Do you have the urge to invest in stock markets when you see everyday news that the stock market index has scaled new heights? Stock market investment is a good one provided you have studied it well and your research on the companies that you want to invest in is proper. You have to constantly monitor and did your research on the particular stock you want to invest in to make good returns. Though some stocks might make good returns, it might not be the case for every stock. Your huge investment could go down within seconds and your favourite stock might end up as a penny stock. Though such situations are scary, there is no need to worry if you plan properly and invest in following sound signals. Many people might not have enough time or patience to conduct proper research because of their work schedules and other assignments. In such a scenario, what’s their next option to invest in stock markets. They can still do but by approaching an expert in stock markets. That is by way of investing in mutual funds. Most of the funds are being operated by good financial experts and have a track record of fetching good returns over some time. But yes there are instances that even mutual fund returns have turned negative but the risk element is relatively low here. So let’s assess which are the key elements an investor should look into while putting their hard-earned money in stock markets. When should they decide to invest in mutual funds and what are the requirements. Let’s find out.
Mutual funds are one of the most popular investment options even for a new investor in the market.
The fund manager will decide whether he wants to invest the collected money in stocks, gold or bonds, depending upon the features of that particular fund. The objective of each mutual fund will be different from the other one. If you don’t have a lump sum fund to invest in, you can opt for a systematic investment plan (SIP). By opting for such a scheme, you can invest a particular amount every month to buy the fund. Considering the many options to open an online account, it is easy for an investor to buy a mutual fund. However, you have to do a bit of research to find out which is the right mutual fund for your requirements.
You have to do your research to finalize the best mutual fund. Some of the parameters to consider are return expectation, risk tolerance, investment horizon, investment knowledge, etc. You can invest the money based on past performance, expense ratio, assets under management (AUM), fund manager’s experience, etc. Firstly, you have to identify your requirements before going for an investment. If you don’t require money immediately, it is good to invest in a long-term fund so that the returns will be good. Historically, mutual funds will provide good returns if you stay invested for a longer period.
Before investing your money in a random mutual fund, you have to make a risk analysis of a particular fund. You can read the reviews of experts regarding the fund. They will provide you with the advantages and disadvantages of investing in a fund. After reading different reviews of the fund, you have to make a call of selecting which fund will suit you perfectly. At the same time debt, mutual funds have lesser risk when compared with equity funds but the returns from debt mutual funds will not be substantial. They tend to offer steady returns but when you take the risk of investing in a mutual fund your returns might be good. Similarly, there is a chance for negative returns from equity funds as well.
The mutual fund managing company will take an expense ratio, or commission, from you while buying or selling the mutual fund. It’s considered that the higher the AUM, the lower the expense ratio. It’s also important to understand the tax implications when you are buying a mutual fund. But the significant point is that one has to take a calculated risk if the intention is to get a good investment. Otherwise, one has to be satisfied with the bank interest rate only.