Mutual funds investing comes baring a lot of benefits, however, only if invested wisely. There is so much to take care of while investing from choosing the right funds, researching, building portfolio to keeping a thorough check on investments and their performance. Investors should keep in mind following tips to head start their investment process in mutual funds which can help them achieve their financial objectives and thereby succeed in the investment process.




Know Mutual Funds investment’s Risk Factor


Mutual funds investments are subject to market risk. Please read the offer document before investing “–These lines are often displayed at the end of mutual funds advertisements and hence need to be given well attention. Risk comes along with investing, thus an investor can never be free of the risk factor However, investments vary with the risk factor. Some may have high risk, or some may have a lower risk, while this can be said that there is no investment that is totally risk-free. However, in the case of mutual funds, investors can invest according to their risk appetite. Higher risk investments are expected to deliver higher returns and vice versa. Thus, an investor should be aware of the risks associated with the funds and then proceed with the investment process.


Know Your Risk Tolerance

Investors should be aware of their risk tolerance, a measure of the level of fluctuation, in other words, the volatility of the market, and market risk before getting onto selecting the funds.

Risk tolerance is said to be pretty low for Beginners in mutual funds investment or investors who get worried even if there is a minor fall in their account value. In this scenario, investors should not opt for investments that facilitate high risk. A balanced fund can be the go-to option for those kind of investors.

Whereas, experts or pro in the mutual funds investing can look for more high risk affiliated investments with better returns.

Asset Allocation

Investors can move on to considering their asset allocation after getting done with the determination of risk tolerance level. Asset allocation is mixing the investment assets that are, stocks, bonds, and cash. Usually, the risk tolerance level is shown by asset allocation. It can be a high-risk tolerance, medium risk tolerance, and low-risk tolerance.

Select the Best Funds

Since there exist thousands of mutual funds with hundreds of different fund families offering them, the chances for making a mistake rise and with so many options, confusion can lead to selecting a wrong mutual fund according to your objectives.

You can start with selecting the best mutual fund based on your requirements and financial goals after getting done with asset allocation. Investors can start with fund screener or comparison of performance from choosing a fund from a huge range of mutual funds. Moreover, there e some other factors that can be taken into consideration such as funds fees and expenses, expense ratio, manager tenure etc. Above all, diversification in selecting the funds should be maintained to reduce risk factor and increase potential gains through your investments.

Investors usually have the online research tool option, using which they can make their research easier and can get better results. Beginners, as well as a pro, can look for the best mutual funds out of the pool by various methods such as evaluating and comparing different funds, reviewing existing funds and much more. Mutual funds research sites are another way to assist investors in selecting mutual funds.

It may not be certain that past performance indicates future performance as well. However, by studying the past performance one can learn how to analyze and evaluate the performance of funds, and what to avoid while making an investment decision. S&P 500 Index funds with the lowest expense ratios can be considered the best.

Building and Maintaining the Portfolio

While maintaining a mutual fund portfolio, investors need to undergo a comprehensive thought process. Different tools, strategies, designs and much more need to put in consideration while building a portfolio in order to accomplish desired financial objectives. Diversification is the key to lower the risk possibilities and increases the rate of returns. A combination of mutual funds can keep up with one’s needs and goals when carefully selected with thorough research.


Know Taxation related to mutual funds


Next point is to learn about the taxation related to mutual funds. Knowing about taxation can help you generate higher returns. Taxes related to mutual funds can be avoided if researched well. Investors can acquire a thorough knowledge of the basics of taxation and increase returns on their portfolio.


In touch with the latest news and trend in Mutual funds markets


When it comes to investing, volatility and uncertainty go along with it. In the case where movement of indices goes range bound, investors have to maintain caution as it becomes difficult to be unaffected through those movements. These movements result in affecting the overall performance of indices and mutual funds.

Investors’ investment objectives can be affected by the news and the latest trends of the market. Thus, investors should always keep a check on daily news and trends of mutual funds to make investing worthwhile. Another tip is to review the portfolio that would require scanning the schemes in your portfolio, involving the diversified ones.


Regular Check on your Funds and rebalancing


Another important factor to consider while investing in mutual funds is to monitor the investments and evaluating the performance on a regular basis. Constantly managing and supervising their investments enables investors to take required action and fulfill their financial and investments objectives.

Hard work and keeping a check on investments is the key to success in mutual funds investing. Stock trading requires you to check and monitor portfolio almost on a daily basis, however, if you are checking up your mutual fund portfolio in a month or two, you are good to go.

Next up is rebalancing which is reviewing your portfolio and taking a corrective action that is, making changes as required according to your goals and performance of mutual funds. Investors may seek the help of financial advisors for the purpose of rebalancing.

Important things to remember before investing in Mutual Funds

Returns are not the only factor investors should look for in mutual funds before investing. There are other important factors as well that require due attention before choosing a mutual fund for investing. Following are factors that need to be considered prior to start investing in mutual funds.

  • Higher rates: Do not get attracted to higher returns. Select funds based on the duration you are willing to invest in for.
  • Drop selecting a fund based on its popularity, since your financial condition may vary from other investors and hence one should select funds based on their financial condition and objectives.
  • Investments should be reviewed on the regular basis, once a month or two is sufficient.
  • A fund house should be selected that have experienced fund manager, who can guide you in the right ways.




Smart and successful investing comes from experience and thus is a long process. These tips can definitely give you a head start in the investment process, however, there is so much more to mutual fund investing that can only come from thorough research, knowledge, understanding, and experience and thus becoming a smart investor can take your time but as simply said, Good things always take time.

From these tips, investors can get a basic understanding of mutual funds investing and thus can maintain their own portfolio. However, one thing to remember is mutual funds research, evaluation, and monitoring portfolio can be a complex process and not for everyone.