Mutual fund investment is a preferred choice of many people. It is a great way to get income and / or make your wealth grow. However, like all other financial matters, knowledge is the key here too. You need to know how the mutual funds work and how to go about them to get the most out of your investments. Take a look at this article to learn about the important points you must consider before investing in a mutual fund.

Mutual funds to meet a financial goal

If you are making a mutual fund investment because you saw a TV commercial about it Or are you doing so because your friends told you to? There must be a solid financial goal that you wish to fulfil with your mutual fund investments. This goal is vital as it will set up the dynamics of the mutual fund and tell you how to invest, where to invest and how long to invest for. Unless you have a clear-cut financial goal in mind, your mutual fund investments won't be completely fruitful.

Try to set up your financial goal on our website

Monetary value of the goal

Let us assume you want to buy a bungalow in about five year’s time. Your current income is not going to be sufficient. So you choose to invest in a mutual fund for the purpose. The bungalow you are eyeing costs Rs 2 Crores now, but will most likely cost about Rs 3 Crores in another five years due to rising inflation. So, you have to keep the future monetary value of the goal in mind and invest in such a way that you have the desired funds at the desired time. So do your math, get the figures in hand and then proceed towards your mutual fund investments.

Want to know what would be the future value of an asset

Term of the goal

You can have short term, mid-term or long term financial goals. For example, if you want to go on a holiday to Switzerland with your whole family in a couple of years, you need to look at it as a short term goal. Similarly, if you are looking to build up a corpus for your daughter’s marriage from an early age, it will be a long term financial goal. So you need to determine the term of the investments too. The short term goals need low risk investments. So the mutual funds with debt and hybrid funds are better suited. Longer goals can be addressed with riskier, high-yielding options such as the equity funds. Determining your goal terms will therefore, help you choose the right fund to invest in. This is the most important consideration before you start your mutual fund investment.

You can now set up a composite financial goal on our website

Selecting the correct SIP scheme

You are investing your hard earned money, so you need to ensure the mutual funds you choose have strong performance track record. Preferably, the funds you choose must be performing well for a span of at least three to five years, preferably longer. You should also ensure that the risk profile of the funds chosen by you, are consistent with your risk taking capacity. You may work with an experienced financial advisor like Bridge Investment Advisors to ensure that the right funds are chosen for your mutual fund investment.

We have, however compiled the top performing funds in one place and you can see it here – Top consistent Mutual Fund Performers

The correct amount of the investment

Your investment goal will come in to play once again here. If you know how much money you need to fulfil your target, you will know how much to invest too. It is wise to keep a slightly lower expectation and plan your investments accordingly. Let’s assume you invest in a fund that historically provides 17% returns. It is prudent to be conservative and assume that you will get a 12 - 15% return from it over the cumulative term of your investment. This way, the risk of falling short of your financial goals at the end of the investment tenure is limited.

This tool can help you check how much you need to save for your goals

Maintain your SIP payments carefully

You have to be meticulous with your SIP payments. Choose the monthly SIP date wisely, as per your personal financial situation. SIP instalments should be scheduled after your income / salary credit and any other fixed payments for the month (like house rent/EMI, school fees, utility bill payments, salary payments of staff etc). By scheduling your SIP instalments early in the month, you can ensure sufficient funds in your bank and not miss your SIP instalments. Please note that, if you miss your SIP instalments for three consecutive months (due to insufficient funds), the AMC might cancel your SIP.

See how the top performing SIP funds have generated wealth for the investors


Keep the points mentioned above in mind and you will surely be able to get the most out of your mutual fund investments. It is vital to keep the financial goal in mind as that proves to be the crux of the investments. Reassess your financial goals, both short term and long term, and then choose a mutual fund investment option that is best suited for you.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.