A mutual fund means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the pubic under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, real estate assets and such other assets. In case of a first-time investor in mutual funds, you need to formulate an investment strategy to diversify your investment which may help to generate long term risk adjusted return. A stock market on the bull run seems an exciting moment to invest, but one needs to be patient while investing in the market.
You can follow the following strategies while investing in mutual funds when the market is high.
1. Review your portfolio: When you initially constructed a portfolio, the markets must have been quite different. Currently, you may be cautious of market behaviour. This is a good time to assess your mutual fund investments and make a comparison of the mutual funds. If you have been investing in equity funds, you can transfer some of your mutual fund investments to debt funds to protect mutual fund investments from volatility.
2. Goal evaluation: It is essential to revaluate one’s goals at regular intervals. Newer goals will help you to invest your money efficiently. If you were an aggressive investor in the past, now you can follow a slightly conservative policy. Your mutual fund investments should be in line with your financial goals. Make a comparison of various mutual funds and choose a mutual fund based on the terms and risk profile of the goal.
3. Stick to SIPs during market high: Investors who are not aware of the market dynamics should go in for systematic investment plan(SIP) in mutual funds. When one invests a certain amount in a fund at regular intervals, one buys more units when the price is lower and lesser units when the price is higher. This is called the ‘rupee cost averaging’ method.
You can use a mutual fund calculator which is a financial tool that helps you calculate the returns from the mutual fund investments. You can thus determine the maturity value of an investment if you invest a lump sum amount or use the SIP route.
4. Choose funds as per your investment profile: Financial goals and risk tolerance should be the priority of every investor. It is essential to invest as per your risk profile and market levels should not hinder your financial goals.
For example: if you invest in mutual funds aiming to finance your retirement years after around 25 years, a sudden spike in market levels should not stop you from investing. You should keep investing in whatever funds you have invested in.
A mutual fund calculator is important because you can calculate the returns based on assumed rate of returns on investments.
5. Do not try to time the market: Every investor has done this at some point. Not only does it result in missed opportunities, but can also lead to wrong choices that hamper the growth of your portfolio.
Finally, be lion-hearted and invest in the market. The rise and fall in stocks is fundamental to market behaviour. A good financial advisor can come up with a good investment plan that can help you to create wealth in the long term.
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