Mutual Funds: 10 hidden tips for your 10-year investment plan

Mutual funds are often the choice of many to grow their long-term wealth. Nevertheless, no good investment plan is complete without a broad plan from which you draw all your benefits and help you achieve all your personal financial goals. Here is how you create a good 10-year mutual fund investment plan to help grow your wealth through mutual fund investments.

Define the goal: Set clear financial goals for the next 10 years. Is it for the education of your child, your retirement, or perhaps a new home? You can then set specific goals and tailor your mutual fund investment plan according to that.

Assess your risk tolerance: Before investing in mutual funds, you have to understand how much risk you are willing to take. Your age, financial situation, and comfort with market fluctuations are the basis of choosing your mutual fund options.

Raghvendra Nath, MD, Ladderup Wealth Management says, "Understanding and figuring out your comfort with risk is crucial when thinking about investing in mutual funds. It's the foundation on which your entire investment plan is built. For example, if you're saving up for your child's education in 10 years, you might want to put a lot of your money into equity funds because you have a long time for your investments to grow. But if you're saving for a vacation in 2 years, it's not a good idea to put too much into equity funds because they're riskier in the short term. So, it's important to understand the risks associated with different funds and match them with your goals to build a good mix."

Diversify your portfolio: Diversification is key to reducing risk in your mutual fund investment portfolio. Spread your investments across different asset classes, industries, and regions to minimise the impact of market volatility.

Choose the right mutual funds: Research various mutual funds to find ones that align with your investment goals and risk tolerance. Consider factors such as past performance, fund fees, and management team before making your selection.

VLA Ambala SEBI RA and Founder of SMT Stock Market Today says, “In light of SEBI's recommendation for mutual funds to undergo stress tests, investors are increasingly focused on selecting the most suitable mutual fund schemes. Key considerations include aligning fund choices with one's age and risk appetite, opting for NFOs or equity-heavy funds for the adventurous, and preferring hybrid funds for the cautious.”

“It's crucial to avoid funds with high concentration in instant liquidity scenarios, compare fund performances against benchmarks, and consider the total expense ratio to gauge potential net earnings. For investment strategies, SIPs are recommended for those with steady incomes, while lump sums suit business individuals. Thematic MFs offer sector-specific growth opportunities but come with higher risks,” Ambala added.  

Monitor your investments regularly: Keep track of your mutual fund investments on a regular basis to ensure they are performing as expected. Review your portfolio at least once a year and make adjustments as needed to stay on track with your investment goals.

Stay invested for the long term: Mutual fund investments are best suited for long-term growth. Avoid the temptation to make frequent changes to your portfolio based on short-term market fluctuations. Be patient and give your investments time to grow.

Rebalance your portfolio: Over time, the performance of your mutual fund investments may cause your asset allocation to drift from your original plan. Regularly rebalance your portfolio by selling assets that have performed well and reinvesting in those that have underperformed, in order to maintain your desired asset allocation.

Track fees: Mutual funds collect various types of fees such as management fees, expense ratios, and sales charges. These eat into your profits over time. So remind yourself to choose a low-fee fund whenever possible so that you can maximise growth in your investments.

If you have doubts about how to draft an investment plan for mutual funds, then seek a professional financial advisor. The advisor will help you in creating your investment strategy according to your goal and risk level.

Stay disciplined: You cannot gain wealth overnight in the name of mutual fund investment; it needs a disciplined mindset and patience. Maintain long-term focus on your investment goals and not panic over market fluctuations. In doing this, you are well-prepared for a decade-long financial success.

In conclusion, planning the 10-year mutual fund investment requires one to exercise caution and be very rational in making choices. Please review and amend the plans regularly, then seek experts' advice when it becomes compulsory. With such a thinking and approach, you could be well placed to hit financial success later in years.

Disclaimer: Investing in mutual funds carries risks and past performance is not indicative of future results. It is recommended to consult with a financial advisor before making any investment decisions.