Home/Article/5 Tips to Help You Become a Successful Mutual Fund Investor
5 Tips to Help You Become a Successful Mutual Fund Investor
05 Jan 2023

There are several myths doing the rounds where investment is concerned, especially if you take mutual funds or stocks into consideration. Largely, it is due to these myths that investors often shy away from investing in these asset classes. The main myth that you will find, and probably the one that plagues most careful investors, is that these are risky investments. Why risky? The reason is that both mutual funds and stocks are dependent on market behaviour, and at the worst of times, markets can face the brunt of volatility. 

What you should know if you wish to invest in equities is that mutual funds offer you a less risky way to invest in equities. First of all, a mutual fund is a professionally managed fund. Hence, you, as an investor, do not have to do much leg work. Second, a mutual fund pools wealth from several investors that contribute to the fund. This wealth is then used to purchase securities. These could be stocks, bonds, or any other assets. So, if you are an investor in a mutual fund, that means you own part of the holdings of any given fund. In mutual funds, in case one stock performs below the level of expectancy, the others may perform well. Consequently, this means the mitigation of risk for the investor. 

Tips for Mutual Fund Investment Success

The most successful mutual fund investors are those who pay no heed to the myths, but rely on certain aspects of knowledge about investment while investing. These days, it's all too common to see enthusiastic investors jumping headlong into investing in mutual funds online, just to get on the bandwagon of investment. They don’t do the requisite (mental) work and analysis before they pick the right fund. As with any investment, a mutual fund investment takes work. You have to do some research, although a fund manager may give you some advice. Mutual funds are a great way to diversify your portfolio with a minimal to moderate amount of risk. If you wish to be a successful mutual fund investor, then you shouldn’t ignore five tips that can make you a winning investor. 

Tip # 1 - Assess Goals and Choose Schemes

Mutual fund investment is no rocket science, but there is some logical reasoning behind how you invest. You should never select a fund based on its estimated returns, or based on returns it has brought in the past. This is one of the main reasons that investors land up investing in funds that do not match their appetite for risk. Consequently, when the fund displays some unexpected and sudden movement, and an adverse effect on returns, investors tend to withdraw from the fund. Hence, if you are a true investor, you should be into investment for the long run, and you must pick your schemes based on your financial goals and appetite to cope with risk. You will avoid the panic that volatility brings and be able to have hassle-free periods of growth. 

Tip # 2 - Get Involved

As a mutual fund investor, especially if you are dealing with equity markets, you will discover that these are unpredictable places. Without some degree of knowledge, it is impossible to predict movements of markets. Most investors spend too little time in the arena of mutual funds, believing that they have attained sufficient knowledge. The idea is that you should not attempt to time the market, but spend enough time in it to gain a better knowledge of assets, especially equities. Additionally, if you plan on making investments in a lump sum, or wish to add to existing investments, don’t invest all your wealth in a single go. Make staggered investments in a gradual way. 

Tip # 3 - Diversify! Diversify!

The good aspect of mutual funds is that they contain various categories of assets. These take on different investment approaches as the risk related to each is different. The common error made by investors is that they put all their wealth into a single kind of asset. This increases risk, and limits growth. The whole idea of successful investment is to diversify a portfolio. This means that investors should allocate their wealth to different categories of funds, or different asset classes. This combination is a surefire way to get both growth and a stable investment. You may diversify and choose different asset classes according to your unique goals. 

Tip # 4 - Regularly Review

For your mutual fund growth to be seamless and continuous, you have to consistently review your funds at frequent intervals. At least, once every six months, it is necessary to keep a track of where your funds are headed. In the event you discover that your fund is not up to the mark in its performance, lagging behind peer funds, you may consider a mutual fund switch. This is the time to change your investment. To do this, you should always opt for mutual funds to invest in online, so you can monitor them conveniently. 

Tip # 5 - Explore Various Opportunities

The arena of mutual funds contains a myriad of options. Each option gives you varying benefits as per different growth patterns and styles. For instance, ELSS funds from the category of equities and liquid funds from the categories of debt funds are two kinds of funds to consider. ELSS funds offer high growth levels, and they give you benefits in terms of tax deductions (up to Rs. 1.5 lakh). Liquid funds give you the advantages that are similar to a savings bank account, but with a more substantial degree of growth. Therefore, within the mutual fund industry, you can find different options to meet your needs. 

Your Funds, Your Growth

Mutual fund investments arose to fame because they provided people with an easy, and less risky, way of making the most of securities investments in india. With the success of mutual funds, most investors attempt to rush in to invest, but this must be done with care. Mutual funds can be invested in, but you must do your research well and tread with well-informed steps. You can also try your hand at other investments at reliable brokerages and open a demat account to do so. It's time you took a good look at Motilal Oswal, one of the most reputed brokers in India.

Related Articles: Investing in Mutual Funds is Now Easy with MO Investor App | Invest In Mutual Funds Online In 5 Simple Steps |  How to Analyse Mutual Funds for Big Returns | Tax Benefits of Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | Upcoming IPO 

Checkout more Blogs

You may also like…

Get Exclusive Updates

Be the first to read our new blogs

Get Expert financial insights and advice for informed investment decisions.

Intelligent investment insights delivered to your inbox, for Free, daily!

Take your next step

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C