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Monday, 6 September 2021

Here are 8 things to keep in mind before investing in a mutual fund, otherwise you may incur losses.

Mutual funds have given good returns over the last few years.  Because of this, its popularity among investors is growing rapidly.  In this case, if you are also planning to invest in a mutual fund, it is important for you to understand a few things first.  "There are some important things to keep in mind when investing in a mutual fund and getting a good return," says Pankaj Mathpal, a personal finance expert and founder and CEO of Optima Money Managers.
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 Decide where to invest
 Investors should first make an investment list of where and how much money they need to invest.  This process is called asset allocation.  Asset allocation is a way for you to decide how to put your money into different investments that have the right mix of all asset classes.

 There are some asset allocation rules that tell you how much money to raise at what age.  For example, if an investor is 25 years old, he should invest 25% of his investment in debt instruments and the rest in equity.  This is a general rule.  But the risk-taking capacity of each investor may be different and may vary according to the situation.

 The greater the risk the greater the benefit
 The reality is that everyone’s situation and financial condition is different.  To understand asset allocation you need to know age, occupation and number of dependent family members.  The younger you are, the more risky the investment can be and the better the return.

 Choose the right fund
 You need to choose the fund that is right for your needs.  Set your financial goals first.  Invest accordingly.  Before investing, you should decide which fund to invest in.  All types of funds are good for investing.  It is important to know about it.

 Portfolio diversity required
 A portfolio should include several asset classes.  Diversification protects you from the ill effects of poor investment performance.  Sometimes the performance of a company or sector is worse than the rest of the market.  In this case, if you have not invested all your money, it is definitely helpful for you.  However it is also not advisable to invest in many types of funds.

 Be aware of how your investment is performing
 It is important to keep track of how your investment is performing after investing.  For this type of information the mutual fund publishes monthly and quarterly fact sheets and newsletters containing information related to its performance.  You can also view performance statistics on the mutual fund's website.

 It is not advisable to stop investing
 It is often observed that people withdraw money from the scheme during adverse times like Coronation or other bad times.  But investment decisions should not be based on fear and temptation.  For this, investors should take the path of mutual fund's asset allocation or balanced advantage category.  It is not advisable to stop investing in the meantime.

 It would be appropriate to invest through SIP
 Instead of investing money in mutual funds all at once, one should invest through a systematic investment plan i.e. SIP.  With SIP you can invest a fixed amount in it every month.  This reduces the risk as it is not much affected by market fluctuations.

 Invest for a long time
 The scheme should be invested keeping in view the time period of at least 5 years.  Keep in mind that fluctuations in the stock market in the short term can have a greater impact on your investment while in the long run this risk decreases.

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