Mutual Fund Strategies: A Lifetime Approach to Managing Your Money



Article by Mr. Abhinav Angirish Founder

Mutual Funds, an infamous way of investing once is now gaining popularity among investors on its lucrative returns and liquidity, mostly among the young blood planning their retirement, children’s education and various other things. As the market is breaching its all-time high, again and again, Mutual Funds are turning out more fruitful for the investors. But as it says ” Mutual Funds are subject to market risk”, the following strategies could help you out to take the most out of it-

Mutual Fund Strategies: A Lifetime Approach to Managing Your Money

  1. Know your purpose: Mutual Funds are a mixed bag, where there is something for everyone, but the investor must understand their purpose and goals of investment, only then they could get the desired result. An investor must know their tenure of investment, risk appetite, money required to pay bills over month and         year, the corpus one wants to generate over the period of investment, etc. Only after taking all the things       into account an investor can get the suitable options of Mutual Funds among the pile of schemes.


  1. Do not run after returns only, there are other things to consider: Returns are useful and important in choosing right Mutual Funds but it is not the only thing to consider while going out for shopping. Running after returns could be disruptive as it is possible for a fund to perform very well in one year and wane the gains out in the other. Fund Manager’s experience, its investment approach, Mutual Fund’s rating given by various credit rating agencies are a few other things to look after before making an investment.


  1. Taxation of Mutual Funds: India’s taxation policy is hard to understand, but if you are about to invest in Mutual Funds, it is good to know the tax implication. 2018 Budget has made a lot of changes in taxation policy. ELSS is the scheme where investor enjoys the tax deduction of the amount invested, but before doing that one must ensure its remaining deduction limit out of Rs 1,50,000 u/s 80C. Dividend scheme attracts DDT about 10% of dividend distribution which turns out to be 12.94% of the net payment. Short Term Capital Gain taxed at 15%, whereas Long Term Capital Gain attracts 10% tax over Rs. 1,00,000 gains. As dividend plans attract more tax and less compounding benefit in comparison to the growth plan, it is advised to invest in a growth plan with opting out a systematic withdrawal plan to withdraw money out of the fund.


  1. Diversify your portfolio: If an investor is planning to be here for long, one must diversify its portfolio, first, dividing its portfolio into various fund schemes and second to diversify its investment over various tranches of investment as a Large-cap, Mid-cap, Small-cap and Debt. A well-diversified portfolio helps an investor to curb the volatility of the market and to maintain a well-proportion between the risks and the rewards. Even when investing through SIP one must spread its investment dates to the whole month instead of paying out on a single day.


  1. But do not overdo it: over-diversified portfolio, neither help on risk nor on rewards instead, it makes a whole investment process perplexed. An investor investing only in SIP, 3-4 schemes are maximum to invest in, and where one invests in Lump Sum + SIP, 5-6 investment schemes are good to go for.


  1. Continue your SIP even when market disrupts: when the market plunges, it’s the retail investors who turn their back first and stop their investments, which left their portfolio on higher prices. It is advisable for the investors to continue investing through SIP even when the market crashes as it helps the investor to average its costing and when the market comes up, their returns would be better.