To get higher returns from mutual fund investments, it is not enough just to choose the best performing fund but it is important to review its performance from time to time.
Let us discuss some important things related to mutual fund investment here.
Mutual Fund Investment: Mutual funds have emerged as the preferred investment options in the last few years. In this investment, people are getting more returns than bank FDs. But at the same time there is also market risk attached. The best thing about investing in mutual funds is the service of fund managers. Mutual fund companies hire professionals to get higher returns than the index.
However, relying solely on the fund manager for an investor can sometimes backfire. To get higher returns from mutual fund investments, it is not enough just to choose the best performing fund but it is important to review its performance from time to time. For this, investors can use five methods through which the returns can be increased by 1.5 percent.
Choose Direct Funds
Investors can get higher returns of 1-1.5 per cent by investing their capital in a direct plan. Direct plan is more preferable than regular mutual fund investment as investors do not have to pay brokerage to the fund house which can be as high as 1-1.5 per cent depending on the investment.
Mutual fund load is the fee that has to be paid for buying shares in the fund. This is repaid as the advice or services of the fund managers. That is, if you are investing 10 thousand rupees, then investors will have to pay 1 percent (100 rupees) charge to buy the fund. This means that only Rs 9900 will be invested. On the contrary, 10 thousand rupees will be invested in the direct plan because this load is not to be paid in it.
Choose SIP instead
of lump sum Invest your capital through Systematic Investment Plan (SIP) instead of investing it in lump sum. With this, more units can be raised by investing small amounts regularly. Unlike lump sum investment, one does not have to worry about thinking about the best time for SIP.
In lump sum investment, investors have to wait for the market to collapse if they want to get higher returns, but it is almost impossible to predict.
Invest in Index Funds
Like direct plans, investing in index funds has a lower cost of investment. However, the main advantage of investing in an index fund is that it is designed according to the performance of the market index. Through this, it helps to reduce the risk.
Diversify
your investments Don’t invest your capital in just one asset class. Instead, it is the right decision for investors to invest in multiple asset classes based on their risk appetite. Investors can invest in small-cap, mid-cap and large-cap mutual funds. Those who can take more risk should invest more capital in small-cap funds. Small-caps have the potential to yield higher returns on investment.
Debt vs Equity Investment
Debt funds are risk-free and have predictable returns. In contrast, equity funds invest in the shares of the company and carry market risk. One can invest in both debt and equity funds through mutual funds. With increasing age, the risk appetite of investors decreases, so such investors should invest more capital in debt. Its thumb rule is to subtract your age from 100 and invest that number in equities. If an investor has a high risk appetite, then he can invest 10-15 percent more in equities than the specified limit.
Keep reviewing the performance
Investors should keep checking the performance of their investments from time to time and invest their capital in the right funds when needed. According to investors, the portfolio should be reviewed at least once or twice a year. If the fund’s performance is not up to the expectations, then one must check the performance of the industry before exiting.
