While investing in mutual funds, your financial goal should be fixed. Like why are you investing, for how long and how much return do you expect. If you are doing SIP, then you should wait for at least one to two years, only then you will know whether you are getting the right return or not.
In the last few years, the trend of investing money in mutual funds through Systematic Investment Plan (SIP) has increased very rapidly. These include especially those people of rural people, who earlier did not trust mutual funds. But, now they are also investing money in mutual funds, leaving traditional investment mediums like bank fixed deposit (FD).
Of course mutual funds give very good returns, especially if in the long term. But, you should always keep checking whether you are giving the right return or not. Let us know how you can do this work.
How much should be the return
The meaning of any investment should be that it gives more returns than inflation. This means that if inflation is increasing at the rate of 7 percent every year, then the return should be more than this in any case, otherwise you will lose your principal. But, 7-8 percent return is also available in FD and many government schemes.
In such a situation, you should keep in mind that you are investing in mutual funds by leaving the options considered safe. You should expect at least 12 percent return on average. If you are consistently getting less return than this, then you need to change your strategy.
The purpose should be clear
Your financial goal should be fixed while investing in mutual funds. Such as why are you investing, for how long and how much return do you expect. If you are doing SIP, then you should wait for at least one to two years, only then you will know whether you are getting the right return or not. Many people stop SIP after getting low returns in three-four months, you should avoid doing this.
Keep checking the benchmark
You should always keep checking whether your mutual fund is performing better than its benchmark or not. If it is consistently performing worse than its benchmark, then you should talk to your financial advisor and consider investing in another scheme. If you do not do so, you may miss your financial goals.
Keep an eye on the risk too
Mutual funds are often volatile. If you have invested in a high-risk mutual fund, then it is possible that it may also see a big movement during the turmoil in the stock market. If there is a bullish phase, then your investment can grow rapidly, whereas in case of a downturn, the value of the investment can also decrease. In such a situation, you should choose a mutual fund scheme according to your risk capacity.
