Mutual funds are investment vehicles that are designed for practically any investor, from the first-timer to a more seasoned individual. There are certain factors that need to be kept in mind before making an investment in mutual funds, because as an informed investor, you should be aware of all the aspects of your investment.
In order to make your investment work optimally for you, here are a few things to keep in mind prior to investing:
- Understand the fees and charges applicable to the scheme of your choice.
- Expense ratio: This comprises of the expenses that a fund incurs, such as investment management and advisory fees and other operating expenses. The total expense ratio is available on the respective websites of various mutual fund houses and is updated on a daily basis.
- Exit load: This refers to the one-time charges that are applicable upon exiting the scheme and are normally levied as a percentage of the investment/ amount encashed.
All the fees and costs applicable to your mutual fund investment are mentioned on the AMC’s website as well as the Scheme Information Document (SID) of the mutual fund scheme you are planning to invest in. It is advisable to go through all the fees and charges prior to investment.
- The very nature of mutual funds indicates probable returns on your investment, and not an assured rate of return. This needs factored in, keeping your financial goals, risk appetite and investment horizon in mind always.
- The past performance of a particular scheme does not indicate the future performance. Hence, use this information judiciously at the time of selecting a scheme to invest in.
In conclusion, it is necessary for an investor to be well-informed before making any investments. You may also seek advice from your financial advisors to make sound investment decisions.
For most investors, mutual funds prove to be attractive as they may help create wealth in the long run.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.