Mutual Funds

Your Role in your Mutual Fund

A popular belief among the masses is that when it comes to Mutual Funds, personal contribution goes only as far filling up an application form and writing out a cheque. But just like everything else in life, Mutual Funds also demand a little extra effort from your side, because the success of any investment depends on having the right information at the right time.

Seek Professional advice

There are several questions that plague the mind of a new investor. Consult an advisor and clear all your doubts, it is important to be aware and informed. Understand your requirements and select a scheme that suits your needs. Assemble all possible information and then make an informed decision. Make it a point to approach a professional to avoid ambiguity over this subject.

Asset Allocation

Asset allocation is a method that determines how you allocate your money in different investments with a proper mix of various asset classes. Investing across different schemes like debt, equity, index funds etc is a good idea since all of them have their own advantages and disadvantages which help in different phases of the market. Some schemes give consistent returns whereas; others are more risky which can translate into higher returns. There is no standardized solution for allocating your resources. Every individual requires a unique solution based on their goal, time-frame and risk appetite.

Role of an Advisory

An advisor plays a key role in understanding your investment objectives and thereby can help you identify the right schemes to meet your financial goals. However, it is important to consult right advisor who can help you in your interest rather than his own. Advisory cost is an important factor that must be considered before finalising a Mutual Fund scheme.

Risk bearing capacity

It is necessary to know your risk tolerance since it will help you in selecting the right scheme. In order to arrive at this figure, you will need to consider your age, income, personal responsibilities (family) and your current financial position. Are you in the position to withstand the highs and lows of the market or would you rather invest in a safe scheme? Choose a scheme that matches your risk appetite. Remember, one must always be prepared to bear risk when entering the market.

Holding period

The most common mistake that people make is not setting the time duration on their investment schemes. Consider your time horizon and be clear about your goals (short-term and long-term). Do not panic when the market crashes and sell off your funds on the basis of a temporary correction. Stay disciplined and stick to a plan. It is important to be clear about the expected returns with reference to the time allotted per scheme.

Going solo

If you are understand and regularly track the economy, markets, investments strategies of the various Mutual Fund schemes and their expense ratios; then you have the option of being your own advisor! You can simply choose the scheme you wish to invest in on the basis of your understanding and goals and monitor your fund. This eliminates the extra cost of Advisory if any and gives you a better control of your own investment.

Regular Monitoring

One highly underestimated aspect of Mutual Funds is self-monitoring. You are investing your hard earned money in a fund, the least you could do is keep track of it from time to time and monitor the performance of the Fund’s growth. With the development of technology, information is on our fingertips within seconds of being published. Investors can now access Fact Sheets and Newsletters that the MFs publish from time to time that contain portfolio information, a report from the fund manager and performance statistics on the schemes managed. Websites and Newspapers are among other sources of information in addition to news channels and business magazines.

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