What Strategies Should You Use to Achieve Your Goals with Mutual Fund Investments? | Mutual Fund Investment | IndiaNotes.com

Every investor must have a set of long-term financial goals in mind before he/she starts investing. Whether you want to purchase a house or travel abroad, you will have to start investing in order to grow your wealth. Achievement of financial goals cannot be possible overnight; you need to spend time in planning and researching the right investment options in order to build a corpus.

How to achieve financial goals with mutual fund investments

Investors who invest in a long-term financial goal tend to weigh different assets and choose the one that meets their tenure, risk appetite, and investment ability. Age also plays a crucial role in achieving any financial goals. If you start investing at a young age, you will have enough time to achieve your goals. Here are some steps you may follow to streamline your investment process:

•    Create a long-term financial plan

The first step to achieving your financial goals is to lay out a long-term financial plan. Based on your financial requirements, you need to build a plan that may be divided into short-term, medium-term, and long-term. Include specific goals under the plan and prioritize the same. There are higher chances of achieving your goals, if you invest with a purpose in mind.

•    Start saving

Once you have your goals and your plan in place, you will have an idea of the amount you need to save each month. Start making monthly savings to have enough liquid funds for your investment. You may also set up a Systematic Investment Plan (SIP) that will allow you to save and invest in mutual funds. The advantage of an SIP is that the overall transaction cost will come down and you will be able to purchase at different Net Asset Values (NAVs) of the fund.

•    Determine your risk appetite

Consider your risk appetite when you begin investing. Depending on your current financial condition, you will be able to judge whether you may take a higher risk or not. For instance, if you are at the start of your career, earn a handsome salary, and have no liabilities, you will have a high-risk appetite than if you are close to retirement. There is a risk-reward balance which different securities offer and you should invest in those securities which meet your risk appetite.

•    Allocate your assets

Weigh the different asset classes and compare the risk and return of every investment avenue. Your asset allocation should be strategically structured to help you achieve financial freedom in the long term.Invest in mutual funds to fulfill your goals in a systematic manner. The low-risk and high-return investments remain diversified and allow you to avail of the advantage of compounding interest.  The fund managers who manage your mutual fund investment will invest in equity and debt securities that will generate higher returns in the long run.

•    Know the liquidity you want

Select the securities after considering your current financial condition and the liquidity you may want to maintain. If you want to invest in a risk-free asset with a fixed income, you may choose to invest in fixed deposits. Alternatively, for a low risk in a mutual fund scheme, you may invest in debt securities. If you seek immediate returns and have a short investment period, you should invest in equity schemes that grow quickly. If you have a higher risk appetite, do not need immediate cash in hand, and are willing to invest aggressively for the long term, it is ideal to invest in equity. The best part is that you may easily invest in mutual funds online and handle your portfolio with ease.

•    Gauge the additional costs

Once you decide on an investment option, do consider any additional costs associated with the same. Costs may add up if you are unaware of the expenses. Consider all the expenses that will be incurred when you enter or exit an investment.

•    Review your portfolio periodically

Monitor the performance of your mutual fund investment. Since the portfolio is diversified, you might gain from certain investments and lose from some. So keep a check on the portfolio at regular intervals in order to understand how the fund is performing. Do not stress over its performance or take irrational decisions due to any market impact. The best method is to gain information about the market and invest in a couple of diversified funds. With diversification, your risk will remain at a minimum and the funds will give higher returns in the long run.