Investors often flood their mind with various questions related to investing – is it the right time to enter the markets? Should I invest in SIP? Is it the right type of mutual fund for my investment portfolio? Should I move towards debt funds? And the list goes on…In this article, we aim to adopt a more policy-based investment towards mutual fund investments. Read on to know the 6 secrets for successful mutual fund investing.

6 secrets for successful investing in mutual funds

Following are 10 secrets for successful mutual fund investing:

  1. Always invest towards your financial goals
    This is the foremost secret of mutual fund investing. All your mutual fund holdings should ideally have a context which come from your financial goals. Basis your varying financial goals, invest in different types of mutual funds that are ideal for a particular financial objective.
  2. If scared about market volatility, consider SIP
    If you are one of those investors who is scared of the turbulent markets and the uncertainty in the stock markets, you must consider spreading your investments over time through SIP mutual funds. SIP allow you to divide your investment amount into several small, inconsiderate investment amounts which are invested regularly on a periodic basis.
  3. Don’t run behind short-term returns
    One must not look at the short-term performance of a mutual fund scheme when choosing the right mutual fund scheme for their investment portfolio. Rather, look for consistent returns over a period of time and different market cycles. This will give you a better picture of the performance of your mutual fund investments.
  4. Diversification is important, but not too much
    It is always a good idea to spread your investments across different types of sectors, asset classes, and locations. This helps you to diversify your investment portfolio which can further protect you from any losses thar may occur from a particular type of investment. However, you must ensure that you do not overdiversify your investment portfolio. A good investment portfolio must invest across around 5 to 7 different types of investments.
  5. Rebalance and reshuffle your investment portfolio as and when required
    You must constantly track your mutual fund investments so as to understand the performance of your mutual fund investments. This will help you to identify underperforming assets and reshuffle or rebalance your portfolio as required.
  6. Don’t invest beyond your risk appetite
    Often in the race to achieve high returns on their portfolio, an investor goes overboard and invests in securities that are beyond their risk profile. However, this drastically impacts the mental and physical health of the individual as such investors often experience sleepless nights. If you are one such investor, it is advised to take a step back and invest in less risk securities.

Hopefully these six secrets for mutual fund investing will help you a create a sound financial plan for yourself and help you achieve your financial goals in an efficient way. You can also compare mutual funds belonging to a similar category to understand the performance of your fund against its peers. Happy investing!

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