Mutual fund investments are one of the most popular categories of investments in India. As per data released by the Association of Mutual Funds in India (AMFI), mutual fund SIP (systematic investment plan) accounts stood at 9.61 crore. Furthermore, the total amount collected through SIPs in August 2024 amounted to ₹23,547 crore. So, can mutual fund investments help you earn exceptionally high returns? Read on to know more.
Why is long-term investing beneficial?
Long-term investing in mutual fund schemes is beneficial for several reasons. Mutual fund-based long-term investing helps you plan for the distant future (for instance – your retirement, higher education, or a wedding in the family). You can also benefit from the “power of compounding” by investing in mutual funds for the long term. This phenomenon helps you generate additional returns over time, thereby exponentially increasing your earnings.
How to generate long-term wealth through mutual fund investments?
You can follow a set of specific steps to generate long-term, sustained wealth through mutual fund investments:
- Define your mutual fund investment goals and investment horizon: It is very important for you to know why you are investing in a mutual fund scheme. In this first stage, you must not only define your investment scheme, but also assign an investment duration to it.
- Start as early as possible and invest consistently: Starting sooner with smaller, fixed amounts is advisable for mutual fund investors as it helps your money grow exponentially over time. An SIP plan can help you start a mutual fund investment by regularly investing a sum in a mutual fund scheme over time.
- Research and compare mutual funds before investing in them: You must check the fees charged by the fund, the fund’s type and past performance, and the details of the funds in which the fund manager has invested before investing in any mutual fund scheme. You should ideally compare multiple mutual fund schemes online before choosing the one that suits you best. Be sure to consider the tax benefits of investing in a mutual fund scheme while researching it.
- Diversify your portfolio: Next, you must take measures to diversify your investment portfolio. Mitigate your portfolio’s overall risk by investing in a variety of mutual fund schemes. If, for instance, you have invested in several high-risk funds, you could consider balancing the overall risk by investing in debt-based securities like liquid funds.
- Reassess and rebalance your portfolio regularly: You must also keep reassessing your portfolio to check if your mutual fund investments align with your investment objectives. If they don’t, you must rebalance your portfolio accordingly.
- Seek professional guidance: If you are a first-time investor who has little knowledge about mutual fund investing, you must consider seeking the help of a mutual fund advisor before investing.
Will investing in mutual funds make you rich?
Investing in a mutual fund scheme after researching and comparing funds online and seeking the right professional guidance certainly can make you rich. Adopting the right investment strategies and investing regularly is important for earning high returns. You can use an SIP calculator to know the exact value of your mutual fund returns before investing in the fund.
You can earn higher returns by investing across a diversified range of mutual fund schemes. Hybrid mutual funds, for instance, help you benefit from exposure to equity and debt-related securities. To be rich by investing in mutual funds, you must invest regularly, identify the right mutual fund investments, and if necessary, realign your investments from time to time if they don’t align well with your investment goals.
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