How to maximise the returns on mutual fund investment

Coming up with tricks and strategies to get the best out of your mutual fund schemes can be tricky, especially since there are a lot of companies that are offering mutual fund schemes. Getting the best return is not about simply finding and purchasing the best funds. You must have the knowledge of deriving maximum returns from the same. Besides long term planning, there are a few points that you need to keep in mind to invest in equity mutual funds. This article shall brief you with everything that you need to know. 

So let's begin.

1. Go for sector-based funds: A common misconception among investors is that they must invest in high-risk funds to reap higher returns, which is partially true. Another way of doing this is by investing in different types of sector funds to minimize risk. Sector funds can be a bit riskier but opting for a sector fund in your portfolio can diminish the overall market risk if your sector fund helps in diversifying your portfolio. It has been observed that sector funds, in the long run, have been helpful in the healthcare and technology sectors.
2. Understand your risk appetite: Investors who are into bearing high risks and can tolerate market volatility should consider pure equity investment investors. Those who have a stable risk appetite should opt for more balanced funds while those who have a low-risk profile can invest in debt mutual funds, so it is important to know the risk you can undertake to get considerably higher desired returns.
3. Go for a SIP investment: An extremely useful way of getting maximum returns from mutual funds is to invest in a monthly SIP investment plan. Market trends reflect that new investors or those who get investible surplus through their primary income every month can meet their necessary expenses by investing through SIPs. The best feature about this is that investments can be made regularly without worrying much about the need to time the market and investors have the leverage of choosing their style, keeping their financial goals in mind to get better returns. They can decide how much they need to invest through each route considering their unique investment in requirements.
4. Asset allocation: If you are not already aware of it, let me tell you, you need not solely rely on mutual funds alone to obtain greater long term returns because sometimes stocks perform worse than bonds and bonds mutual funds despite their regular nature of outperforming bonds and cash. So to increase your returns and keep market risk at bay, you can opt for asset allocation that includes bonds. For example, if a person wants to invest for 10 years and maximize returns with stock mutual funds, allocation of 80% of stock funds and balancing out the risk with 20% bond funds can be done.

Apart from this, you can also choose to invest in equity mutual funds. Do not wait for the right time to invest. Instead, start investing as early as possible for better returns.