So you have now decided to invest in mutual funds? What Next?
Like with any other long journey the first step is to be prepared.
Here are the must-haves that one needs before you set out on your journey of wealth creation by investing in Mutual Funds.
1. List down your financial goals
This step helps to determine what type of mutual fund is suitable for you. Consider your investor profile and your financial goals carefully before you set out to invest in a mutual fund. Tag each goal to a target amount and time horizon and factor in inflation to arrive at the amount you need to invest today.
The image is for illustration purposes only.
2. Consider your risk appetite
Investors many a time overestimate their risk appetite especially when the markets are going up only to panic when markets crash and realise that their actual risk appetite wasn’t so high.
The image above is for illustration purposes only.
An easy way to find your risk appetite is to think of how you would react if your portfolio declines by over 50%.
If you find you are too risk averse consider increasing your investment in debt funds and tweak your asset allocation accordingly.
3. How diversified will your portfolio look?
Asset allocation is essential to protect your portfolio from market movements. When investing with a mutual fund it is a good practice to diversify across asset classes, which helps optimize the risk and return of the overall portfolio.
4. Shore up an emergency corpus
Before beginning your investment with a mutual fund, it is advisable to have an emergency fund. Ideally this should hold around 12-18 months’ worth expenses and this is especially important if you are a non-salaried person or someone who is a freelancer or owns a business.
5. Monitor your portfolio periodically
The best laid out plans are sometimes not fool proof and investing in mutual funds is no exception. By monitoring your investments periodically you get the opportunity to rebalance your portfolio when the market movements deem this necessary. Also to be noted, is that over the course of your investment journey your income levels and your risk appetite may change. So a rejigging is essential to get the appropriate mix of asset classes.
Investors that are prepared to really understand what they are getting into and learn how to take care of their portfolio are ultimately the ones that are successful in achieving their goals.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.