Mutual fund is a fund controlled by an asset management company. This brings together like minded investors on a common platform and pools in funds. The collected funds are handled by a fund manager who invests in stocks and bonds. It evolves down to the amount an individual invests; units are allocated to the portfolio. To invest in a direct mutual fund there are some pointers to keep in mind.
Attention to your personal goals
Investing in mutual funds is a long race, as the funds chosen needs to sermonize with your financial goals meaning funds are available for access before an event. For example you might have planned to buy a house 4 to 5 years down the lane, just invest the fund for the same duration as this is going to make you self -sufficient.
Choice of a profile in a careful manner
The market is flooded with variants of funds. To the ones investing in blue chip companies, to others who look to invest in banking companies. The asset management company is going to provide you with a mixture of debt and equity funds and a flexibility to choose as per your needs. Do choose a fund properly after evaluation of the major risks involved.
Understand the fund
To make an investment in mutual fund involves considerable money and you need to choose a fund with careful thoughts. In order to obtain more inputs you can do a detailed study online or can go through the performance of the yield in the last few years. Detailed information is presented on the website of the asset management company, pertaining to the performance of a fund.
Opt for a systematic investment plan or SIP
A recommended option to start off with your mutual fund is a systematic plan. Pretty much on the lines of a loan the working module is you invest a certain sum of money every month as you are entitled to fixed units every month. This is dependent on the NAV. The difference with loan is that you are clearly your liability over a period of time whereas with mutual funds you are building your asset portfolio. One of the striking features of a SIP period is that there is a lock in period bestowed with a degree of financial discipline.
Monitor regularly
Once you invest they churn in returns over a period of time and do not need any form of monitoring. On the negative side it would be better to monitor the funds on a monthly basis to check out the performance of the funds. On routine monitoring you can redeem the funds when the value is high.
To conclude, mutual fund are a viable investment option for investors who have diverse investment needs. It is known for its high linked yields and they are available in various sizes and shapes. Whatever are your financial goals if you have one mutual fund in your kitty it would be of immense help?
John Smith 