Everybody who invest in some or the other instrument look for ways of maximizing their returns, similarly there are ways one can maximize their returns from mutual funds:
Also, after eight straight months, there has been seen a surge in SIP registration and so amid such a trend here we tell you ways to maximize your return on mutual funds.
1. Investors with market insight need to go for direct plans:
Here your cost charged to the NAV on account of charges is done away with, so returns are typically 1-1.5% higher than the regular plans. And this higher earning or saving of 1-1.5% over a longer tenure means a substantial amount.
2. Mutual funds that show consistency in performance should be opted for:
MFs that have had a good track record over a 3 and 5-year timeframe should ideally be chosen. Also, you need to go with funds having sufficient fund size as liquidity risk can emanate in case of low AUMs.
3. Diversify your mutual fund portfolio:
As it is mutual fund offer a degree of flexibility and is a mix of investments, do ensure to have a varied set of investments in your mutual fund bucket. Say for instance, do not put all your investible surplus into equity funds as any sharp correction will turn out to be very heavy for you.
4. SIP route offers disciplined return:
Rupee cost averaging benefit via Systematic investment plan offers both a higher return as well as reduces investors' cost. Here in case the markets are low, one can get a higher number of units and viceversa.
5. On index correction, you may move some liquid portion into MFs:
In case of correction, you can put some of the funds from liquid fund into equity funds and this will help you to buy lower. And now you will be able to maximize or improve your returns on mutual funds in the long term.
6. Plan your exit from mutual funds:
Here you can plan redemption from mutual funds schemes across timelines such as to spread your profits across years to get higher benefit of tax-free gains. This shall mean higher post-tax earnings for an investor.
7. Regularly review your portfolio and steer clear of laggards:
Mutual funds need to be watched out for six quarters and now if the fund underperforms its peers consistently then it shall be better to completely exit such a fund. Here's regardless of the exit load and capital gains tax implication, one should focus on exiting the fund.
8. Index fund can also give better returns:
If the equity funds have been underperforming for quite a while then taking exposure into large cap stock via index fund or ETF carrying low expense ratio can still be a profitable move. Index fund typically provide an exposure to all the index constituents.