People who invest for the first time, have a limited knowledge about mutual funds and often get astounded by uncertain investment situations. But there is always much to Mutual Fund invest than the market timing.
How To Invest In Mutual Fund
Firstly, make what type of portfolio you want to build, if you are a first time investor. In other words, you just need to judge the true asset allocation. Asset allocation is a way which determines how one invests his capital in investments with the proper mix of various asset classes. Keep in mind, the type or class of security you own i.e. equity, debt or money market, is of a higher importance than itself the particular security.
According to The popular thumb rule for asset allocation , whatever is the investor’s age, he should keep that % age of his portfolio in debt instruments. i.e, if an investor is 25 in age , he should have 25% of the invested sum in debt instruments and the rest in equity. However, in real life, different situations and financial position for each person may require different allocation. Portfolio variable is an other factor that every body needs to understand to be a part of asset allocation. These are age, job, number of people dependents in the family. Usually the smaller in age you are, the more riskier the invested part you can hold for getting superior returns.
The Next thing is to keep your aim on choosing the right fund’s. The key is to choose the fund’s on the basis of their investment philosophy and consistency in the terms of returns.
To make sure that you are choosing the right type of funds that are enough to fulfill your needs, consider the following steps :-
Decide what your financial aim is ?
Are you investing as a retirement plan ? A child’s education plan? Or for the current earnings ? decide your time frame. When Do you need your money, v in five months time or five years?
The lengthy your time horizon is, the greater risk you may be able to undergo. What is your personal view about risk ? Are you in a position to tolerate the slows and fasts of the stock market for the possibility of greater returns? It is always mandatory to know how much risk you can tolerate.
It can be your guide to pick up the right schemes and always keep in mind, regardless of the potential returns, if you are not fine with a particular asset class, you should consider the rest of available options.