What are interesting tips of mutual funds?

  • Prepare well

Before starting to invest in mutual funds, an investor should prepare well to turn their investment into a profitable and successful one.
Whether a beginner or a seasoned investor, it is always good to take some essential advice from your financial advisor.
An investor looking to learn and invest simultaneously should answer all the questions related to their financial goals, retirement plans, strong corpus, and mainly the period of investment.
Different mutual funds have different types of risks and profit that can turn out to be rewarding or loss. Thus, an investor should prepare well to earn profit and to save themselves from significant losses.

  • Build a strong and well-diversified portfolio

Many mutual funds invest your hard-earned money directly in blue-chip companies, whereas others invest in particular segments like banking, real estate and more.
Some mutual funds can offer a mixture of equity funds and debt per your requirements to deliver more flexibility.
Thus an investor chooses the appropriate mix and profiles to get valuable and profitable returns. If an investor is looking to invest in one or two equity funds, they must diversify across several sectors and asset class to build a strong portfolio.

  • Read and understand the tax laws

In investment, several people say that “a rupee saved is a rupee earned”, which is true. But, tax can eat up all your returns.
Therefore, it is essential to know the tax slab when investors are looking to redeem their investments. In addition, several mutual fund schemes like Equity Linked Savings Scheme offer a tax benefit to their users.

  • Build a strategy focused on long term growth

Mutual funds are not known as quick rich schemes instead, an investor has to think as a long-term investment horizon to reap the highest returns.
Those investors looking to invest for five years or more must look for equity-oriented mutual funds because equity markets rise upwards in the long term while in the short term, they remain volatile, which can be either profit or loss.
The ideal strategy is to make equity investments along with short term investment holdings to maintain the liquidity of their portfolio.
Thus, investing in debt funds will help an investor meet emergency requirements in cash without sacrificing their long-term opportunities to get higher returns.

  • Know when to exit a mutual fund

It is important for an investor when to exit from a mutual fund. Unfortunately, when the market enters a bearish phase, several investors make the mistake of exiting from mutual funds, which is a wrong practice and not a recommended strategy.
The fund managers who are capable enough know how to jump back from the bearish phrase and use it to their full advantage.

There are few signs that investor should know when to exit from a mutual fund, such as:

  • When they have achieved their goal from a fund
  • When they have achieved their goal from a fund
  • When there is a change in investment objectives of the fund that does not match with its goals
  • When the fund performs badly for a longer period.
  • Keep investment objectives clear

Investor should keep their investment objectives clear before heading towards investing in mutual funds.
Mutual funds are known as flexible financial products, which an investor can start today just by investing with RS 500.
Apart from ELSS schemes and closed-ended funds, an investor can invest in any mutual funds and redeem at any time as per their choice. This allows investors to select their desired mutual funds by keeping in mind their investment objective.

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