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“What is your favourite colour or any other option you are looking for?”
You must have been familiar with this question while you went shopping. Whether you are looking to buy a new laptop or a new pair of jeans, you consider so many factors before buying them. There is always a bucket list; it may not be on paper, but you know the purpose before buying a particular commodity.
You finalise your purpose for buying a particular item, and secondly, you may look for the quality to avoid damages that may occur in the future. Will it give you long-term value for your money? Are there any discounts? Will you get it online or offline? If it is an electronic device, what would be its performance? You tend to look at these factors.
When choosing a mutual fund to invest in, you tend to look at similar factors. Like when you choose a fund on the basis of your goals, you will analyse the risk, your investment strategy, and a few others.
Let’s discuss them briefly, one by one.
- Purpose: As mentioned above, when finalising a particular item to buy, you’ll look for the purpose or utilisation of the product. The same goes with selecting mutual fund services. Decide the purpose of your investment; it may be for education, marriage, buying a car, or going on vacation. Plan your investment in mutual fund solutions as per your goals and return expectations. It may also be for wealth creation and tax savings.
- Risk Criteria: Risk comes from not knowing what you are getting into. There is always some element of risk involved when you buy a product. Whether it’s quality, physical damage with time, performance, or performance, you may suffer a loss. Investing in mutual fund solutions draws a parallel line. The investor should evaluate the investment risk before selecting a mutual fund. He or she must also determine whether the risk is manageable.
- Investment Strategy: How would you use the product? Every product comes with a guideline, but we tend to ignore it. In mutual fund services, the majority of investors overlook the importance of investing strategy when determining how to choose the best mutual fund. However, it plays a critical role in your investment portfolio’s success. The term “investment approach” can also be used to describe an investment strategy. The fund houses use this method to decide on all of their investments.
- Performance: Just as the performance of a product can be measured by its sales, customer reviews, and market demand, the performance of a mutual fund service can be evaluated by its returns, expense ratio, and investment strategy. Both require careful analysis and research to make informed decisions and maximise success.
- Taxes: When you get the final bill, you will see the tax implications at the end. It happens the same with mutual fund services; according to the Income Tax Act, any profits (returns) that you, as the investor, make from your investment are taxable. The returns on equity fund units are taxed according to the holding period when they are redeemed.
Conclusion
Smart buyers analyse everything. It is not about spending your money to buy a product; it is mainly about getting the right product. You check online for reviews, customer feedback, advice, etc. While investing in mutual funds, do your research, prioritise your goals, investment horizon, and strategy, and consult a mutual fund service advisor.
