Mutual fund investments are subject to market risk but the best part of it is availability of the fund managers. Fund managers are those who are hired by the mutual fund houses for optimising the investors’ return. However, being an investor, depending solely on fund managers is not advisable. According to experts, an investor should be vigilant about one’s investment if they want to maximise one’s returns. The experts listed out the following 5 ways to optimise one’s mutual fund investment.
1] Choose direct plan: Investing in direct plan instead of regular plans help an investor garner around 1 to 1.5 per cent more return on one’s mutual fund investments. “Direct plans are better than regular plans as it helps an investor save the money being paid as brokerage to the fund houses which is to the tune of one per cent to one and half per cent, depending upon the type of plan one has chosen,” said Kartik Jhaveri, Director — Wealth Management at Transcend Consultants.
2] Choose SIP instead of Lump sum amount: Mutual fund investments give Systematic Investment Plan (SIP) option in which one can start investing from a small amount too. Batting in favour of SIP instead of one time lump sum investment Manikaran Singhal, Founder at goodmoneying.com said, “SIP can be started at any time while lump sum investment is advisable when the market has made its bottom. As it is difficult to find the market bottom, it’s better to invest via SIP.”
3] Diversify your investment: Suggesting mutual fund investors to diversify one’s portfolio Pankaj Mathpal, MD at Optima Money Managers said that diversification of the investment helps one minimise one’s risk. He said that one should have investment in small-cap, mid-cap and small-cap mutual funds on the basis of one’s risk appetite. If the risk appetite of the investor is high then one should invest to the tune of 60 per cent mutual fund investment in small-cap, 20 per cent in mid-cap, 10 per cent in index fund and 10 per cent in large-cap.
4] Debt vs equity investment: Mutual fund offers both debt and equity exposure. One should choose one’s exposure on the basis of one’s risk appetite. Generally, an investor’s risk taking ability goes down as its age goes northward. Manikaran Singhal of goodmoneying.com said that one should subtract one’s age from 100 and the outcome should be the equity exposure of one’s mutual fund investment. However, he maintained that if an investor’s risk appetite is high, he or she can increase one’s equity exposure by 10-15 per cent more.
5] Regular review: A mutual fund investor should review one’s portfolio from time to time. According to SEBI registered tax and investment expert Jitendra Solanki, “Regular review doesn’t mean analysing one’s portfolio on a daily basis. It means, one should review one’s portfolio at least on quarterly basis and if any plan has given lesser than its expected returns, then the investor should first check about the industry performance before making any exit move from the plan.”