Whenever you invest in mutual funds, always get confused about which scheme to select, which one is better, and which scheme will offer the highest profit & lowest risk. Although scheme selection is important, however, there are other important factors as well which investor generally ignore and incur capital losses after investing in mutual funds
In India, there are 44 AMC that offer more than 3000 schemes to their investors. However, the investor is more interested in knowing which scheme is top-performing or the highest return generating scheme rather than finding out the scheme which suits their individual requirements.
Therefore, some homework and planning are important before investing in Mutual Fund. There is 8 steps process to build your investment portfolio basket through mutual funds. These eight steps are:
- Know your Investment Criteria - need analysis
- Identify your Financial Goals - the purpose of your investment
- Define Investment Time Horizon
& Set Priorities - when you actually need money
- Understand your Risk Profile - match your risk appetite vs return expectation
- Diversify across various Asset
classes - understand the nature of the asset class
- Select the Right MF Scheme - know the scheme investment philosophy
- Start Early - time for execution
- Review & Rebalance your Portfolio - 90% return generated from this step only
- Money never sinks in mutual funds. If you are not able to generate a return or getting a loss on the principal amount, probably you have not followed above mentioned 8 steps process religiously.
- MF scheme selection is the sixth step to execute and most of the investors make a blunder by skipping the first five stages.
- One can also take the help of a Certified Financial Planner to follow the above steps and also require to maintain his Asset Allocation over a period of time to generate a return consistency.
Disclaimer: Mutual Funds investment are subject to Market Risk
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