Mutual funds have appeared as the most popular investment option for the individuals who want to invest their money for the long-term period and want to earn safer returns by minimizing the risk through the portfolio diversification. One of the fundamental reason behind their growing popularity among the investors is their flexibility and associated taxation. The minimum investment in mutual funds may starts from Rs.5,000.
Many of us believe that mutual funds are all same. It is a myth. Mutual funds are divided into different categories such as: equity, debt and hybrid funds and further, funds of funds or sub funds. Each fund has its own specifications, benefits, return on investments and tax treatments attached within.
In the following section we would give you some tips for investment in mutual funds in Pakistan.
Additional Reading: Everything You Need to Know About Mutual Funds
1. Define Goals of Your Investment
Before investing in a mutual fund make sure you are clear with your investment objectives. For what purpose you want to invest the money. Either after retirement fund, to strengthen your financial position or any other purpose. For how much time period you can invest your money. For 5 years, 10 years or more. After clearing these answers in your mind, you will have a fair idea about the type of investment you want to made and which mutual fund category best serve your need.
2. Assess Your Risk Tolerance
Investment in a mutual fund is not an everyday type of investment where you get fixed returns no matter what the financial institution is facing like in banks, where people deposit their money for fixed returns. In mutual funds, market is volatile. You’ll get to face financial dips as well. So, before investing your money into the mutual funds assess your risk tolerance. Either you can tolerate the risk or the losses attached to those mutual funds or not.
3. Diversify Your Portfolio of Mutual Funds
To hedge the risk, arise out of the mutual funds, it is advisable that you diversify your portfolio. As the most populat saying goes:
DO NOT PUT ALL YOUR EGGS IN ONE BASKET
Diversify your investment by investing in different investment portfolios by assessing their risk intensity and returns. For example, you can diversify your portfolio with a mic of debt as well as equity fund investment, which can balance the overall risk and return of your investment.
4. Pick a Strategy Focused on Long-term Growth
It is advisable that you invest your money for a long-term period, which can yield positive returns on your investment. Because in short term equity markets are normally volatile and but the historical trend has shown that in the long run equity markets always headed up in the forward direction. Considering this trend, it is suggested that if you want to invest in the mutual funds, invest for at least minimum 4-5 years.
5. Periodic Monitoring is Mandatory
A crucial step towards successful investment is the monitoring of your investment on periodic basis, this will give you a fair idea about the performance trend of your investments and if there is any change required in the portfolio diversification that can also be done in the required framework of time.
In a nutshell, at Mawazna.com we help you in every aspect of your life even in financial management of your money so that you can make the most out of it. Mutual funds investment is a tricky job to do and it requires a thorough homework before you invest in it.
“Mawazna Karein Apne Liye, Apno key Liye”