fund portfolio.
Whether you have selected a regular plan or a complex one, choose the schemes option before anything.
People who want to get only capital enjoyment after a certain period of time should go for the growth opportunity, while those who want to get a regular or annual payout opt for the distribution opportunity.
Choose funds with liquidity norms to ensure that your mutual fund portfolio can be liquefied whenever you are thinking of needs of funds.
Young people have more risk-taking abilities as compared to senior and older investors.
When you invest, consider using your due diligence so that your stock funds allow you to enjoy profit for a longer period of time. Once you have invested your capital in a scheme, review the scheme every 6 months or yearly as per the time range of your financial goals. This is an essential method, which helps in maintaining your investment returns over that extended period.
For any further assistance, please feel free to contact your Relationship Officer at the nearest AU Small Finance Bank branch.