Business News Desk, There are two ways of investing in mutual funds, one way is SIP, in which a fixed amount is invested in the market every month. The other way is Lumpsum, in which a lump sum amount is invested in mutual funds. Generally, the method of investing in mutual funds through SIP is more popular. Whatever way you invest, but before investing, understand some important things because you must have heard a lot about the profit from mutual funds, but perhaps you do not understand its risk factors yet. There are many risks in this market linked scheme, so if you are going to be a first time investor in mutual funds, then you should especially know some things related to it, so that you do not have to suffer any kind of loss later.
Selection of funds is very important
The biggest risk of mutual funds is the stock market itself. However, the risk depends on the type of fund your money is invested in. Investing in large-cap or blue-chip funds may reduce the risk, but if you are investing in small-cap funds with the possibility of good returns, then keep in mind that the possibility of loss increases in the market fall.
Changes in interest rates are also a big risk
Changes in interest rates are also a big risk for debt mutual funds. To get better returns, you have to look at many other factors along with the increase or reduction in rates while choosing the scheme. Experts believe that debt funds perform better when interest rates fall.
Risk is less as compared to straight stock
Even in the event of market uncertainty, the risk in mutual funds is considered to be low. The main reason for this is that the money in mutual funds is invested based on the experience of the fund manager. This increases the chances of better returns and the risk is reduced significantly compared to investing directly in stocks. But this risk is not completely eliminated.
This is how you can improve your returns
There are many types of schemes in mutual funds. Expert advice is very important to know which scheme will give you good profit because if the scheme in which you are going to invest is already giving very good returns, then the rapidly increasing inflation will not have much effect on it and you will be in profit, but if the scheme in which you have invested has low returns, then due to inflation its actual value decreases. In such a situation you are not very profitable. This is the reason why experts advise to invest in different schemes on the basis of different risks and returns. So that your average return remains good.
How to choose the best mutual funds
Make a list of the top contenders for the best mutual fund and compare them. Keeping in mind the goal for which you are investing in mutual funds, check which one is meeting your needs. Compare their history, expense ratio, fund manager history etc. This will help you a lot in choosing the best SIP as per your need.
Consult a financial advisor
If you have no idea about investing in mutual funds, or even after following all the instructions mentioned above, you are unable to take any decision, then talk to a financial expert. They will help you choose the best SIP according to your needs. If you choose the right SIP for yourself, you will get better returns and will never regret it.
