How to Invest in Mutual Fund for Beginners
Once you have decided to invest in mutual funds, the next step must be to increase your expertise in stock market investments. Unless you are self-assured about markets and stocks, do not manage the investments by yourself.
There are advisors or experts who can help you do that.
It is not only about expertise; you need to have ample time in hand to monitor your funds on a quarterly basis all by yourself. So, even if you seek an expert’s help, study the whole process so that it will help you understand the decisions of your advisor.
Here are some tips which can be followed while doing Investments.
- Understand the process of mutual fund investments thoroughly. Even if you seek the help of an advisor, understanding the process helps you assess the decisions of your advisor and the sensibility of their decisions.
- Realise the fact that all mutual funds are not the same. Based on your objective, the asset class and category, performance differs. There are varied forms of funds in all categories and it is essential to know the difference.
- Make your goals clear. Only if you know the goals will you know your holding period and the level of risk which you can handle.
- Compare the performance of the funds belonging to the same category and asset class. Imagine the one who have chosen is an equity large cap fund. Differentiate its risk factor and performance with another equity large cap fund, not with a small or mid cap or a debt fund.
- Choose a mutual fund assessing its performance in specific situations. Even though there are ratios available to know the risk inherent in various funds, performance in these situations matter.
- Assess the expense ratio or the cost of investing. Make sure you compare it to similar category of funds. Higher costs need not dissuade you from choosing a fund. It is just that the returns should also be higher.
- Diversify the funds in varied asset categories. Make yourself clear about the objectives and invest in debts or equity accordingly. Choose not more than 5 portfolios while investing a smaller sum.
Follow these tips and prepare yourself before venturing out into the world of stock market investing.