Starting investment in mutual funds? to do list

Starting an investment in mutual funds?

It’s great to start investing at an early age. It helps you to reap the rich experience. Starting an investment in mutual funds is a good start for a peaceful retirement. Investing is an art. It is filled with a lot of patience, care, and awareness. If you miss any of these, you may end up losing your life savings. But then we can’t survive on our savings once we stop working. we need to put our money on work. Thus starting an investment, at an early age can make your retirement less taxing. Here we have compiled a small list of information you must seek before investing in a mutual fund. Although there are various instruments to invest. But mutual funds are the most famous. It offers you professional management of funds. Which is almost impossible in the case of small investments.

Take care of making a bouquet of various investment options

There are a variety of funds available in the market. It’s wise to diversify the investments into various sectors.

Select the top performers of each sector. e.g. in the case of equity-based funds, select the large-cap, small-cap, and mid-cap.

Divide your available funds for equity into 10 parts and start an investment in one of each group.

Then you can go for the sector-based funds. Do a wide study of sector performance. Every sector has a cycle of performance. Keep the largest chunk for buzzing sectors.

Then put some amount in traditionally strong sectors. Education and medicine are evergreens. Then Defence and pharma are other strong ones. Telecom can also be selected.

Start with small but consistent investments

You don’t need to bother to daily movements in the market. It’s volatile. If you keep an eye on it every day, it will hamper your investment. yes, you read it right. You need to change your investment pattern on a trend change and not on every up and down. Start with a small amount and invest consistently. If the market starts a downtrend, start increasing your monthly investment in a staggered manner. you need to move very slow and consistent. It’s not easy at all. When you hear about a stock hitting the upper circuit daily, it’s normal to regret it. But that regret sits on your mind and force you to enter into that stock when it is already in a risky position. That’s the reason for losses for most of the investors. So keep yourself a little less informed about there kind of fake investment opportunities. Rathe spend your time in focusing on your career and increase the SIP on every increment in salary or monthly earning.

Make it regular and increase it with every increase in income

Consistency is the key to a successful investment. A small amount without hurting your monthly needs can do wonders in your life. keep it small. We have a habit to spend first and then save. It’s better to save first and then spend. Monthly SIP’s can be helpful in your discipline of saving. Keep the date of SIP’s near to the date of your credit for salary. The amount should deduct within a week of credit for salary. If you are a business person, keep it at the beginning of the month. But then it can be with variations. Because in business income is not consistent. You can invest directly whenever you have the surplus amount. But then keep an emergency amount also. You can also make some monthly SIP’s to meed the sudden expanses. Like the medical urgency of an employee.

Sell it only when you need to spend the money

When you sell your investments, take care to pre-decide the treatment of money received. Some times we save for years but when we redeem it we forget to spend again. Trust me if a huge amount is there in your account. You will end up spending it. So it’s better to fix the stream where it will be reinvested and redeem it only after that.

Calculate actual return before an exit

The calculation of actual ROI is important. It can differ from the CAGR of the investment for the same period. You need to conder the following facts to calculate it.

Value of various amounts invested during the various time frames:    x

Less: Exit load (if any).                       -xe

less: tax payable (if any)                    -xt

Try to avoid these two costs. Keep your investment at least for 36 months. Most of the mutual funds remove exit load in that time frame. Also, tax benefits will also add to your absolute returns. Don’t try to redeem it for the emergency requirements.It is better to keep an amount separately for emergency requirements.

Find out the correct time to enter and exit

Its a game of entering, retain and exit. Your investment is not complete until you make an exit. It is more important than the entry itself. Gains accumulated during a long period of time may vanish if an exit is not made at the correct time.  Make an informed decision. Invest when there is a bull cycle in the market. Redeem at the start of a bear trend. But it’s hard to find the exact point. Thus don’t try to reach an extreme level in any case. Invest when you see the market is moving and start redemption at an appropriate level. Only then you can retain the gain. Then invest it back when you see that there is enough fall in the market.

Key Takeaways-

Here I would like to summarise the write-up. Take care of the following points.

• Invest in bull sectors
• Diversify
• Make entry and exit at the appropriate time
• Invest again with discipline
• Don’t try to buy at the lowest and sell at the highest. No one can predict those levels. It may result in the loss of an opportunity. Then you will make more losses to cut off on the past losses.
• Follow it passively
• don’t track the individual stocks
• Don’t listen to the market news, Specially the exceptional return products or stocks.
• Exceptional returns result in exception losses. You never know when it will start crashing.
• don’t get emotionally connected with your investments.be practical and try to see the real scenario.
• discipline is more fruitful than luck.
• Keep a track of taxation. It can save you around 20-25% of your return. Bad planning may make you pay higher taxes. It can result in substantial cuts from your total returns.