7 Investment Strategies To Get Better Results in Mutual Fund

It takes much more than just buying a top-performing fund if you want to earn high returns from your Mutual Fund investment. Read this post to know seven tips that can help you get better results from your investments in Mutual Funds.

Thanks to the internet, you can easily find the list of funds that have delivered the highest returns in the past year. But a common mistake among new Mutual Fund investors is believing that such top performers would continue to deliver impressive returns in the future too.

Key Benefits of Mutual Funds

Here are the key benefits of investing in mutual funds:

• Diversification: Diversification offered by mutual funds means spreading your money across different stocks, bonds, or assets, helping reduce risk. Even if you start with a small investment, you get exposure to multiple securities.

• Professional Management: Your investment is managed by experienced fund managers who make investment decisions based on research and market trends.

• Flexible Investment Options: You can start with as little as ₹500. Choose between one-time (lump sum) or regular investments (SIPs), depending on your comfort.

• Suitable for All Goals: There are funds for short, medium, and long-term goals. Whether you are planning for a vacation or retirement, there is a mutual fund to match.

7 Proven Tips to Earn Higher Returns from Mutual Fund Investments

Earning high returns from Mutual Fund investment takes much more than simply investing in a top fund. You need to work on a strategy after considering several factors to earn high returns. Some tips that can help you build a strategy are as follows:

1. Understand Your Risk Appetite

Different types of Mutual Fund investment plans are for different types of investors and risk appetites. Investing in a fund which does not suit your risk appetite can make you exit the fund sooner than you should, resulting in lower returns or even losses.

2. Keep Your Age in Mind

Your age also plays a crucial role in your Mutual Fund investment strategy. Younger people have fewer financial obligations and can take more risk as they have more time to recover from losses if any. Equity funds are an excellent choice for someone in their 20s and 30s while people above 40 should invest most of their money in safer funds like debt funds.

3. Diversify Your Mutual Fund Portfolio

Rather than relying on a particular type of Mutual Fund, keep your portfolio diversified with at least a few different types of funds. If at all, a specific market segment starts underperforming, funds from other market segments can balance the portfolio and still help you earn decent returns.

4. Know Your Investment Objective

One of the most important investment strategies in Mutual Funds is to know your investment objective clearly. For instance, someone aiming for retirement planning or other long-term goals can consider equity funds while someone looking for tax saving can invest in Equity-Linked Savings Scheme (ELSS) funds.

5. Go the SIP Way

This allows you to invest as little as Rs <1,000> per month (or even lesser) in the fund of your choice. Over time, small Systematic Investment Plan (SIP) investments can help you create a considerable portfolio and benefit you through rupee-cost averaging and compounding.

6. Prefer Funds with Lower Expense Ratio

Expense ratio is an annual fee that investors pay to the fund house. The lower the expense ratio will be, the higher will be your returns. So, if you are looking to learn Mutual Fund performance analysis, give special attention to the expense ratio of the funds.

7. Track and Adjust

Once you have invested in Mutual Funds, make sure that you check the performance of your investment regularly. Give adequate time for the investment to grow, but do re-adjust the portfolio if the performance of the funds is below your expectations.

Strategies for Mutual Fund Investors to Maximise Returns

Read these smart strategies that can help you maximise your returns in the long run:

• Set Clear Financial Goals: Define why you are investing, such as your goals like education, house, or retirement. It helps in choosing the right fund and setting your investment amount and duration.

• Know Your Risk Appetite: If you're cautious, pick debt or balanced funds. If you are open to risk, equity funds may offer higher returns over time.

• Use SIPs for Regular Investment: SIP help you invest regularly and benefit from rupee cost averaging. It also builds financial discipline.

• Stay Invested Long-Term: Longer investment periods help you benefit from compounding and smooth out market ups and downs.

• Review and Rebalance: Keep track of your funds. If one consistently underperforms or your goal changes, adjust your portfolio accordingly.

Types of Financial Goals

• Short-Term Goals: These include travel, small purchases, or a short-term emergency fund. Choose low-risk funds like liquid or ultra-short-term debt funds.

• Medium-Term Goals: Planning a wedding, buying a car, or starting a business in 3–5 years? Consider hybrid or balanced advantage funds.

• Long-Term Goals: Saving for retirement or your child’s higher education? Go with equity mutual funds for long-term growth.

Choosing the Right Mutual Funds

Learn below how you can choose the right mutual fund:

• Match with Your Goals: Align fund type with your financial goals. For example, equity funds for long-term wealth, and debt funds for stability.

• Check Risk and Time Horizon: If you’re investing for the long term, you can take more risk. Short-term goals call for safer options.

• Look at Past Performance: Past results don’t guarantee future returns, but they help you understand the fund’s consistency and strategy.

• Review Fund Costs: Always compare expense ratios and exit loads. This is because lower costs mean higher take-home returns.

• Read the Scheme Document: Every fund has an objective; make sure it matches your expectations and needs before you invest.

Staying Invested for the Long Term

Below are the various smart mutual fund strategies to maximise your benefits over time.

• Benefit from Compounding: Reinvested earnings generate their own earnings over time, helping your investment grow faster.

• Ride Out Market Volatility: Markets go up and down. Staying invested helps smooth out short-term losses and ride the recovery.

• Lower Tax and Transaction Costs: Long-term investments can reduce tax liability and avoid frequent trading costs.

• Meet Big Life Goals: Long-term investing helps you accumulate wealth for major life events like retirement, home buying, or your child’s future.

Earning Better Returns from Mutual Fund Investments

Look for Mutual Fund investment guide on the internet, and you will come across millions of results. However, the best way to earn high returns from your investments is first to understand your investment goal and risk appetite.

There are now different types of funds to suit every investor and knowing your personal profile will enable you to select funds that suit you and have excellent returns potential.

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