Mutual funds are one of the most popular investments for growing wealth over time. In 2024, investors of all levels will have access to a wide range of mutual funds, each catering to different financial goals.
You can achieve your financial goals starting with as little as Rs. 500 if you’re new to mutual funds or want to optimize your investments.
Investing in mutual funds could be one of the best strategies for maximizing returns in 2024 if you know which funds to choose. We’ll also discuss how to start with a tiny investment amount of Rs. 500.
Why Mutual Funds?
Stocks, bonds, and other securities are diversified in mutual funds by pooling the money of many investors. Investors who want market exposure without picking individual stocks can benefit from mutual funds, which are managed by professionals.
In addition to offering diversification, liquidity, and the potential for good returns, they are a great investment option for investors regardless of their experience level.
Key Mutual Fund Strategies for 2024
It is important to choose the right mutual fund strategy in order to maximize your returns. For 2024, here are some effective strategies:
1. Focus on Long-Term Investments
Mutual funds have historically provided higher returns than short-term investments over the long term. It is possible to ride out market volatility by investing for 5-10 years and allowing your investments to compound.
2. Diversification Across Asset Classes
Risk can be managed by diversifying your investments among equity, debt, and hybrid funds. Make sure your portfolio includes large-cap funds for stability, mid-cap funds for growth, and debt funds for risk management in 2024.
3. Systematic Investment Plan (SIP) Approach
Through an SIP, you can invest as little as Rs. 500 regularly. However, SIPs allow you to invest a fixed amount regularly, allowing your purchase cost to be averaged out and reducing market volatility.
Regardless of market fluctuations, an SIP ensures that you accumulate units at varying price points, maximizing returns over time.
4. Invest in Sector-Specific and Thematic Funds
Funds that focus on specific sectors, such as technology, healthcare, and renewable energy, are known as sector or thematic funds. During 2024, it is anticipated that the infrastructure and technology sectors will perform well.
You might be able to improve your return on investment by allocating a small portion of your portfolio to these funds if you have a higher risk appetite.
5. Monitor and Rebalance Your Portfolio
Importance of regularly reviewing and rebalancing your portfolio cannot be overstated. Using rebalancing, you can maintain the asset allocation of your portfolio.
It may be appropriate to switch some funds to debt or hybrid options in order to maintain balance, for example, if equity funds have performed well and constitute a larger portion of your portfolio.
How to Identify the Best Mutual Funds for 2024
When you have so many options to choose from, it can be difficult to decide which mutual fund to invest in. Here’s a step-by-step guide to finding the best funds:
1. Define Your Investment Goals
You should determine your objectives before selecting a fund, regardless of whether you are hoping to create wealth, save taxes, or do both. Long-term growth is best achieved with equity funds, while conservative investors will benefit from debt funds.
2. Evaluate the Fund’s Performance
The past performance of an organization is one of the most important metrics. Take a look at the fund’s performance over the past three, five, or ten years.
It is an indication of a well-managed fund when its returns remain consistent across various market cycles. It is important to keep in mind, however, that past performance should not be the sole determinant.
3. Check the Fund Manager’s Track Record
It is crucial for the fund manager to have the necessary expertise and experience to make the investment successful. Consider the manager’s track record in managing funds similar to the one you’re considering. Fund managers who are skilled can navigate ups and downs in the market.
4. Analyze Expense Ratios and Other Charges
You will see a direct correlation between your returns and a fund’s expense ratio. You will be able to put more of your money to work for you if your expenses are low.
Ensure that a similar fund’s expense ratio is comparable before making a decision. You should also keep an eye out for exit loads and other hidden charges that could affect your net return.
5. Consider the Fund’s Risk Profile
Risk levels vary from mutual fund to mutual fund. Decide what level of risk you are comfortable with and choose funds accordingly. In addition to offering higher returns, high-risk funds such as small-caps and sectoral funds can also be volatile. In the case of conservative investors, balanced or hybrid funds might be a better option.
6. Assess Asset Under Management (AUM)
Popularity and trustworthiness of a fund are determined by the size of the fund. There is, however, a risk associated with very small funds, while very large funds may have limited growth potential. It’s important to strike a balance.
Mutual Fund Categories to Consider in 2024
Here are some mutual fund categories that are likely to perform well in 2024:
1. Large-Cap Funds
In these funds, investments are made in well-established companies with strong track records. Investors who are conservative are attracted to them because of their stability and reasonable returns.
2. Mid-Cap and Small-Cap Funds
A mid-cap or small-cap fund offers growth potential for investors with a higher risk appetite. In times of growth, these funds offer impressive returns, though their volatility is higher.
3. Hybrid Funds
Funds that invest in hybrid funds have a mix of equity and debt exposure. This type of investment is ideal for investors who want a balanced risk-return profile. Stability comes from the debt portion, while growth comes from the equity portion.
4. Index Funds
An index fund tracks a popular market index such as the Nifty 50 or the Sensex. Investors seeking market returns without actively managing their portfolios can benefit from these funds due to their low expense ratios.
5. Tax-Saving ELSS Funds
In accordance with Section 80C, equity-linked savings schemes (ELSSs) offer tax deductions. Investing in these products offers tax savings while growing wealth, because they have a 3-year lock-in period.
Starting with ₹500: The SIP Route
It’s a good idea to start investing in mutual funds by SIP if you’re a novice or have limited funds. To get started, follow these steps:
1. Choose a Fund That Allows SIP with ₹500
It is common for mutual funds to have a minimum SIP amount as low as ₹500. Make sure you select funds that allow you to invest small amounts and align with your financial goals.
2. Start Your SIP Online
It takes less than a minute to start a SIP with most asset management companies (AMCs) and investment platforms. In order to use this service, you will need to complete a one-time Know Your Customer (KYC) process, which requires you to provide basic personal information and proof of identity.
3. Set Up Auto-Debit
Make sure your SIP is linked to your bank account and set up an auto-debit option. By doing so, a fixed amount is automatically deducted each month, allowing you to stay disciplined about investing.
4. Monitor Your Investments
It’s important to periodically review your investments even though SIPs work best when they are left untouched for the long term. Making informed decisions about your portfolio, such as increasing your SIP amount when your income increases, can be made by tracking your portfolio.
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So, that’s all we have for you on the best Mutual Fund Strategy for the Best Returns in 2024. We hope that this guide has helped you. For more info, visit our YouTube channel.
