Investment is a big challenge in this oscillating economy and inflationary market. And Investment has now become a trend these days, the mutual fund has become one of the most common financial tools for investors as they offer various types of schemes which attract a new investor to join this market.

Why invest in mutual funds?

Mutual Funds have become the most common investment vehicle as it offers a variety of advantages to the investor.

1) Professionally managed

The best part of Mutual Funds is that they are managed by professionals that means the funds invested by the investors are in the safe hands. These professionals have all access and knowledge about the market who can take balanced and informed decisions.

2) Diversified Portfolio

When an investor invests money, his funds are divided into various sectors which reduce the risk of losses and also have more chances of high returns. As the money is spread across various companies and sectors, the investor can reap the benefits of diversification which lessen the exposure to risk.

3) Variety and Affordability

The market also welcomes small investors also who wants to invest money in the market but a small amount. They are affordable to even the common man, they invest in small denominations and can be fine-tuned depending upon the degree of risk an individual is willing to take. The Mutual Funds also offer a variety of different types of schemes to the investors. They can choose any scheme according to their financial goal or objective.

4) Liquidity

The main reason for investors to invest their money in Mutual funds is that it can be converted into cash anytime. Mutual Funds are highly liquid thus, attract investors to invest more. It ranks high on the liquidity factor also.

Guidelines while investing in Mutual Funds

It is rightly said that anybody can invest in Mutual Funds from small businessman to large companies but it is not a child play. One should have the required knowledge and certain level of experience. There can be umpteen number of tools, ideas, and designs that one can corporate into the model of your mutual fund portfolio based on individual choices, yet there are few guidelines that are consistent across all the structures –

1. Consistency vs. Performance

It is easy to make runs in T-20 Match but taking wickets is a challenge! Similar is with the mutual funds, an investor should invest money in that scheme which is tending towards consistency rather than flattering with quick profits. The portfolio that consistently outperforms the benchmark will benefit the investor more rather than fair weather friend. A consistent performance will help investors to emerging victories in the game of investment.

2. Design Based on Financial Goals

Every investor has his own reasons to invest, we can say financial goals and objectives. Some people have big goals like owning a dream house or big BMW car or some can have medium goals like buying an iPhone. Every goal is unique in its own way. The basic idea and strategic way to implement this would be to identify your financial goals and blueprint your funds as per the time horizon of the goals you’ve set.

3. Monitoring the portfolio

Investors think that after making the investment, their job is done, Fund Managers will take care of the rest which is wrong. After all, it’s your money, not fund manager’s money, you have to safeguard your money. A mutual fund doesn’t require daily monitoring like stock but should be reviewed within every quarter by the investors to check whether it lags behind or is up to the mark.

4. Restructuring mutual funds

Mutual Fund Requires immediate restructuring if the fund has been underperforming. Realign your portfolio, based on the category or fund that has strayed from the intended asset allocation strategy. It also helps in ensuring that the portfolio sustains at your risk tolerance levels. De-risking your funds means diversifying further.

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