Mutual fund investment is probably one of the best long-term ways to make money.
Mutual funds are looked upon as targeted investment options which gives you the ability to choose between several schemes and timelines.
SIP (Systematic Investment Plan) is one of the best ways to invest in mutual funds. The best thing about SIP is that with regular investments you can yield a considerable amount of money after a while. It also helps to mitigate risks associated with mutual funds.
But there are certain things you should keep in mind before you go start investing on mutual funds:
1 . Have a clear financial plan
Most people start investing in mutual funds to save tax or for some extra amount of money. But you can gain much more than tax savings.
First, you must have a clear financial plan like are you investing for your retirement or higher education for your children?
If you have a clear financial goal then it helps you to stay on track and also helps you choose the right type of fund and the amount for investment.
Every month a particular amount is to be deducted from your account and will be invested in the fund. So, plan your monthly expenditures.
2 . Timelines
You must determine that the investment you are making is for a short-term, mid-term or long-term objective according to your financial plan.
The short-term goal can be 1-2 years. Mid-term can be 3-5 years and long-terms can be five years or more.
You should keep another thing in mind and that is investing in mutual funds is all about practice, discipline and patience. Irrespective of market fluctuations mutual funds provide better growth.
3 . Do your research
People many times are reluctant to take financial advice mostly because of lack of trust or due to privacy concerns. But when you are investing in mutual funds, always do detailed research on the market and take advice from people who have already invested in mutual funds.
4 . Choose the right bank and scheme
Choosing the right bank, the correct SIP scheme, and also the perfect SIP date is of utmost importance. Do your due diligence and find out the past performance of the scheme and the fund manager and track record of the bank. You must calculate the credit and debit cycle of your bank account and choose the correct SIP date or it might end up in defaults.
Keep in mind that it is all about discipline and time spent. With time you will master both and yield better results.