You should know 5 important things before investing in mutual funds. So that your money is not immersed in any way but can be used properly.
Are you thinking of investing in mutual funds? Mutual funds can be a great option to get good returns from the market in the long term. However, it is important to understand some things related to mutual funds before investing. There are many types of mutual funds, and the risk of each one, the duration, cost and objective of each vary. You should know these 5 important things before investing in mutual funds.
- You should choose mutual funds according to your financial goals and the ability to take risks. If you want to invest for a long period, equity mutual funds can give more returns. At the same time, date or hybrid mutual funds can be better option to invest for a short time.
- It is better to choose a low -cost mutual funds. This reduces the fees cut from your profits.
- Even though the previous performance does not guarantee future returns, it is necessary to see its previous record to evaluate a mutual fund. You can guess its stability by looking at the performance of 1 year, 3 years, 5 years and 10 years. Choose funds that have been continuously performing better than other funds and benchmark index like you.
- Do not invest all your money in the same mutual fund. To reduce the risk, also invest in different types of assets and mutual funds investing in sectors.
- You have to decide whether you want to invest in active fund or in passive funds. In active fund, professional fund managers manage your investment and try to earn maximum returns from the market. Passive funds follow a market index. Statistics around the world show that 66% of active funds give less returns than index funds. In India, this figure is 50% in the last 3 years, but if we look at the 4 -year figures, it is close to the global average.