How to choose the right Mutual Fund scheme
Once you are comfortable with the basics, the next step is to understand your investment choices, and draw up your investment plan relevant to your requirements. Choosing your investment mix depends on factors such as your risk appetite, time horizon of your investment, your investment objectives, age, etc.
What should be kept in mind before investing in Mutual Funds?
Mutual Fund investment decisions require consistent effort on the part of the investor. Before investing in Mutual Funds, the following steps must be given due weightage to decide on the right type of scheme:
1. Identifying the Investment Objective
2. Selecting the right Scheme Category
3. Selecting the right Mutual Fund
4. Evaluating the Portfolio
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A) Identifying the Investment Objective
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, level of income and expenses, among many other factors. Therefore, the first step is to assess you needs. Begin by asking yourself these simple questions:
Why do I want to invest?
The probable answers could be:
» "I need a regular income"
» "I need to buy a house/finance a wedding"
» "I need to educate my children," or
» A combination of all the above
How much risk am I willing to take?
» The risk-taking capacity of individuals vary depending on various factors. Based on their risk bearing capacity, investors can be classified as:
* Very conservative
* Conservative
* Moderate
* Aggressive
* Very Aggressive
To ascertain your risk appetite, try out our Risk Thermometer.
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What are my cash flow requirements?
For example, you may require:
» A regular Cash Flow
» A lumpsum after a fixed period of time for some specific need in the future
» Or, you may have no need for cash, but you may want to create fixed assets for the futur
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