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6 Tips for Successful Mutual Fund Investing

Written by - Akshatha Sajumon

February 18, 2022 5 minutes

Mutual funds offer investment opportunities that no kind of investor should miss out on. But the basis for investing in mutual funds requires strict adherence to the fundamentals – research to choose a fund that meets your investment goal, build a trustworthy, well-planned portfolio and stick with it. In search of some advice that the investment gurus have with regard to mutual funds? Then read on!

  1. “Income – Spending = Savings” approach

One must not forget to maintain the fine balance between income and savings ratio. It is important to track and budget one’s finances meticulously. 

  1. Research, apply, do more research!

Rachana Ranade, YouTuber & Chartered Accountant cautions against taking unsolicited tips from peers as markets are volatile. To quote her most important advice – “Invest in learning and then utilize that learning to invest!”.  Get clarity on your investment goals and then search for mutual funds that best fit your investment goal. Analyze the mutual fund based on the asset class, the structure, level of risk, etc. to take that decision. 

  1. Do not invest based on someone else’s strategy! 

It is not advisable to adopt someone else’s investment strategy, no matter how good, as is – it could spell disaster! Before taking the first step towards investing it is important to define what one’s investment goals are – it could be retirement, securing one’s health, securing the education of one’s child or higher education for oneself, purchasing a house or car etc. These goals must be specifically identified and all investments must be made in the line of these goals. One must carefully understand one’s risk profile (which is unique to each individual) based on risk averseness, financial stability, family dependence, etc. and then take a call.

  1. The secret lies in diversification 

One must build a well-diversified portfolio with an appropriate mix of equity as well as debt to get the best of safe returns and high returns. For instance, if you invest in hybrid funds that are equity-oriented, you can enjoy a balanced exposure to both segments.

  1. Understand tax laws 

They say that every rupee saved is a rupee earned. Looking into the tax liability associated with every fund is important to understand if there is any scope to save on taxes. One must understand Long-term Capital Gains Tax (LTCG), Short-term Capital Gains Tax (STCG) and deductions under Section 80C and its application to these funds before investing and while deciding the time horizon for investment.

  1. The exit is as important as the entry

Exiting a fund while a market is bearish is a bad idea – it is counterintuitive. One must consider exiting when the fund is consistently underperforming for a period of time, when the fund changes its investment objectives, when you wish to make a structural change in your portfolio and when you have achieved the set financial goals from the fund.

Some other pointers – 

  • It is important to seek assistance if you feel that you are guessing more than analysing.
  • Beginners could try their hand at investing in Index Funds to begin with and then graduate onto other classes of mutual funds. 
  • The SIP route for investment is a safer and more prudent method of investing over a period of time. It cultivates financial discipline.
  • Ignore short term fluctuations as they might be deceiving. Do not go on a panic spiral by virtue of that.
  • Review your portfolio on a half yearly basis and reorient whenever needed.
  • Avoid timing the market i.e. buying low and selling high as there is no guarantee that the current low or high is actually the lowest or highest it can get.


Managing your finances might seem like a daunting task. But with a little bit of preparation and effort, even the most difficult of tasks might seem manageable. So go ahead, take some time off and learn whatever there is to learn about mutual funds before making that investment.

Frequently Asked Questions

  1. What are the benefits of investing in mutual funds?
    The benefits of investing in mutual funds are that one can invest in both short term and long term goals, there is reduced risk as the fund will be professionally managed, there is flexibility in terms of investment. 
  1. Apart from investing in mutual funds, what are the funds must one account for?
    One must keep aside funds for emergencies and retirement in addition to other investments. The emergency funds must be highly liquid. 
  1. What are the top investing strategies for mutual funds?
    Growth Investing (Short-Term and Long-Term Investments), Passive and Active Strategies,, Dividend Growth Investing, Contrarian Investing Value Investing, Income Investing, and Indexing are the top investment strategies.

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