Wednesday, 28 November 2012

How to Invest in Mutual Fund Wisely?

You may have many dreams and some of them are your financial dreams. Financial dreams, I mean financial plans. These financial plans are deciding our financial future up to a certain extent. Financial plans may be differentiated in two ways. One is long term financial plans such as your retirement plan, higher study of your children, permanent residence after retirement etc. Short term financial plans may be to buy a car, buying a flat at  your workplace etc. Long term plans of many are short term plans of others. For long term financial plans, we must invest in long term investments such shares of companies, real estate, long term fixed deposits etc., and for short term financial plans we must invest in any short term investments such as recurring deposit, open ended mutual funds etc.

Here we can see how to invest in mutual funds. Mutual funds investment  is very easy now and an expert fund manager will deal with everything. We should choose mutual fund wisely and start investing. The rest of the work will be done by the mutual fund. Mutual fund diversifies our investments. They  invest in shares of different companies, government securities etc, gives us so great chance of diversification of our investment. But we should choose mutual fund wisely after some calculations.

Check a few things before investing in mutual funds.

What is the minimum investment in the mutual fund. You just check the minimum investment of a mutual fund before taking decision to invest in the mutual fund. Some funds offer Rs. 5000 as minimum investment while some others offer only Rs. 500 as minimum investment. Choose them as per your convenience.

SIP facility is available or not in the mutual fund. SIP of Systematic Investment Plan in mutual fund creates saving habit and the investor can invest a convenient amount regularly, say monthly How to invest in Mutual fundor quarterly . Now most of the mutual funds allow SIP facility. You can invest in such mutual fund if you don’t have a sum of Rupees at one go.

Minimum  amount of installments in SIP. You must also check that the minimum amount allowed for SIP. Whether it is Rs. 100 or Rs, 1000. Check whether this amount is affordable to you. Then only you can invest regularly without breaking of SIP.

What is the fees of mutual fund and how they take this fee. Some mutual fund charges fee for allotting mutual funds, redemption etc. Check those fees and calculate how it affect your profitability. They may charge an entry load or exit load or both. Usually mutual funds do not charge an entry load , but there may be an exit load if you redeem before a stipulated time period. Check them before investing.

Risk factor and profitability. Check the risk factor of mutual fund and correlate them with your risk bearing capacity. Some mutual funds invest in high risk securities which may fetch you a good growth and at the same time there may be loss also. Some are investing in debt instruments which may give you a steady but slow growth. Decide whether these mutual funds are in your financial plans.

Ratings of mutual fund. Rating agencies rates mutual fund with the consideration of certain facts. Just see the ratings of the particular mutual which you wish to invest. They rate Mutual fund with the performance of the fund house, mutual fund and fund managers. A good rating is a good symptom of the positive performance of a mutual fund.

Check where the mutual fund invests. Mutual funds invest in certain securities, shares etc. Check these shares are as per your policies. You may not like to invest in certain companies with any reason. So check whether they invest in those companies.

Mutual funds are convenient media of investment and one can make a good profit out of them without doing much effort. But Invest in them wisely and choose mutual funds with proper analysis.

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