6 Things a First Time Mutual Fund Investor Should Know
It is important to drive your investment to make the most of it, and the best option is investing in mutual fund schemes in India. There are only two ways to make money either work or make your idle money work using financial expertise. Most financial experts suggest you invest in mutual funds as they are one of the best and safest ways to drive your money earn for you. This article will go through 6 essential things that every first-time mutual fund investor should know.
1. Different Types of Mutual Funds Are Associated With Different Types of Risk Profiles:
The first and foremost point which every rookie investor must understand is there are different types of mutual funds schemes available in India. It is vital to understand a scheme before you invest your money. One of the common mistakes most investors make is deciding on a mutual fund scheme based on its past performance and without any idea about the risks they invest and lose their money.
Most mutual fund experts suggest beginners go with equity mutual funds as it has low risk, and it also gives sufficient time to beginners to find the best scheme for their investment.
2. Direct Plans Help In Generating Higher Return:
The next paramount point to consider is direct plans help new investors in making better returns. One of the main reasons direct plans help make good returns is that no brokers or fund managers are involved in such plans. Hence, investors don’t have to pay an annual brokerage fee and redeem their entire investment.
3. Mutual Funds Don’t Offer Guaranteed Returns:
Mutual funds that are linked to share prices don’t offer guaranteed returns. You might get a 10% annual return in the first year and no return in the second year. It is important to prepare yourself for market volatility and build a diversified portfolio where you can drive your investment efficiently. It is important to monitor your mutual fund performance to get a clear idea about your investment.
4. Go With Consistent Mutual Funds:
Generally, you will find two types of mutual funds in the market. One will promise you 5% of annual returns every year, while the other will fetch you 17% in the first year and 4% interest in the second year. For first-time investors, it is better to go with consistent returns.
5. SIP:
SIP or Systematic investment planning is one of the best learning options for first-time investors. It is also called rupee cost averaging, which can help investors in the long run.
6. Don’t Keep All Your Eggs In One Basket:
It is not something new, but new investors need to have a diversified portfolio to minimize the risks. Asset location helps new investors diversify their portfolios to eliminate or reduce the risks associated with their mutual funds.
Investing in mutual funds is quite simple as you can find various companies online. Knowledge is the crucial element that will help you in making good profits from mutual funds.