Investing surely isn’t a cake walk altogether, especially when you plan to invest in mutual funds. Market as you know is always fluctuating and a lot of issues make an impact on it every day, which further get reflected on most of the mutual fund schemes as well. Also, picking the right fund, at the right time and as per your financial goals, knowing the terms and conditions, repercussions that otherwise might go unnoticed. It all requires in-depth knowledge of fundamentals of mutual funds and their performance.
So, before you take the plunge towards investing your hard earned money into mutual funds, make sure you read below the list of 5 must do’s of investing in mutual funds.
Dos of Investing in Mutual Funds:
1. Diversify your asset Classes
When you make investments, it is important to determine the types of funds you would like to buy. This answer like mentioned above varies on several factors like your how much money you wish to park, what is your age, what are your financial goals, when would you need your money and what’s your risk appetite, to name a few. When you finally decide to make a portfolio, keep your fund types diversified and buy a mix of funds.
2. Check and go for no-load funds
When buying funds, make sure to check those are load free. There are always alternative, yet similar types of funds that offer no load compared to the funds that charge loads. For the core part of your fund portfolio, better go with index funds, which are low on expenses and have no load attached.
3. Know the fund expenses
The cost of trading and managing the fund is what you pay as fund expenses. These include annual charges as well. Between the many funds you choose, always go with high performing fund even if the fund expense is a point higher, as its better returns would outperform the other fund.
4. Think tax and tax savings
Tax savings is another important issue of concern when investing in fund types. If you can then why not go with fund schemes that offer better tax saving benefits. Always notice that funds with steady returns over a long span tend to give better tax efficiency. If you are bound towards tax saving investment, clearly go for funds that promise that and ask for them from your fund manager
5. Check the fund manager’s performance
Often a fund’s performance is dependent on the choice and performance of a fund manager. So when you choose a fund manager, do track their last five year records and see how they’ve lead the fund during its tenure. Always go for a fund manager who has good knowledge, is passionate, committed and has a sound plan and strategy for your goals.
With these set of dos for your mutual fund investments, read more and research well. Keep a track of mutual fund performance and work out on your own what type of funds would work best for you.