Choosing the Right Mutual Fund for Investment

While people today recognise the benefits of investing in mutual funds, many may feel overwhelmed by the vast number of funds to choose from. Check out this post to learn how to choose the right mutual fund.

Thanks to the rising popularity of mutual funds in India, the market is flooded with different types of mutual funds with different investment objectives. Therefore, it’s vital to know how to choose the right mutual fund before finalising the one for your investments. 

Tips to Choose the Right Mutual Fund

  • Determine Your Financial Goals

You may be planning to build a retirement corpus or become financially independent in the next 15 years. Alternatively, you may plan to buy a car or go on a solo world trip in the next two years. Simply put, your mutual fund investment should be aligned with your financial goals. 

You can consider investing in a large-cap mutual fund to fulfil your long-term investment goals. On the other hand, debt funds can be a good choice if you have short-term financial goals.

  • Consider the Fund’s Past Performance

While the previous performance doesn’t guarantee future returns, long-term trends suggest that strong-performing funds may continue to provide good returns if the management is competent. 

  • Look For Performance Consistency

Consider investing in funds that are consistent with their returns. For instance, a fund that has generated a consistent annual return of above 12% over three years can be better than the one that has provided 25% returns in the last year but has negative to single-digit returns in the previous two years.

  • Monitor Your Investments

It’s important to monitor your investments periodically. You can track the performance of your mutual fund investments through the mutual fund company’s website, mobile app or other online platforms. As an investor, it is also essential to know what kind of middle-office solutions your asset managers have. You can learn more about what is middle office by clicking on the link.

How to Invest in SIP?

Let’s understand how to invest in SIP. The Systematic Investment Plan (SIP) is a popular and disciplined way of investing in mutual funds in India. It enables you to invest a pre-decided amount at regular intervals (usually monthly) in a mutual fund scheme of your choice. So, investing small and consistent amounts of money can help you accumulate wealth over the long term and meet your goal.

Moreover, SIP is a flexible investment option as it allows investors to increase, decrease or pause their investments based on their financial goals and market conditions. The main objective of SIP is to inculcate the habit of disciplined and regular investing and to help investors achieve their long-term financial goals.

You can follow the steps given below to begin your SIP with a mutual fund of your choice.

  • Choose the Right Mutual Fund

The first step is to select the right mutual fund with the help of the tips given above. You can research and compare different mutual funds to see which ones suit your investment goals.

  • Register for Mutual Fund

Once you have selected a mutual fund, visit the fund house’s official website and sign up for the mutual fund you want to invest in.

  • Complete KYC

Before investing in any mutual fund, you must complete the one-time KYC (Know Your Customer) process. You can complete the KYC process online through the asset management company’s website or a KYC registration agency.

  • Decide on the SIP Amount and Duration

Decide the amount you want to invest in your SIP and the duration. Consider your earnings and expenses to arrive at a sustainable SIP amount.

  • Provide Bank Details

You must provide your bank details, such as account number, IFSC code, and other necessary details. This will enable the mutual fund company to auto-debit the SIP amount from your bank account every month.

  • Make the Payment

Make the required payment to complete your investment. The fund house will send you an email confirming your payment and other fund details.

Once you identify the right mutual fund, consider beginning your mutual fund investment journey at the earliest. It may potentially become one of your milestone investment decisions a few years from now.

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