Off late, people have started veering towards mutual funds. While many are thorough with their understanding of the product, a lot of them do not know how to utilise the instrument to their advantage. Hence, we have built a step-by-step guide on how mutual funds can enhance your financial prospects.
Start By Defining Your Goals
- Make a list of your goals based on your priority; this will help you identify how you need to spread out your mutual fund investments and the amount you require for each goal.
- If you have short-term goals, you can focus more on debt schemes; with minimal exposure to equity schemes. When the time frame is small, it is wise not to expose your investments to unnecessary risk, you don’t have time in hand if something goes wrong.
- However, if you are playing with a longer time frame, you can choose to bet on equity mutual fund schemes to achieve them. Simply put, you should choose a scheme that is in line with your goal, investment horizon and risk profile.
Compare fund types
Once you have identified your financial goals, you should start short listing funds based on them. Below are a few tips to pick up the right funds:
- Understand the past history of the fund and how has it performed during market fluctuations.
- Ensure that your funds fit as per your time frame and risk profile.
- In case of debt funds – check the performance for the last 3 years and in case of equity, check for the last 6 years.
- Check the performance of the fund manager
If you follow the above process, it will help you make an informed decision and choose the right Mutual Fund for you.
Get in touch with a Financial Advisor
If you are not seasoned with the markets, then it is smarter to hire a financial advisor who will help you get around the nitty gritties of investing. You also have the option of investing through broking websites such as Edelweiss(link), which offer robo-advisory. Having the aid of a financial advisor will help you build wealth in the long run.
- Benefits of a financial advisor
- Personalized recommendation of schemes
- Clarification of queries, if any
- Keeping a track of investments and timely sell recommendations.