Mutual Funds Investment: 5 Ways to Invest Smarter in Mutual Funds

Fiscal prudence calls for investing as soon as you start earning. Higher risks yield higher returns and vice versa. However, an optimum return can be earned if invested wisely. Here are a few ways you can get better at investing:

Most people invest in order to achieve a specific goal. This goal might require a substantial amount of money. However, to generate significant profits, an investor needs to invest for a long time. Therefore, by investing early, an investor can build a larger financial corpus.

A good rule of thumb is to invest 70% of your disposable income into equity funds and the rest 30% in debt funds. While high returns from equities compound your wealth, debt provides stability against market downturns. At the same time, it’s prudent to have some exposure to fixed-return instruments such as a bank fixed deposit that provides assured returns.

It is of utmost importance to research your investments. You can read the reviews of the funds and compare different schemes in order to understand which investments can help you earn more. Furthermore, by researching the investments, you will understand which funds are better for your risk appetite.

Many a time, you will find individuals marketing a scheme that will double or quadruple your investment in a small amount of time. Do not give them your time or money. Steer clear of such investment opportunities even if they show you proof of people having made huge amounts of money through it.

There are a lot of investments which can help you lower your tax liability. Take advantage of these instruments. Through investments in Equity Linked Savings Schemes (ELSS) , you can lower your tax liability by Rs. 1.5 lakhs in a financial year.

There are certain life events in the coming 2-3 years which you know of from beforehand and you must invest early to meet those short-term needs. However, retirement planning and general wealth creation are long-term commitments.For addressing long-term goals, it’s prudent to invest in equities via systematic investment plan (SIP) . When you receive a lump sum, such as a bonus or some arrear payment, use it to invest in an equity fund that has performed well across market cycles. The most important thing to do is to stay invested and not redeem or break any of these investments halfway.

Life is uncertain and an emergency can strike anytime. Thus, it’s essential to be financially prepared for the same and set up a corpus for the same. You can do so by investing in liquid funds , which offer higher returns than a bank savings account and can be easily liquidated when required.

It is crucial for you to review the performance of your investment. You need to compare the performance of your investment to your objective. Furthermore, reviewing your investment can help you choose better investment options in the future.

Investing calls for gauging your risk appetite, investment horizon and most importantly understanding where you are putting your money. Seek help of a professional if required.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.