If you have invested in the best mutual fund scheme to invest by now you might have gone on to make substantial amount of money. Over the course of 20 years some of the top performing mutual funds have given returns to the margin of 20 %. In case if you are planning to grow your wealth careful planning in relation to investment is expected to do the trick for you. When you are investing in mutual funds there are some pointers you need to keep in mind
Regular investment
In case if you are planning to invest in mutual funds, then a regular systematic investment plan is the key. This works out to be a monthly investment plan chosen by you, as per the mutual fund of your choice. From your account the amount is automatically deducted and accrues to the mutual fund. Even investing in mutual funds can be started with SIP at varying amounts. In any case the minimum amount to invest is Rs 500 and you can stop it anytime as per your wishes.
The main reason why SIP is a good option is because it takes into consideration market averaging. From time to time the market is expected to be facing an up and down situation. The moment markets are up you are going to avail fewer mutual funds and conversely happens once the market is low. In this manner you ensure that you are not paying a high cost for your investments.
Invest for a long term
Mutual funds provide maximum returns if you invest the funds for a long period of time. This requires a degree of patience and when the returns are low investors panic and withdraw the funds. This proves to be a wrong strategy on their part. Novices end up investing when the market is at a high and withdraw fund when the market is low. This proves to be a wrong strategy. The moment you are investing in mutual fund consider the long term performance. See how the funds have performed in the last 5 years and evaluate the good and the bad times. This would give you a concise picture of the fund.
When you invest for a long time you subject it to the power of compounding. Once you have invested you are likely to earn returns and this sum of money would be further invested. This is the power of compounding. This cycle continues and the longer you invest the more scope of earning money.
Rebalancing
Once again investment in mutual funds is subject to market risks. No way you can invest in a mutual fund and forget it over a longer period of time. It is not only about the market conditions. Sometimes you might have invested in a fund and this could perform poorly when you compare it to funds in the same category.
The best way to check out for mutual funds is to flip through the ratings. Most online sites provides access to ratings.
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