Step One- Identify your investment needs.

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 your needs. Begin by asking yourself these questions:

  1. What are my investment objectives and needs? Probable Answers: I need regular income or need to buy a home or finance a wedding or educate my children or a combination of all these needs.

  2. How much risk am I willing to take ? Probable answers: I can only take a minimum amount of risk or I am willing to accept the fact that my investment value may fluctuate or that there may be a short-term loss in order to achieve a long term potential gain.

  3. What are my cash flow requirement?

Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a specific need after a certain period or I don’t require a current cash flow but I want to build my assets for the future.

By going through such an exercise, you will know what you want out of your investment and can set the foundation for a sound Mutual Fund investment strategy.

Step Two- Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose which Mutual Fund and scheme you want to invest in. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are :

  • The track record of performance over the last few years in relation to the appropriate yardstick and similar funds in the same category.

  • How well the Mutual Fund is organized to provide efficient, prompt and personalized service.

  • Degree of transparency as reflected in frequency and quality of their communications.

Step Three-Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all your investment needs. You may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.

The following chart could prove useful in selecting a combination of schemes that satisfy your needs.

Step fours-Invest regularly

For most of us, the approach that works best is to invest is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum month, you buy when the price is low, thus bringing down your units when the price is low, thus bringing down your units when the price is low. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. With many open-ended schemes offering systematic investment plans, this regular investing habit made easy for you.

Step Five –keep your taxes in mind

As per the current tax laws, Dividend/Income Distribution made by mutual funds is exempt from income Tax in the benefits available for investment in Mutual Funds under the provisions of the prevailing tax laws. You may therefore consult your Tax advisor  or Chartered Accountant for specific advice to achieve maximum t0061 efficiency by investing in Mutual Funds.

Step six-Start early

It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.

Step seven – The final step

All you need to do now is to get in touch with a Mutual Fund or your agent and start investing. Reap the rewards ion the years to come. Mutual Funds are suitable for every kind of investor-whether starting a  career or retiring, conservative or risk taking, growth oriented or income seeking.

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInPin on PinterestShare on StumbleUpon

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.