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Mutual funds are considered very good in terms of investment. This scheme is considered to be a scheme that gives huge profits. Experts believe that the return of mutual funds in the long term is around 12 percent, which is not available in any other scheme. In this, you can invest a fixed amount every month through SIP (Systematic Investment Plan). The good thing is that you can start investing in mutual funds even with a very small amount and can increase this amount whenever you want when your income increases.
Due to all these features, this scheme has become very popular, but before investing in it, we all should not forget one thing that mutual fund is a market-linked scheme, so the return on it depends on the fluctuations of the market. It is less risky than investing money directly in shares, but it cannot be said that there is no risk in this scheme at all. So if you are going to invest in this scheme, then understand the ways to deal with its risk factors very well, so that you do not regret anything later.
Minimize risk with the help of a fund manager
In this case, financial expert Deepti Bhargava says that mutual funds are considered risky because their returns are affected by the fluctuations of the stock market. However, the risk of returns depends on the type of shares you have chosen. If you are investing in large-cap or blue-chip funds, then the risk will be less for you. On the other hand, investing in small-cap funds will give higher returns on growth, but the possibility of loss in decline will also be higher. In such a situation, the experience of the fund manager proves helpful. They reduce its risk and create opportunities for better returns for investors.
Choose Mutual Funds as per your Financial Goals
It is very important to choose the right mutual fund for investment. Right means that the mutual fund can meet your needs. Every person should decide his financial goal before investing and then decide which mutual fund will prove better for you. To choose the right mutual fund, first make a list of the top contenders claiming to be the best mutual fund. Compare them and see which one is meeting your needs. If you want, you can also take the help of a financial advisor.
Be sure to look at the expense ratio
Before investing in a mutual fund, definitely check the expense ratio. Usually you must be thinking that if the return of a fund is 15% or 18%, then you will also get the same benefit by investing. But this does not happen because the expense ratio comes in between. The management cost of your mutual fund is called the expense ratio. The expense ratio of any fund decides how cheap the fund will be for you. The expense ratio being low or high also affects your returns.
Inflation risk
Mutual funds also have inflation risk as investments are made for a long term. However, you do not need to worry about this as this is where the experience of your fund manager comes in handy. Fund managers try to maintain the returns of the fund at such a level that the profits remain good even after the impact of inflation.