5 steps to ensure better returns from mutual fund investment

In the recent years, people are trending more towards MF investment rather than following the traditional investment options. But before investing one should always take care of the risks. That is one should always do some basic home work before investing and one should always link their investment with their financial goals.

Below are some aspects which every investor should look into before investing in the mutual funds.

Make sure you have Emergency fund

Emergency fund helps in facing the unexpected events like severe illness, sudden job loss etc. So before investing in the mutual funds or any other investment one should always ensure the availability of the emergency fund. Without this, if one keeps on investing then he might end up dissolving his investments to meet these emergencies.

Decide the financial goal

After creating proper emergency funds, investors should draft their financial goal. The financial goals change from person to person with respect to their age, profession, marital status etc. A person who is in his 40’s and has reached a good income level, building retirement corpus or child’s higher education corpus will get more priority, whereas a 24-year-old may prioritize to build a corpus for marriage and his child’s birth.

Determine the required corpus

After identifying the goal, one should always plan for the required corpus. While determining the requirement of corpus, investors should factor-in inflation. The key reason is increased inflation decreases the purchasing power over the time, so investors should not ignore the inflation aspect while determining the corpus required for the specific financial goal.

Decide the time horizon

Once an investor is clear with his goal, he needs to decide the time horizon for those goals. This may vary as per the goal from 1 year , 5 year, 10 year or more. With a clarity on time horizon, one can easily reach out his financial goals.

Assessing the risk appetite

Investors should always check the capacity to bear losses in the investment. This is important as the risk appetite decides the investment avenues, so an investor should always bear this in mind.