One of the most preferred investment options in India are Mutual Funds as they offer flexibility to invest according to individual needs and requirements. One can invest in the Mutual Funds that are suited to their goals and aim at creating wealth to achieve different goals as per their individual needs like education, marriage, property or create a retirement corpus. However, the most important question is how to choose the best Mutual Funds to invest which will meet your investment objectives. There are a few points to keep in mind before choosing the right Mutual Funds, as mentioned below:
1. Before preparing an investment plan, one should define different financial goals and decide how much and where to invest along with the duration of the investment. Once you are clear about this, you can select appropriate Mutual Funds which will help you to reach your goals.
2. You have to be clear about your risk appetite as some investors have higher capacity of undertaking risks while some have less. Your risk appetite depends on various factors like age, financial standing etc., so if you can assess your risk rightly, you will be able to pick the right Mutual Fund which fits your risk taking capacity. ETMONEY has launched a useful tool for investors to check their investor personality.
3. Invest after having a clear understanding of asset allocation as different asset classes have their own risk profiles, for example debt funds carry less risk as compared to equity funds but yield lower returns too. Before choosing the right Mutual Funds, one should know about the risk and returns as they are deeply connected. If your risk appetite is high, equity funds are the best and if you want lesser risk, debt or hybrid funds can be the right choice.
Mutual funds offer a wide variety of products that can provide solutions for a wide range of financial goals, investment tenures, risk appetite and liquidity needs. If you evaluate the factors discussed above, you will know how to select the best mutual funds.