5 golden rules of mutual fund investments

SIP investments or mutual fund investments come with certain golden rules that you should never forget. When it comes to investing in a SIP mutual fund, you should never forget these basics. Here are the top rules that you should follow while investing in SIP plans or any other mutual fund plans.

1. Have a long-term outlook- The reason why SIP plans or SIP investments are so popular is that they come with a perspective or outlook which is more long-term. A systematic investment plan will help you accumulate wealth for the long term and you can conveniently buy SIP online to get the same started seamlessly as well. The recommended investment tenure should be analyzed from this long-term perspective or outlook. This should be as long as possible with the exception of money market funds or some other types. Always make a correlation of your investment decisions with your preferences in terms of liquidity.
2. Emphasize upon the future and not the past- While deploying investments in SIP mutual funds, make sure that you are focusing more on the future instead of dwelling in the past. The same returns should not always be anticipated from the same type of investment that you are making or from the same financial instrument. Do not keep harking back to performance of any fund or instrument in the past. This may not always be the right way towards investing. Cyclical market movements may lead to various themes for investments. For this purpose alone, it is necessary that you keep focusing on market expectations and future trends.
3. Diversification is hugely important- when you buy SIP online, make sure that you are investing throughout multiple asset classes. It is always possible to scale up expected returns from various instruments in the market for investments. No investment product will be able to adhere to all the needs of investors and no single investment fund is sufficient for being an alternative towards conventional deposits or any other products for investments.
4. Bypass risks of concentration- Diversification of asset classes in your portfolio in sync with risk related preferences will naturally indicate bypassing concentration risks. Following the right strategy is of paramount importance in this regard.
5. Investor profile and risk perception are very important- There are key variables like liquidity preferences, risk perceptions and investment instrument knowledge which are really crucial with regard to determining overall investment success and the functioning of this world/environment at large. In sync with risk profiles and investor preferences, diversification of the portfolio with various asset classes may be the best strategy for scaling up prospective returns.

You should discover your financial objectives and attempt at syncing all future and existing investments to the same likewise. This will help you in choosing the suitable mutual funds for accomplishing goals within any set duration. With regard to short term goals, you may opt to go with liquid or even ultra-short duration funds and for long-term goals, you may go with equity investments.

A combination of these types may be suitable in case of meeting goals for the medium term. Never choose funds on the basis of only 1 year returns. It is best that you steer clear of anticipating short term performance and instead go for long term consistency in terms of overall performance. Sticking to time-tested funds will help you achieve consistent returns over the long haul. Beginners should skip thematic and sector funds as advised by industry experts. Do not attempt to time the market as well. Work out a strategy and stick to the same after taking sound financial advice from your consultant or an industry professional.