Are you looking to invest in long term goals such as retirement plans, higher education, housing, etc.? A good investment plan, in the long run, helps in wealth creation. Long term mutual funds investment may be the ideal option for you if you are looking for consistent growth.
Mutual fund is a product that is run by a professional fund manager. The fund manager pools funds from various sources and invests these funds in various asset classes, intending to earn maximum returns. There are currently more than 40 mutual fund companies in India providing both short term and long term investment plans and wide choices in terms of portfolio and risk profiles, as per 2021 data by Association of Mutual Funds in India.
Following are some strategies that could help you find the ideal plan:
- Do your research
Numerous websites/blogs provide detailed information on mutual fund investment strategies. Comparisons between various schemes is also available on many platforms. Do your research on well-known platforms to have credible knowledge before investing and review their performance from time to time.
- Tax implications
Long term mutual funds yield higher tax benefits compared to short term investments. If tax benefits are a major determinant of investment decisions, mutual funds such as ELSS (Equity Linked Savings Scheme) could be an ideal choice.
- Plan ahead
Before investing, find out the monthly or lump sum investment required to reach your expected payout from long term investments. You could use a mutual fund calculator online and get pertinent tips for mutual funds investment.
- SIP vs lump sum investment
Mutual funds can be invested in either a lump sum one-time instalment or a fixed monthly instalment (SIP). Systematic Investment Plans (SIPs) entail a rupee cost averaging feature which ensures that you buy more units when the market is going down and lesser units when the market is going up. In the long run, this ultimately brings down the average cost of the units.
- How much risk should you take?
There are large-cap Funds, mid-cap, and small-cap mutual fund companies designed to suit the preferred risk profiles of investors. The key to minimising risk is to diversify your portfolio to the optimum.
- Patience is the key
Long term investments may initially project slower growth. Even though all mutual funds are subject to market risks, long term investments are comparatively consistent and mostly averse to market volatility. You must be patient and not get lured by temporary and inconsistent high growth trends.
Investors can reap the true benefits of their hard-earned money if they diversify their portfolios and let them grow through market cycles. Plan investments with the help of a financial expert and invest in mutual fund schemes according to your preferred risk level.
