Mutual Funds: Why are you still unsure about your mutual fund investments?
According to advisors, many investors bypass starting points when beginning their investment journey. A friend or colleague talking about their successful investments would be the spark that would inspire many investors to start their investments. Or it could be social media touting how he made a fortune in the market. Most new investors try to emulate the strategies of friends or so-called influencers.
However, these investors find it difficult to reach out to their friends or so-called influencers when they want to clear their doubts. Even if well-meaning friends try to help them, the advice may not be satisfactory. Even friends may be new to investing or may not know enough to offer help.
Is there an easy way out?
Well, you can start with the basics. First, you should always choose mutual funds based on your goals, investment time horizon, and risk profile. This is your starting point. You can adjust it according to your personal needs. However, the basics remain the same.
For example, let’s say you’re looking to invest for two years to buy a high-end television. You don’t want to take too many risks, because you’re only two years old. In addition, you have saved most of the required amount. Well, your options would be either a bank deposit or a short-term mutual fund. What if you invested for 15 years to finance your children’s studies? Well, since you have a long term horizon, you can invest in stock mutual funds. However, you should choose the mutual fund category based on your risk profile.
For example, if you have a conservative risk profile, you should invest in large cap mutual funds. Moderate investors can choose open-end mutual funds. Aggressive investors can choose mid cap plans, small cap plans, large and mid cap plans, multi cap plans, among others. If aggressive investors also plan to invest in sector funds, they must decide what percentage of the total investment will be allocated for these purposes.
This is part of a series of articles ETMutualFunds has published or for the benefit of new or relatively new mutual fund investors. You can visit our Facebook page and leave messages to us regarding your doubts and other mutual fund investment issues.)