How To Define Your Investment Goals
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This blog will help you understand how to pick top mutual funds, what you should keep in mind before investing, and how you can invest in the top mutual funds for 2021 using Cube Wealth.
A mutual fund is a pool of money collected from several investors. This money is invested in various securities by a fund manager. Mutual funds are classified into debt funds, equity funds, money market funds, and more.
Mutual funds offer the benefit of potentially high returns, low minimum investment amount, and risk-based investment options. But there are over 1000+ mutual fund scheme options available.
Your risk profile can tell you what type of fund you should pick. The risk spectrum is broadly divided into:
For example, if you’re a conservative investor, your portfolio will primarily consist of debt funds. If you’re an aggressive investor, you’ll include more equity and international funds in your portfolio.
The Cube Wealth app has an intuitive risk quiz that can help you know your risk profile. You’ll even receive curated fund recommendations after this from our mutual fund advisor, Wealth First.
Watch this video to find out why you need to know your risk profile
Understanding a fund’s objective, type, and management style can tell you if it’s suitable for your portfolio. Some funds may have a long term capital appreciation objective while others may differ.
But it’s important to note that investing style is not the same as a fund’s objective. Debt funds and equity funds may have the same objective but invest in different securities like bonds and stocks.
You must also pay attention to the style of fund management. Most funds are actively managed which can allow them to beat the market. Others are passively managed so the returns mirror the market’s returns.
This is why it’s recommended that you speak to a wealth coach before investing in any mutual fund scheme.
Different mutual funds have different expense ratios. This is the fee paid to a fund manager. An ideal expense ratio is 1% or less than 1.25% at the most.
Some mutual funds charge an entry and exit as well. An entry load is a fee you pay to join a scheme. An exit load is a fee you pay to leave a scheme.
Knowing this will help you invest the right amount of money in a fund that suits your needs. It can also help you avoid funds with high expenses since this can eat into your profits.
A mutual fund is a market-linked investment which is why the fund manager’s strategy is crucial to delivering returns better than the benchmark.
The fund manager will monitor, invest and reinvest according to market conditions. Looking into the past performance of the fund manager can tell you how reliable or intuitive they are.
Asking these questions while evaluating a fund manager’s performance might help:
Too confusing? Get access to top mutual funds handpicked by industry experts on Cube Wealth. Download Cube For Free
The mutual fund you pick must fulfil your goals. For example, if you’re looking to generate passive income, you’ll have to choose a fund that pays dividends.
Similarly, you’ll have to go beyond star ratings to identify mutual funds that will work for you. A wealth coach can help you understand this in more detail.
Moreover, funds that are performing well today may not do well tomorrow. Let’s look at this in more detail.
Here's how handpicked mutual funds work on the Cube Wealth app
Analyzing past performance can be helpful. But it doesn’t guarantee future success. The fund’s objective or manager might change, the market conditions might change, or it might just not be right for you tomorrow.
So the conversation must move beyond past performance to future potential. A good wealth coach can help you invest in the right mutual funds for your future goals.
Investors generally confuse a wealth coach for a bank employee or salesperson. A wealth coach is a financially sound professional who looks out for you and your financial health.
Instead of hard-selling, a wealth coach will have a conversation with you to understand your investment needs. They will suggest the top fund types for you based on this conversation.
Speak to a Cube wealth coach today to know more. You can even have a live conversation with our wealth coaches on the Cube Wealth app.
A wealth advisor is as important as a doctor. A good wealth advisor can help you invest in the right way and in the right mutual fund schemes.
A wealth advisor can give you investment benefits like:
For example, Cube’s mutual fund advisor, Wealth First, has a historical track record of beating the market by ~50%. Better yet, Wealth First also helps Cube users sell a mutual fund at the right time.
Watch this video to know more about Wealth First
It’s a good rule of thumb to pick a fund that can help you reach your investment goals for the short, medium and long term instead of just picking the top fund at present.
Before investing in any fund:
The Cube Wealth app gives you access to curated recommendations hand-picked by our mutual fund advisor, Wealth First. Speak to a wealth coach today to know if you should invest in the top mutual funds.
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