Today, the number of people investing in mutual funds is increasing. However, the risk is high since they are directly related to the stock market.
Sound investment strategies should be followed to minimize this risk. Instead of investing a large amount at once, investing in a systematic investment scheme (SIP) is better.
Create a fund: Avoid withdrawing money from long-term investments, even in emergencies. Ensure you always have enough money for at least six months of expenses. You can invest in liquid funds for this purpose.
Medium-term: Young investors have some medium-term goals. It is advisable to invest separately for such needs. For example, you may wish to buy a car or make a down payment for a home. All of these should start with a separate SIP. Short-term debt funds can also be chosen for this purpose.
Long-term goal: If your goal is 15-20 years or more, invest with a long-term strategy. Examples are children’s higher education and retirement. For this, 80-90 percent should be invested in equity mutual funds based on the ability to bear the risk of loss.
New entrants to the market should consider large-cap funds that operate based on the Sensex and Nifty indices. Equities are synonymous with volatility, so you must be mentally prepared for market fluctuations.
This will take at least two to three years. After that, more investment should be allocated to things like the Nifty Mid Cap Index.
After gaining some experience in investments, a long-term portfolio should be prepared. 70-80% of the portfolio should comprise Nifty index funds, value funds, low-volatility funds, etc.
Only then should one try for higher returns. Volatility is high in small and mid-cap funds. At the same time, getting huge profits is possible, but you should focus on these only when you have experience.
Diversification: There are better ideas than investing all your money in equities. Debt, gold, and other schemes should also be examined.
At least 20 percent of the investments should be allocated to these. Only then will there be a chance of portfolio stability.
These are important!: Be disciplined during market fluctuations. While selecting funds, one should not only focus on short-term returns.
Do not choose funds based solely on recent performance. Learn the fund’s fundamentals. Will it grow in the future? Also, consider that.
Continue investing step by step. Investing should continue even when the market is falling. Focus on investing regularly.
Do not focus too much on sectoral funds that are initially limited to one sector. Make sure your portfolio is diversified.