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Mutual Funds Tips: Are you planning to invest in Mutual Funds? Keep these 8 things in mind, you will earn a lot..

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Mutual funds are a great option for investment. Through this, you can make a lot of money. But if you are going to invest in mutual funds for the first time, then you must be aware of some things. Know those 8 things, if you understand them, then you can earn a lot from Mutual Funds. After this, you will be proud of your understanding.

First, understand what is a mutual fund.

A mutual fund is a scheme where the money of many investors is collected and invested in different shares, bonds, and other assets. It is run by a professional fund manager. For example, if you invest in an equity mutual fund, then your money will be invested in the shares of different companies, which will reduce the risk.

Equity, debt, or balanced fund, where to invest money?

Every investment should have a purpose. For whom are you saving? You should know this. With this, you will be able to do financial planning in a better way. If you want to save money for long-term like retirement or children's education and want to make long-term investments, then invest in an equity fund. For the short term, choose the option of safe investment and it would be better to choose a debt fund. For medium-term investment and medium risk, you can choose a balanced fund.

Understand your risk-taking capacity.
Every person's risk-taking capacity is different. If you are young and can take more risk, then you can choose an equity fund. If you have retired and want stability, then a debt fund will be better. If there is any confusion, then take the help of a financial advisor.

Open a demat account.
A demat account is required to invest in mutual funds, where your investments are stored electronically. While opening a demat account, see what are the fees and annual maintenance charges. Does it provide a facility to track the investment?

Check the performance and track record of the fund
Check the past performance of the mutual fund before investing. Has the fund given stable returns in the last 3-5 years? What is the qualification of the fund manager? Is the expense ratio (fees) low or high? Pay attention to all these things. Apart from this, choose only the funds with good performance.

Bring diversification to your portfolio

Instead of investing all the money in a single fund, invest it in different funds. Include equity funds for better growth, debt funds for stability, and sector-specific funds to invest in a particular sector in your portfolio. This method will help you protect yourself from market volatility.

Do not take decisions emotionally.
Mutual funds are for long-term investment. Do not take any decisions out of fear of market fluctuations. For example, many times when the market falls, many investors panic and withdraw money, causing them losses.

Invest through SIP
Systematic Investment Plan (SIP) is a great way to invest in mutual funds, where you can invest a fixed amount every month. It reduces the impact of market fluctuations. Maintains discipline in investing. Apart from this, you can start investing in it with just Rs 500.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.