Mutual funds have become a popular investment choice among investors in India. As the Diwali festival arrives, people look to start making new purchases, start new business ventures or make new investments into stocks or mutual funds. If you are also considering beginning your investing journey in mutual funds on the auspicious occasion of Diwali, there are some important things that you must keep in consideration before you start picking which mutual funds to invest in. So for your consideration, we have compiled a set of important factors that you need to keep in mind before investing in mutual funds. Moreover, we have also created a list of the most prominent mutual funds that are recommended by financial experts for beginners.
Here are some of the most important points that you need to understand and keep in mind before you begin investing in mutual funds:
There Are Different Types Of Mutual Funds With Differing Levels Of Risk
There are multiple types of mutual funds that you can choose to invest in, such as money market funds, equity funds, bond funds, debt mutual funds, etc. All of these different types of mutual funds carry different levels of risk and offer different levels of returns. For instance, debt mutual funds are generally less risky compared to equity mutual funds, but also offer lower returns compared to equity mutual funds. As an investor, you need to understand the basics of all types of mutual funds before you can start investing in them.
Consider The Time Period Or Tenure Of The Mutual Fund
Mutual funds can also be divided on the basis of their time periods. If you wish your funds to be invested only for a short period of time, and you know that you are going to need the funds in a few months or years, then you should consider investing in liquid mutual funds or short-term mutual funds. On the other hand, if you are sure that you are not going to need the funds anytime soon and can afford to invest them for a long period of time, you should look into investing in long-term mutual funds.
Check The Past Performance Of Mutual Funds Before Investing
It’s also important to check the past performance of mutual funds that you are interested in purchasing. A good indicator is to check whether the mutual fund that you are interested in has performed consistently in the past few years with stable returns. If the mutual fund does have consistent and stable performance, you can consider investing in them. On the other hand, if the mutual fund does not have a stable history of returns, it is better to avoid investing in them, especially if you are a beginner investor.
The following are some prominent mutual funds that financial experts recommend for investors: