Mutual fund investing is not rocket science; it is about making smart decisions. Being a smart investor is not just limited to the mutual fund schemes you choose to invest in; it depends on understanding which strategy aligns with your goals and provides an opportunity for wealth creation. Your holistic approach to investing determines whether you are a smart investor. It is not a onetime decision; it is your investing habits that you practice throughout your life.
Here are 10 quick tips to determine if you are a smart investor-
Mutual fund returns are based on the concept of compound interest, which also implies that the longer you stay invested, the relatively better returns you may expect. Hence, starting early is better.
It pays off to think long-term; there are no shortcuts. Spread your investments over time and plan systematically.
Set your goals
What is it you're investing for? Always align your goals to your investments and eventually to the type of scheme you are investing in.
Identify your risk appetite
Marry your goals with your risk appetite. Invest in a mutual fund only if it matches with your goals & risk appetite.
Allocate your assets
Decide on the asset allocation that will finally drive your goals home. Do your goals need more equity schemes? If yes, then does that match with your risk-taking ability? Be clear on how much will be invested in which asset class. You may keep a steady mix of assets like equity, debt, etc.
Create an Emergency Fund
Always build an emergency fund for unforeseen circumstances and keep the liquidity intact. A liquid mutual fund may provide you with a good balance of liquidity and returns and also the required cushion for unseen situations.
Buy low, Sell high
Avoid making hasty investing decisions. If your fund is not performing temporarily, it may be a good idea to stay invested and see how the tides turn. If you decide to redeem at such a time, you may end up making losses.
Include tax planning in your financial goals and identify the medium of investment for it. It is advisable to not make tax-planning a last-minute thing every year.
Invest via SIP
Investing through a Systematic investment plan ensures that there is a discipline to your investment and also helps you spread out your risks and costs over a period.
Whenever in doubt, seek advice from your financial advisor/mutual fund distributor, because one wrong decision can deter your entire financial plan. Talk to the experts, research, and invest accordingly.
The above pointers can help you to determine what to change in your approach towards investing.
"ABOVE INFORMATION IS ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF Nippon India Mutual Fund. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully