3 must-dos when investing in mutual funds

While Mutual Funds are one of the most versatile options for investors with a varied risk profile, time horizon, needs and goals, they have not been able to earn their rightful place in the universe, according to an article in the Business Standard.

While returns on investments could be affected due to volatility in the markets, performance could also be affected due to certain factors like wrong selection of funds, ignoring non-performance, redeeming funds in a hurry or following illogical strategies. So what should an investor do - well, here are some tips to keep in mind when going in for mutual fund investments.

•Invest in quality funds -Investing in a good quality fund is a good bet as these funds generally tend to appreciate over time and always make a come back. It’s also important to make sure that your portfolio is aligned with your risk profile with respect to exposure in different market segments like small caps, mid-caps and large caps.

•Ensure the right balance between risk and reward - While tracking the performance of your portfolio on a regular basis is important, it is also wise to consider the risk taken to achieve those returns. An investor must always keep in mind the amount of risk the fund manager subjects you to and whether he is suitably rewarded or not.

•Avoid investing in a fund just before the dividend is paid - Don’t even think of investing in an equity fund just before its dividend payment as you may end up investing in a fund that does not merit an investment. Dividend payment is an ongoing process and only those unit holders who are in the fund for a long time end up benefiting from it in the real sense.