If you are not sure that your investments are right for you or not, then don’t worry we are here to help. Being in the finance industry for more than 10 years, we have known that often people end up investing in wrong funds. There are a wide range of mutual funds available. For certain financial investors, this huge universe of schemes might appear to be very confusing. So, we have defined a easy strategy to select the right mutual funds.
Steps to select right Mutual Funds
You have to choose the funds based on 3 broad parameters:
Your TIME HORIZON
Your RISK PROFILE
The following parameters can help you decide if you have invested in the right mutual funds.
HIGH RISK INVESTOR
- For Short Term (0-3 years) – Hybrid Funds
- For Medium Term (3-5 years) – Multi Cap Funds
- For Long Term (5+ years) – Mid Cap & Small Cap Funds
MEDIUM RISK INVESTOR
- For Short Term (0-3 years) – Ultra Short Duration Funds
- For Medium Term (3-5 years) – Balanced Advantage Funds
- For Long Term (5+ years) – Multi Cap Funds
LOW RISK INVESTOR
- For Short Term (0-3 years) – Liquid Funds
- For Medium Term (3-5 years) – Gilt Funds
- For Long Term (5+ years) – Large Cap Funds
Prior to putting money into any mutual fund scheme, you should initially distinguish your objectives. Is your goal long term capital gains, or is current income more significant? Will the cash be utilized to pay for certain expenses, or for retirement that is many years away?
Risk and return go hand in hand that means more risk will give more returns.
At last, the ideal time horizon should be looked into. How long might you want to hold the investment? Do you expect any liquidity soon? Mutual Funds have exit charges, and that can lower down your return in the short run. To alleviate the effect of these charges, an investment for at least five years is great.
When you realize your risk appetite, you can pick mutual funds in light of your objectives, time, and risk.
You could lose lot of cash assuming that you know everything, or doing trial and error method. So, consult a mutual fund advisor.