The mutual fund has been growing rapidly over the last few years due to high returns. But investors have to keep an eye on several things like the selection of mutual fund category, investment goals, the time horizon, and risk factors before investing. Also, a crucial factor to monitor is the upcoming nfo in mutual fund schemes.
Investors often get puzzled while choosing from the plethora of MF schemes and end up investing in the wrong MFs. Hence, you must select the portfolio first that are matching your requirements to acquire a good return in the future. Let’s check out the considerations of choosing a mutual fund portfolio that can fulfill your investment purposes.
- Recognize your investment objectives: The first step in choosing a mutual fund portfolio is to identify your investment purposes, whether you look for growth or value. If you seek high returns, invest in equity funds or aggressive hybrid mutual funds. But these kinds of mutual funds come with high risk. So, if you do not want your money to get easily influenced by market volatility, you can go for bond funds. You must consider your goals and map out your investments, like whether you want to put money into a retirement fund, children’s education fund, wedding fund, medical expenses and so on.
- Time horizon: Investment objectives and time horizons come jointly. You can plan out your goals as per the time length you want to invest for. With growth-oriented equity funds, you can focus on long-term objectives as you will have sufficient time to see the upheavals of the industry. If you want to achieve good returns and stability against market ups and downs in mid-term goals, you must have a balanced portfolio of growth and value funds. Also, you can invest 30% of your investment into bond funds, if you are going for short-term objectives and do not want negative impacts in the near-by terms due to market volatility.
- Risk tolerance: The foremost thing to consider before putting money into mutual funds is to check your risk tolerance. If you are a high-risk-tolerant person and can bear the ups and downs of the market, you can take some risks. But, if you have a moderate risk appetite, you are advised to play safe. You should choose the funds as per your risk tolerance. Hence, you should decide whether an aggressive approach or a conservative route you want to take. Remember one thing before deciding a route, the risks and returns are proportional. High-risk investors can go for equity funds, especially mid-cap funds and small-cap funds to get a high return. And large-cap funds are comparatively safer while the hybrid fund can give you a combination of stocks and bonds. For stability, you can for debt funds. However, you should do proper research about the risk factors of the funds before investing.
Conclusion
Investors must pick their model portfolio as per the listed considerations. You are advised to check the risk of several portfolio models as conservative, moderate, balanced, dynamic and aggressive before investing. Hence, your mutual fund portfolio should be chosen wisely.