A Mutual Fund is a type of investment product in which funds of many investors are collectively used for investment in any Instrument.

If you Don’t know what is mutual fund please refer to know: What is a mutual fund and how to invest in it.

It’s Not Like magic that you invest in a Mutual fund and you will get profit, before that you also have to do some work. so we are giving you on our website https://www.investolingo.com.

Basically few points are kept below to keep in mind before investing –

Goal

You should be more specific with the goal of your Investment. Once you decided to invest before that you have to set a goal, time frame, and expectation from investment. the time frame of investment varies from short to long according to your expectation. if just want any car or house it can be for the short term but if planning for a child’s college fee/ marriage it falls in the long term. Depending on your investment expectation only a mutual fund can be selected which can be a debt/ equity/other.

Types of mutual funds explained. 

Identification and risk tolerance

once the goal is set you can identify the mutual fund you want.

you must have heard higher the risk higher the profit you get.

for a good profit in the short term, you should choose equity.

likewise below image will help you to understand about risk and type of fund.

 

Liquidity refers to the ease with which an asset or security, can be converted into ready cash without affecting its market price.
Compounding works only when our capital is left untouched for a longer duration of time.

This is also important because compounding works best when money is left untouched for long periods. Hence, if you want to raise money for a short period, go for liquid funds.

                                                                     Open Free Account On Groww 

Fund Performance

Before Jumping to any fund must check history as it repeats. the performance of a mutual fund should be checked so that we will be benefitted. While evaluating a fund’s performance, it is important to check the performance details of the fund manager or the fund management team.

Entry And Exit Load

Entry is said to the fee charged by a fund house from retail investors like you and me on starting the investment. Exit load refers to the charges paid by an investor for exiting from the fund scheme. We advise you to go for those fund scheme which has zero or minimal entry and exit load.

Taxes

knowingly unknowingly we pay different taxes to the government. When a mutual fund for example equity is redeemed the amount received is taxed according to applicable tax on the earned amount.

                                                                      

                                                         Open Zerodha Coin Account for FREE

To sum up

Choosing a mutual fund is not impossible but a little bit difficult but we tried to explain it to you in a much simpler way.

We can go with mutual fund if we don’t have any knowledge of finance, we can even start SIP( Systematic Investment Plan)  it helps us to deposit a chosen amount from bank automatically.

Shashi (Prachi)

Shashi (Prachi)

Smile it let your teeth breath Equity Research Analyst at HDFC Mutual Fund ll Portfolio Management ll Wealth Management ll CFA Level 1 Candidate

Leave a Reply