8 Tips For Better Returns From Mutual Funds

By Author: Neha Kabra
Total Articles: 2
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A mutual fund is a type of investment product where the funds of many investors are pooled into an investment product. The funds collected is then invested in a portfolio of assets with a clear and defined investment objective. Present day market has hundreds of mutual funds options to choose from, which makes it a difficult task for a new investor. Here are eight quick tips to play safe while expecting good returns from your mutual fund investments.

Know your Financial Goals

Any kind of investment requires planning and preparation. One cannot throw away their hard-earned pennies into any sort of investments in the market, and that’s where the counselling of an investment expert comes handy. Deciding on your financial goals and the duration for the investment are one of the key factors which determines the returns for the money you are willing to invest in the mutual funds.

Assess the Risk Factor

“Mutual funds are subject ...
... to market risks”, is a general tagline in every mutual fund-based commercial. In simple words, investing in mutual funds is a game where higher the risks you take with your money, higher is possibility of returns. Analysis of your personal risk tolerance in advance will help you invest wisely.

Understand Mutual Funds schemes

The division in Mutual Fund schemes is usually done on the basis of asset class, investing style, objectives and among a few. Basic knowledge of these schemes will be helpful for you in finding suitable schemes to invest in.

Diversify

Frequent investments in only one particular type of mutual fund increases the chances of lower returns. It is a good habit to diversify the investment portfolio by investing in different types of mutual funds. This ensures that even if one of the funds start under-performing, then the other funds can balance out the returns.

Choosing SIP is a smart move

Systematic Investment Plan (SIP) is an investment plan which allows you to invest a particular amount monthly or quarterly into your favourite mutual fund. The benefit of investing through SIP is that it allows you to invest as low as Rs 500 which enables an investor to invest in multiple mutual funds.

Expense Ratio

Expense ratio is defined as a small annual fee which an investor is charged for the management of funds. People generally make a mistake by ignoring the expense ratio, which results in lower returns. The
expense ratio is always inversely proportional to the returns, which means higher the expense ratio, lower the returns you earn.

Tracking Your Funds

Investing in mutual funds and continuing the investments should not be your only concern. You’ll have to continue tracking the performance of your investments regularly in order to monitor their growth. Analyzing the funds’ returns and adjusting your investment portfolio accordingly will help you in making sure that your funds do not perform below par.

Seeking Professional Advice

Mutual funds can be tricky and confusing at the same time, especially if you are a first-time investor. People generally follow their instincts while they are investing, however, it is always advised to seek a professional’s help while making any sort of investment as they have the expertise and knowledge which would help you invest to receive the best possible returns.