Sharekhan Blog

5 Tips to Invest in Mutual Funds

  • Jul 27, 2023

This type of market-linked instrument can take on a wide variety of forms and is distinguished by its capacity to generate high rates of return. Including at least one fund in your portfolio can assist you in realizing the required investment returns, regardless of the financial objectives that you have set for yourself.

What Exactly is a Mutual Fund? 

It is a privately managed fund, which stands for an asset management company. It is a pool that is created when participants with similar investment philosophies gather together and deposit money from their accounts to create the pool. A Fund Manager takes great care to invest the consolidated money in properly selected financial products that are available on the market. These financial securities include corporate stocks and public bonds. An individual receives a certain quantity of units in the folio in proportion to the amount of money that they invest.

When multiplied by the number of units, this value serves to determine the asset value that is owned by the individual investor. The value that is assigned to each unit is referred to as the NAV, which stands for the "Net Asset Value." Instead of putting their hard-earned money into the stock market directly, they have the option of putting it into professionally managed accounts, which gives us several advantages. 

Investing In Mutual Funds May Provide the Following Benefits -

  • Because there are so many different mutual funds to pick from, an individual may tailor their investment strategy to meet a wide variety of financial objectives thanks to the availability of mutual fund options. According to the requirements, he or she has the option of selecting either an open or a closed-ended fund.


  • Because an individual can choose how long they want to keep their money invested, it is suitable for both short-term and long-term investing goals.


  • Because the funds are managed by professionals, there is an undeniable reduction in the risk that is related to the performance of the market.


  • The investor can also look forward to flexibility in terms of switching between stock and debt or maintaining a healthy balance of both, depending on the options that are accessible to them. This is something that they can look forward to.



  • When compared to traditional financial products such as savings accounts and fixed deposits, for example, the annualized returns that are offered by mutual funds are significantly higher.


Tips to Invest in Mutual Funds-


  • Always Keep Your Objectives In Mind -


Because purchasing shares in a mutual fund is a medium to long-term commitment, the term you choose should align with your long-term financial objectives. This will ensure that you have access to your money right before a major life event. Suppose you intend to purchase a home four to five years from now; if so, maintaining your investment in the fund for the same amount of time will assist you in becoming almost self-sufficient.



  • Choose The Profile/Mix With The Utmost Caution -


In today's market, investors can choose from an abundance of different types of funds. Starting with those that make significant investments in blue chip businesses and progressing to exclusive choices that make investments in particular subsets of the industry, such as banking. You may also be offered a combination of debt and equity by an AMC, and you may be allowed to rebalance the allocation according to the requirements of your business. It's vital to choose the fund cautiously after a thorough assessment of the dangers involved.



  • Study The Fund -


Because investing in a mutual fund typically requires a large cash outlay, one ought to give some thought and effort to the selection of the fund in question before making their commitment. You can select one of the numerous resources that are available online to assist you with this objective by analyzing the performance and yield over the previous several years. 



  • Think About Establishing A Systematic Investment Plan -


A systematic investment plan (SIP) is both the most effective and most advised means by which to get started in the world of investing. In this case, it operates in the same manner as a loan, in which you pay a predetermined sum into the fund each month in exchange for a particular number of units, the exact value of which is determined by the NAV. The main difference is that when you pay off a loan, you are clearing a debt, but when you invest in mutual funds, you are growing an asset over a predetermined period. 



  • Maintain Constant Vigilance -


After being invested, they continue to generate returns over some time without the need for periodic monitoring and maintenance. On the other hand, it is prudent to examine the performance around once a month to determine the sale ability of the units that are being retained. Maintaining a regular monitoring schedule can assist you in selling or redeeming your assets at optimal times.



These articles have been prepared by Sharekhan and is not for any type of circulation. Any reproduction, review, retransmission, or any other use is prohibited. Sharekhan shall not be responsible for any unauthorized circulation, reproduction or distribution of this material or contents thereof to any unintended recipient. Kindly note that this page of blog articles does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The value of the investments may be affected generally by factors affecting financial markets, such as price and volume, volatility in interest rates, currency exchange rates, changes in regulatory and administrative policies of the Government or any other appropriate authority (including tax laws), or other political and economic developments. Please note that past performance of financial products and instruments does not necessarily indicate the prospects and performance thereof. The investors are not being offered any guaranteed or assured returns. The securities quoted are exemplary and are not recommendatory. While we would endeavour to update the information herein on a reasonable and timely basis, Sharekhan, its subsidiaries and associated companies, their directors and employees are under no obligation to update or keep the information current. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of use of the trading platforms mentioned herein. The trading avenues discussed, or views expressed herein may or may not be suitable for all investors. This information is only for consumption by the client, and such material should not be redistributed.

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