Investors are always on the lookout for investment options that give higher returns. Mutual funds are a preferred choice of long-term investment for a number of reasons; it gives high return at low risk and the portfolio remains diversified. However, many investors have a habit of keeping a track of their returns on a daily basis. Even when they have built a plan and thought things through, they tend to get tensed about their investment and associated returns. Stressing over mutual fund investments leads you nowhere; neither does it increase returns, nor does it reduce risk.
Reasons to curb your worries over mutual fund investments
Below are some of the primary reasons why you should not worry about your investment in mutual funds:
- Mutual fund investments are considered a limited-risk investment option since the fund is a mix of debt and equity.
- The fund is managed by professional fund managers who strive to give you a higher mutual fund return with each purchase.
- You may set up a systematic investment plan (SIP) and ensure that the fund has a lower transaction value. With SIPs, you may make a purchase each month. Due to the impact of market movements, in a particular month, the net asset value (NAV) could be high and in another month, it could be low. This reduces the overall cost of purchase of the fund.
- Based on the risk appetite of the investor, the fund managers diversify the fund and reduce risk to a minimum. Since the fund remains diversified, the impact of market volatility is smoothened out.
- The schemes are picked based on three- and five-year returns. Mutual fund return is high in the long run; hence stressing over short-term investments does not result in anything.
- Even if the fund is not performing up to the mark, you will not be able to withdraw the scheme, if you have invested in a close-ended fund. Additionally, if you withdraw before the holding period, you will end up paying an exit load.
Here is how you may stop stressing over mutual fund investments
In order to ensure that you do not stress over your mutual fund investment, take the right steps for investment and watch your portfolio grow.
- Avoid investing for short term
Short-term returns on mutual funds do not portray the right picture. Therefore, it is advisable to invest in a particular mutual fund after looking at its long-term performance. Do not make an irrational decision by interpreting the absolute return of the fund. Whatever financial instrument you choose, be patient and remain invested for along term.
- Avoid online portfolio trackers
A number of online portfolio trackers are available in the market. They will tempt you to check your portfolio on a daily basis. If you give in to the temptation, you will end up spending long hours tracking your investment, which in turn will lead to unnecessary stress. Mutual fund performance may not be judged overnight. Hence, invest in a good scheme and just keep a tab on its performance.
- Avoid IPOs
You never know how the fund houses arrive at the offer price. The IPO might open at a price lower than what you subscribed for. It is ideal to know what you are paying for, before making an investment. In case of IPOs, it is not possible to predict.
- Avoid market recommendations
There may be several market recommendations you come across every day. Some investors tend to take the predictions seriously and get stressed about their portfolio. You should ignore the unwanted advice and continue with your SIPs, if you want higher returns in the long run. Choosing a good scheme for the long run is the only way of generating wealth.
In short, remember that mutual fund investments are divided into equity and debt. The equity fund will actively be invested in stocks and the debt fund will remain invested in debt securities. You should stop following the stock indices constantly because the cost of purchase of the mutual fund will vary with each investment.
Analyze mutual fund performance over a long period of time before diving into a scheme. It is not necessary that a high-performing fund will perform equally well in the years to come.
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