Do’s and Don’ts of Investing in Mutual Funds

Did you know? Mutual funds are one of the most common types of investment which are done by people in India, considering the nature of investment is diverse, convenient, and available at a lower cost when compared with stocks or other financial investments.

Even if mutual funds are a safer option when it comes to investment, it doesn’t mean you can be rash with it.

So what are mutual funds?

A Mutual fund is a form of financial tool that invests in securities such as bonds, stocks, money market instruments, and different assets by pooling money from different participants. They are managed by experienced money managers who deploy the fund’s assets in an attempt to generate financial returns or income for the investors.

Now that you know what Mutual Funds are, here are some Do’s and Don’ts that you should consider while investing in Mutual Funds!

Do’s

• – Employ SIP for mutual funds through FinMapp
  
  If you’re looking to build long-term wealth plans for yourself, you should go with SIP (Systematic Investment Plan). For SIP, you don’t need to allocate a large sum of money from your income, you can even start with a small amount of INR 100. 

• – Assess your risk profile using FinMapp’s “Risk Profile Calculator”
  
  Your age, income, cash outflows, and the ability to take risks pertaining to the mutual fund investments all makeup for your risk profile, which can be calculated through our “Risk Profile Calculator”, free of cost.

For eg, if your risk persona comes out to be, 

Aggressive: You have an inclination towards employing a hundred percent of your funds towards equity stocks, taking maximum risks. Arrange your portfolio as per 75% stocks, 20% bonds, and 5% cash equivalents

Balanced: You take a careful approach while investing, employing fifty percent of your funds towards equity stocks and the remaining fifty percent towards bonds. Arrange your portfolio as per 55% stocks & equities, 40% bonds, and 5% cash equivalents

Conservative: You take a safe and slow approach towards reaching your financial goals, committing a hundred percent of your funds towards bonds. Arrange your portfolio as per 40% stocks, 40% bonds, 20% cash equivalents.

The app also recommends moderately aggressive and moderately conservative personas through its intelligent AI.

• – Know about the tax implications through FinMapp

So you’re thinking about starting your investment journey through mutual funds, but have you thought about its tax implications?

If the units of equity mutual funds are sold within a year, they are termed as short-term capital gains and are taxed at the rate of 15%, with an additional 4% cess.

If the same units are sold after one year, and if the capital gains are more than INR 1 lacs, they are taxed at 10% + 4% cess. If the financial gains are under INR 1 lacs, there are no taxes levied.

Don’ts

– Avoid investing in loss-making mutual funds

If you have invested in a company whose general market situation is not up to the mark, and is suffering considerable losses, you need to let go of the investments. Redeem your money and invest somewhere that can bring you benefits in the long run.

– Refrain from investing in a fund without research or knowledge

This is one of the most common facts that a person must know before investing, but sadly most people do not adhere to this. The key is to learn about the market conditions, current trends, discuss with financial advisors, and read about the mutual funds you are investing in.

– Attaching sentiments with your investments is a big no

Never attach your sentiment to the brands or companies that you are investing your money on. The financial position of the company and its market value is of the utmost importance, and your investment decision should be based around that.

Bottom of the line:

We hope that we were able to give you valuable information regarding the Dos and Don’ts of Investing in Mutual Funds. These investment vehicles give diverse offerings to investors, with minimal risks when compared to stocks.

You can surely reap benefits, whether it’s for the short term or long term, and FinMapp will help you achieve the same, through its unbiased and intelligent recommendations while keeping into consideration the potential risks and market conditions.

Start investing today for a better tomorrow!

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