HOW TO CHOOSE THE BEST MUTUAL FUND?
“Let the purpose decide the choice”
At Money Multiplier we believe before understanding how to choose the best mutual fund for investing, it’s important to know where to start with.
Here we go!
Before you begin with investing it’s important to understand the “whys” of investing. Which means, you should know why you are investing, why you want to invest in mutual funds, etc.
So answer these few questions before you plan an investment –
Q: What is my current income?
Q: Why should I invest in Mutual Funds?
Q: What is my risk tolerance or risk appetite?
Q: How much can I invest Regularly?
Q: What are my financial Responsibilities?
Q: How am I going to fulfil those responsibilities?
Q: What is your current cost of living?
Q: As a trustee of a family, how many members/lives are dependent on me?
Q: What are my financial goals for next five years?
Q: What are my financial goals for next 10 years?
Q: Which is my dream car?
Q: What are my three dream international holiday destinations?
Q: How would I describe my dream home?
Q: What is my dream monthly income?
Q: What is my dream monthly income after retirement?
Q: Do I dream of a world-class education for my child/children?
Q: What is the estimated cost of the desired education (with inflation)?
Q: How many years do I have on hand to invest to achieve this goal?
Q: Do I dream of a destination/grand wedding for your child/children?
Q: What is the estimated cost of the desired wedding (with inflation)?
Q: How many years do I have on hand to invest to achieve this goal?
Q: In which year would you retire?
Q: How much money would I require every month continuously after my
retirement to fund my used-to-lifestyle?
Q: How much provision have I made as continuous monthly income after my retirement?
Q: What all am I doing to achieve all the above-mentioned financial goals?
Q: If I continue saving the same way for the next five years, just the way I have
been saving in last 5 years, would I achieve all the above-mentioned
financial goals?
Once you answer the above questions, you know exactly how much you can invest, in what type of funds, and for how long.
Now, assuming you want to invest in yourself, as a contrast to using an advisor, it is suggested to know which mutual fund companies offer the best variety of low-cost or no-load funds. From there on you can go on to the fund selection.
WHY NO-LOAD FUNDS?
No-load funds are free of sales charges or fees or broker commissions, which is collectively known as a load. With these funds in your investment portfolio, it is believed that you have already made a DIY vs. Advisor comparison. And that you have decided to do it your way with your mutual fund purchases.
OPT FOR THE BEST NO-LOAD MUTUAL FUND COMPANIES
We believe that you are looking for long-term (more than 5 years) investments and that you will add a few more funds in your portfolio. Hence, you will have to consider the best no-load fund companies that offer a wide range of mutual fund types and styles. This will also help you to build a diversified portfolio.
Here are a few best no-load mutual fund companies–
HOW CAN YOU INVEST WITH JUST ONE FUND?
The simplest way to invest a lump sum in one or two mutual funds such that it keeps the cost low and diversification broad is to go for –
- Balanced Funds – It is also known as Hybrid Funds or Asset Allocation Funds. With this type of mutual funds, you can invest in one fund and take the advantage of balanced asset allocation of stocks, bonds, and cash.
- Target Date Mutual Funds – As the name suggests, this Mutual Fund invests in a mix of stocks, bonds, and cash that is appropriate for a person investing until a certain date. As the target date approaches, the fund manager will gradually decrease market risk by moving the assets out of stocks and pooling it into bonds and cash.
