I have found lots of mutual fund investors are not aware about the proper investment methods to leverage maximum profit from this good investment product. The case studies on financial planning before the recommendations shows that people investing bulk money to the mutual fund at a single time.
Investing large amount to mutual fund at a single time will not give the required result. It is because, the product is entirely depends on the stock market and knowledge on the peak and low of stock market is required by a Mutual fund investor when doing bulk cash investment at single time. If you know the timings well, then why you want to go to mutual funds? You can invest in equity directly.In India, I have found that lots of people including my colleagues investing in mutual fund at the end of financial year to save the tax. They are not aware the consequences or because of the ignorance. Their ultimate aim is to invest somewhere and save tax. As a result, they are losing money that required to save for pension or any other plans by investing in the wrong time and as bulk or for getting temporary tax relief.As a mutual fund investor, you should be well aware about the proper investment methods. You doesn’t have time and that is the reason you are selecting mutual fund path. That is good. But should select a disciplined approach to get maximum benefit. Investing huge amount to mutual fund in a single time is not at all recommended.Below are the disciplined investment possibilities available with mutual funds:
1. SIP or Systematic Investment Plan
Using SIP, you are investing a fixed amount each month, to buy mutual fund units. All the mutual funds providing this facility to investors and they have to register SIP with them at the first time. Through SIP, you are authorizing the mutual fund office to withdraw the amount in each month to purchase mutual fund units for your account using an automatic process called ECS (Electronic Clearing System). The amount required to invest in each month depends on you. This method not only providing a disciplined approach but, shield your capital from huge loses.
2. STP or Systematic Transfer Plan
Through STP, an investor investing an amount in a secure mutual fund and each month, transferring a fixed amount to buy equity mutual funds. In SIP, each month the mutual fund house transferring your investment amount from your bank account. But in STP, it is transferring from another secure fund. The benefit of this, an investor will receive interest returns from the Secured funds for his money as well as have a disciplined investment approach to an equity fund.Use any of these method suitable to you to invest in mutual fund to get better returns and safety till and extend. SIP is suitable to those who has small amount in the account and STP useful to those who have large amount in hand but required a systematic approach to invest in the mutual funds.Thinks wisely and be a good investor. You should be well aware about the possibilities to get maximum benefit from your investments. This is the possible good approach for a mutual fund investor.Your valuable words on this article, highly appreciated. Feedback can be sent to investinternals@gmail.com or comment here itself