Hello there! A majority of mutual fund investors often find themselves feeling at sea, when it comes to choosing a mutual fund scheme that is right for them. The confusion, uncertainty and other niggling questions that follow are due to one thing – the aim to invest one’s hard earned money in an appropriate manner that can help create wealth and achieve future goals. One wrong decision in this case may lead to potential financial losses.
Have you ever found yourself wondering the following when it comes to mutual funds?
- Is my financial goal the only factor I need to consider when investing?
- What other factors should I pay attention to?
- How do I find a mutual fund investment that matches my priorities?
The following pointers can help you answer the above questions from an individualistic point of view and allow you to make smart investment decisions:
Having a specific, realistic and relatable investment goal
Robert Kiyosaki, the famed author of ‘Rich Dad Poor Dad’ has been quoted saying the following –
“Money is not the goal. Money has no value. Value comes from the dreams that money helps achieve”.
Surely, you might have dreams of your own such as a buying a new car, a bigger house, excellent education for your children, a happy retirement and so on. When you align these dreams to your financial plan, you may be inspired to fulfill them. These further become your investment objectives, which can be considered as the first step on the ladder to a smart investment journey. Taking a practical approach and aligning these goals to your time horizon and risk appetite can help you choose an investment instrument that may offer commensurate returns in the long run.
Taking a meticulous approach to investment decisions
Once you have clearly defined your financial goals and the time horizon you may need to achieve them, the next step is to understand your risk appetite (willingness and ability to take risk). All mutual funds schemes come with a certain amount of risk. This risk is directly proportionate to the potential returns that one might stand to receive, therefore higher the risk – higher the chance of returns and vice versa. When you are able to assess and understand your risk, you might be able to narrow down to the asset class that you wish to consider investing in. For instance, if you happen to be comfortable with higher risk, you may want to explore equity and equity-oriented schemes. Once you have clarity on the asset class you wish to invest in, you can begin to explore varied mutual fund schemes investing in that specific asset class.
Investing in mutual funds does not only depend on consideration of the above pointers, it also depends on having a clear understanding of what a particular scheme offers. For this, investors can refer to the particular scheme’s SID or scheme information documents, disclosed by the mutual fund company, online. This can further help to make prudent investment decisions, choose a suitable mutual fund scheme and achieve one’s financial goals in the long term.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.