Class investment and mutual funds are a convenient way to invest your money. Even if you’re starting with small sums, you get the benefit of a professional fund manager who manages your money and decides on which stocks or bond to invest in for you. However, you as an investor should also follow some strategies to build more corpus by investing your monies into mutual funds.
Here are five strategies which you should follow to make more money by investing in mutual funds.
1 Stay Diversified.
When investing for growth, keep in mind the old adage: don’t put all your eggs in one basket. Consider a U.S. large-cap growth mutual fund. This vehicle is already diversified to an extent. It pools your money with that of other investors worldwide to purchase shares of stock in multiple companies.
A seasoned investment manager, with the assistance of a team of knowledgeable financial analysts, makes informed decisions on purchasing attractive stocks for the fund. A typical growth mutual fund may hold the stocks of more than 100 companies, many of which are household names.
Some of those companies may perform well, while others may not. By spreading the risk across a multitude of common stocks, diversification lessens the risk of investing. In the stock of the one company that may have a bad year, or in a worst-case scenario, having to declare bankruptcy.
Mutual fund managers generally have the foresight to sell shares of a poor performer and replace them with those of a company whose prospects are brighter.
2 Know your “why” before investing.
Real wealth isn’t about money or stock portfolios. Real wealth comes when you discover the gifts God has given you and use them to help others. To achieve lifelong wealth, find your “why” and use it to share your gifts. Your “why” should be something that deeply motivates you and is connected to your overall life purpose.
If your “why” leads you to invest in or launch a business, planning is key, and working in your area of passion is critical. When researching, look at all the information that’s available to support your venture. Also, have a clear sense of your end goal and an exit strategy.
The need for entrepreneurs to fully understand their journey, from start to finish, has shaped the purpose of my business. We give you all the tools you need to take your business from inception to reality in a box, aka your “deal in a box.”
3 Make your money on the buy.
With real estate, investors often believe that flipping a “fixer-upper” is where the money is. False. Your purchase price is the main factor that determines your profit later on. Simply put, you make your money when you buy, not when you sell.
To buy right, determine the potential value of a property by researching three comparable sales, or “comps.” Use comps with a similar size, value and location to more accurately assess value.
When buying a rehab property, first ask yourself two questions. One: What is a realistic sales or rental price for the property, after all the necessary repairs are complete? Two: What is the total scope of work needed to attain that value? Don’t allow your personal preferences to cloud your judgment about repairs.
4 Do your home work.
Self-education is an ideal means of investigating individual companies poised for growth through innovation and sound management. Looking at the wealth of products that billions of people consume and the services they utilize every day, it’s not difficult to hone in on a stable of companies that are large, established industry stalwarts.
If long-term growth is your investment objective, purchasing shares of industry leaders is a sound strategy to boost your returns and collect dividends along the way.
While there is inherently more risk in stocks than in mutual funds, individual stock investing can yield far greater rewards. Consumer giants and utility companies are a good place to start searching.
With the myriad of resources available, there is no shortage of information on companies that may have a new product or service coming to market. With a solid base of safe and liquid assets, layered on top with growth-oriented. Mutual funds, you set the foundation to grow wealth while minimizing your risk through diversification.
5 Age-wise asset class investment.
Make your investment in equity and debt funds as per your increasing age. So, whatever your current age is, you should minus it from 100 and invest the same percentage of your fund in equity assets. However, slight variation in percentage can be made as per one’s risk-taking capacity.
If you are a little aggressive investor than you can increase the equity concentration to a slightly higher level then needed. “The right way to invest is to split your investments between debt and equity funds. What percentage should you invest in each? A simple, yet the effective rule of thumb to follow is that you debt allocation should be your age minus 10,” said Kunal Bajaj is CEO & founder of Clearfunds.com