Looking to Multiply Your Wealth with Equity Mutual Funds? Read This!
February 22, 2023 Mutual Fund
Different individuals have different financial goals. You may be planning for retirement, buying your dream home, securing your children’s future, or going on an exotic vacation.
But converting such dreams into reality is not an easy feat. This is where mutual funds come into the picture. Being professionally managed, equity mutual funds are indeed the best way for retail investors to create wealth, fulfil financial goals, and have financial freedom.
It is important to note that the volatile nature of equity mutual fund investment and poor returns in the short run can make investors, especially those who have recently started their investment journey, really nervous.
Furthermore, in this age where anyone and everyone is a ‘ Finfluencer‘, people are often attracted by the proposition of ‘get rich quickly’ to achieve their financial goals. This can also make it difficult for you to stick to your investment strategy. Since your dreams are so important to you, it would be unwise to rely on such ‘quick gain’ propositions as there are high risks associated with them.
Moreover, you should not try to emulate the portfolio of rich investors either, as everyone has different financial needs, personal circumstances, and risk profiles.
So how can you multiply your wealth through equity mutual funds?
We believe that with a clear roadmap and a disciplined approach, you can comfortably achieve your financial goals without taking a very high risk.
The best part about investing in mutual funds is that you can choose suitable schemes across various categories and investment styles/strategies that align with your financial goals.
For instance, if you are an investor with a high-risk appetite and a long-term investment horizon of at least 3-5 years, equity mutual funds are ideal avenues. Similarly, within the equity mutual fund category you will find different sub-categories such as Large-cap Fund, Flexi-cap Fund, Mid-cap Fund, etc., that offer different risk-reward profiles, thus allowing you to create a winning portfolio. On the other hand, debt mutual funds are suitable for short to medium-term goals and for adding stability to the portfolio.
Mutual funds also allow you to make small periodic investments in the form of SIPs, which can potentially work better than lumpsum investments over the long run.
Thus, choosing the right schemes that align with your risk profile, financial goals, and investment horizon and following a sensible and time-tested strategy can help you to manage risk and optimise returns and get an advantage over fellow investors.
[Read: A SMART Way to Select the Best Mutual Funds for Your Goals]
When you invest in mutual funds with an aim to multiply your wealth, avoid doing it with the mind of a trader, as there are high chances that you will end up making losses.
Although timing your entry and exit in equity mutual funds appears as an easy way to sail through the volatile nature of the market, it is not everyone’s cup of tea since market movements are highly unpredictable. You can never tell if the market has bottomed out or whether it will keep rising after reaching a peak. Consequently, there is a high chance of your trades not pulling off as expected. This can lead to the following conditions:
- It can put a brake on the process of compounding wealth, which may negatively impact the overall growth of your investment portfolio.
- Frequent trading attracts taxes and exit load, which can eat into your overall returns.
- You may end up earning lower returns than expected, which in turn, can create a hurdle in achieving your financial goals.
This highlights the importance of investing in mutual funds with a proper investment plan. Many investors, in the hopes of earning high returns, invest in risky schemes/categories without understanding the risk involved. They realise their mistake only when the market conditions turn weak.
Thus, to get the most out of your mutual fund investment, you have to devise a sensible investment strategy that will help you create an ‘all-weather mutual fund portfolio’.
What you need is a solid wealth multiplier strategy that will help you make superior gains. It is proven time and again that disciplined and planned investments bring you closer to accomplishing the goal of wealth accumulation.
This article first appeared on PersonalFN here
