Investing is an important activity to achieve financial independence and stability. As the current pandemic brought the entire world to a halt, the importance of investing once again came to the forefront.
Fortunately, it is not difficult to develop a regular saving and investing habit. You can choose from different types of instruments. Depending on your goals, investment tenure, and risk appetite, you can select from equities, debt, and pension funds, among other alternatives.
Mutual funds (MFs) are a popular product, as these schemes pool funds from multiple investors and invest the corpus in various financial instruments. The total assets under management (AUM) at the end of February 2021 were INR 31.64 trillion. The industry has grown approximately two and a half times since February 2016.
Fund houses offer different types of schemes. Some of these include equity funds, debt funds, hybrid funds, money market funds, and more. The primary objective of investing in mutual funds India schemes is maximizing your returns. However, before you start your investment journey, here are five things to remember:
- Rating
Several rating agencies rate MF schemes based on multiple parameters. You need to check the scheme’s rating before making an investment decision.
- Expense ratio
This ratio defines the total operating costs of the scheme divided by the total AUM. The final market value is calculated after reducing the operating expenses required for fund maintenance.
- Net asset value (NAV)
The NAV is the value of the scheme at a particular point in time. When the market movements are favorable, and the value of the underlying assets increase, the NAV is higher and vice-versa.
- Entry and exit loads
The entry load is the amount you pay at the time of making your investment. A certain percent is added to the prevalent NAV when you invest your funds. Exit load is the amount charged when you redeem your MF holding. This amount is deducted from the total value of your units. The entry and exit loads are paid directly to the asset management company (AMC).
- Risks and returns
Every investment has certain inherent risks. Before you make your mutual fund online investment, inquire about the risk related to the asset allocation. The returns are the profit or loss made on the investment. You should check the one-year, three-year, and five-year returns to make an informed choice.
Systematic investment plans (SIPs) allow you to invest a specified amount at periodic intervals to help you accumulate wealth over the long term. You can pick a scheme based on your financial goals and risk-taking ability. You can check the SIP calculator on Mahindra Finance’s website to know more.