Money From Your Fund

Examine Sector Weightings and the Fund’s Concentration : The funds that have large stakes in just one or two sectors are expected be more volatile than the evenly diversified funds . A concentrated portfolio may also get more successful if its stocks are performing better . You may add a concentrated fund in your portfolio but mostly the concentration should be in a diversified fund which is more predictable . Invest in a few funds and develop a plan : But it does not mean you should invest only in one fund . Even though the funds are diversified , many funds go though a few years of poor performance . When you invest only in one fund , you might lose heavily . On the other hand , investing in too many funds may lead to duplication of many securities and a portfolio with no focus . For long term financial goals , equities are the best option .

Keep it Simple :

To keep the selection of the funds simple , you should stick with well diversified and well established equity funds , an index fund for equity exposure and a floating rate bond fund for fixed income exposure . For long term perspective , equities are the best performing asset class. One should normally stay away from speciality and sector funds because they have a huge risk associated .

Know Your Portfolio & Ignore the hot stocks and funds:

Avoid going for impulsive purchase. It is wise to invest in a fund that invests in stocks that make up an index. This way , you will do no worse than the market. Since , in the long run , markets have a tendency to go up , even your investment will move the same way . But in case you are a little more active , you can go for established ‘value’ funds that invest in undervalued securities .

Invest Regularly :

Investing a little bit of more money every month is the surest way to reduce the risk of investing . Investing on a regular basis is the key to success . Irrespective of the fund you choose , the reality is that its value will keep going up and down . One can expect a reasonable price in long term by investing on a regular basis .

Diversification is suitable for many Investors :

It is generally true that stocks perform better than any other liquid investment . So, in case of long term horizon and if you are comfortable with the risks associated with the stock market , you can think of investing in the stock funds . But in case you are slightly conservative , you may think of investing in different asset classes such as stocks , bonds , etc. The key challenge is to chose the right fund .

Assess Performance Approximately :

Past performance is not necessarily a good indicator of future results and this fact should be kept in mind every time one considers investing in fund . Avoid investing in a concentrated fund and focusing on short term returns . Generally while choosing a fund , one should look for above average performance over a period of time .

Benefits of Investing in Mutual Funds :

Mutual funds offer several advantages to the investors :
Affordable : Almost everyone can buy mutual funds . Mutual Funds generally provide an opportunity to invest with less funds as compared to other avenues in the capita market . Even the ancillary fee which one has to pay in the form of brokerages , custodian , etc. is lower than other options and is directly linked to the performance of the scheme .