If you are thinking of taking advantage of the capital market to create wealth, then investing in mutual funds is a great option for you. The early you start is better for you as the chances of you riding out equity market cycles to create wealth are high. When you are starting to invest in mutual funds in the younger age, then you can make great returns on the rolling cycles when you can hold the shares in mutual funds for a long time which eventually helps in making more money. But as a new investor, you are prone to make some mistakes. But now you do not have to worry. As in this article, there are some tips for youngsters who are investing in mutual funds for the first time. These are really helpful and the investor can earn a lot of wealth using these tips.
So here is the list of five things which an investor should keep in mind while trying to make money in mutual funds.
- Defining a purpose
Well, having a purpose for anything helps in every way and so does in investing in the capital market. The investor needs to define the financial purpose which might include wedding planning, child education, retirement or overseas vacation. This will help them in making a dedicated saving to fulfill their financial related goals in life.
- Holding period
If you are starting to invest in mutual funds, then you must have gained knowledge about types of mutual funds by now. There are own risks of holding periods of various types of mutual funds that include liquid funds, debt funds, equity funds, hybrid funds, etc. The benchmarked time horizon will help in this case. One should also keep the lock in period for tax saver mutual funds in mind.
- Risk is always there
If we talk about the safety in investing in mutual funds, then it can be considered as a safe mode of Investment Avenue only in terms that they are regulated by SEBI (Securities and Exchange Board of India). The investments made are always subjected to market risks and one should have a clear picture of the scheme in which they are putting their money in.
- Compare the mutual funds among its peers
When are thinking about a particular investment in a mutual fund, then do not forget to compare the scheme with its peer schemes. But take care of the fact that they are the same types of schemes. These data are easily available online and you can try a hand more precisely knowing the competition in the market.
- Check the consistency of the scheme
Just checking the whirlwind returns of a scheme is not enough. When you are planning to choose a scheme, keep this parameter in mind. Look for the return value of the scheme in past 2, 3 or 5 years. Do not try to see how much return it as made in last year r less time period, but try to look for the consistency of the scheme. This will be more beneficial for you and later with time, you can take calculated risks.
So these points will help you in investing right time and money in mutual funds.