Are you new to the world of investing? Are you on the lookout for the right investment vehicle that can help you achieve your financial goals? Mutual fund investments could be an ideal investment option for you. In this article we will understand different investment tips for beginners in mutual funds that can ultimately help in mutual fund comparison. Read on to have a look at these investment tips.
Investment tips for beginners in mutual fund investments
Here are a few investment tips for investor beginning their journey in mutual fund investments:
- Comprehend mutual funds benefits
Mutual fund investments provide several benefits to investors. With professional management, easy and convenient mode of investment, diversification of investment portfolio, well regulated by the SEBI (Securities and Exchange Board of India), power of compounding, higher return on investment (ROI), etc. the list goes on. No wonder, several retail investors deploy these investment vehicles to achieve their financial goals. - Types of mutual funds
All investors – old or new, must be aware of the different types of mutual funds available to them. Mutual funds are bifurcated on several parameters such as asset classes, style, objective, strategy, etc. Primarily, mutual funds are divided into 4 distinct categories – debt funds, money market instruments, equity funds, and cash and cash equivalents. You can choose the right type of mutual fund for your portfolio after carefully assessing your financial goals, risk profile, and investment horizon.
- Risks associated with mutual fund investments
Just like any other type of investment, mutual funds also carry some level of risks. This is because no investment is completely bereft of all types of risk. Different types of mutual funds have different types and levels of risk associated with them. Some of the common types of risk among mutual fund investments include country risk, credit risk, liquidity risk, market risks, interest rate risks, etc. Understanding the risks possessed by different types of mutual funds will help you choose the right mutual fund scheme that aligns with your risk profile and matches with your return expectations. - Do not forget the tax aspect of mutual fund investments
It is advised to calculate the expected mutual fund returns on investments after factoring the tax aspects and inflation. This will provide you a clearer picture on the returns offered by your investments. Depending on the investment horizon of your investments and the type of mutual funds you invest in, there are different taxation rules applied to your investments. Make sure that you are well aware and updated with the recent taxation rules on mutual funds in India. It must be noted that the dividends received on mutual fund investments are subject to dividend distribution tax (DDT).
Hoping these investment tips will help you make an informed decision for your investment portfolio. Lastly, remember that you job as an investor does not end at simply choosing the right types of investment for your investment portfolio. You must constantly and regularly review and track your portfolio to understand the performance of your investments. Happy investing!