New Delhi: Nowadays people are getting attracted towards mutual funds. Everyone is investing money in it. But before investing money in it, you should know some things, let us tell you.
Investing in mutual funds can be a good way, but investing without understanding it can also be risky. The right decision should be taken so that you do not have to regret later.
Determine your goal before investing
Why do you want to invest in mutual funds? Are you investing for a long term such as retirement, children’s education or for a short-term such as a vacation or buying a car? Select the fund based on your investment period and goal. Equity funds may be better for long-term investments, while debt funds for short-term investments.
Understand the risk profile
Every mutual fund has its own risk level, which depends on the risk tolerance of the investor. Equity funds are more risky and give high returns in the long run. Debt funds are less risky, but the returns from them are low.
SIP (Systematic Investment Plan)
Through SIP, you can invest a fixed amount every month, which protects you from market fluctuations over time. Invest in mutual funds through SIP so that you get better returns over time.
Diversification
While investing in mutual funds, keep in mind that your money should not be in just one fund. You can reduce your risk through diversification. Invest in different types of funds such as equity funds, debt funds, hybrid funds etc.
Pay attention to liquidity
Invest while understanding liquidity, so that you can get your money immediately when needed.
Understand taxes
Mutual funds are also taxable. Capital gains tax is applicable on returns earned from any fund. Plan your taxes and choose tax-efficient funds (eg ELSS funds can help save taxes).
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