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5 effective mutual fund investment tips for beginners

People are often lost when they start their investing journey because of their lack of knowledge in the field. Well, let us tell you, it’s not tough at all. You just need to be well read about it and must know a few tricks on how you can start. One of the main and easiest tools of investment is SIP or Systematic Investment Plan. You can invest in a mutual fund through this method wherein the investment will be made periodically which can be monthly, quarterly, or semi annually depending upon your preference. You can use a mutual fund SIP calculator to find out the returns you may incur on the investment.

Here are a few tips you must know before starting out your investment journey- 

  • Start small and early- It’s never too late to start investing. The earlier you start, the more advantages you receive. There is absolutely no need to put all your money in a Systematic Investment Plan and you have the freedom to decide the amount as well as the time period within which your investments need to be made. You just need to invest regularly so that you are able to generate appropriate returns.
  • Choose wisely- You have to select the best mutual fund plan to get the best returns. There’s no other way around it. Don’t make your choice based on internet reviews and ratings. Try understanding the minor details of the scheme and learn about it. The best mutual fund scheme can be selected based on its performance, rate of returns, subjective parameters such as the reputation of the fund manager, AUM of fund schemes, how the scheme will perform under stressful periods, etc.
  • Long term goal- SIPs are best suited for long term investment. If you’re planning to withdraw your returns within a few years only, don’t go for SIPs. The minimum period for a SIP investment should be 6 or 7 years. This is because the returns that are generated through the investment get collected until the maturity period and thus help you with a proper amount to accomplish your long term goals. Before making the investment, use a SIP calculator to get an idea of what your returns will look like.
  • Don’t rush into withdrawal- Looking at the down market condition, you may think of withdrawing your investment. Well, this is one of the mistakes that most beginners make. Don’t withdraw your amount, as it will have a direct impact on your portfolio and will decrease the value of the same. Even if you’re choosing to make systematic withdrawals, make sure that the principal amount is intact and that only the return portion is to be taken out.
  • Review the performance- Make sure you keep track of how your funds are performing. Make sure you have used tools such as the SIP return calculator to get an idea of what you will be making. Make sure that your fund is performing up to that mark. If there is any negative performance, you will be exposed to more risk, which is not good for your investment. If it is so, withdraw your amount and invest in any other scheme that is performing well.

Conclusion

The end goal of every investor is to earn the returns. This can only be done if you choose to put your money in the best investment plan. So, learn about different schemes and figure out what works for you. You can take the help of professionals or experts as well.