Think of investing in mutual funds as you would for any other product. For example, before making a purchase, you consider your budget, your needs, the cost-effectiveness, etc. You also take product-specific factors such as the brand and utility, among other factors, into consideration. Likewise, while investing in mutual funds, you must consider your goals, risk appetite, income, and so on. Moreover, you must also consider fund-specific factors such as the track record of the fund manager and diversification, etc. Before we delve into these factors, let’s first understand how mutual funds work.
Mutual funds pool in money from multiple investors and invest this money in securities like stocks, fixed-income instruments, gold, etc. There are different types of mutual funds; you can choose the one that best suits your risk appetite, financial goals, and investment horizon.
2. How should a person in their early 20s invest their money?
One of the most important things that you should know about investing your money at this age is that by the time you use this money in the future, inflation will probably be through the roof. Therefore, you need to pick an instrument that offers you returns that are higher than the rate of inflation, so you end up making a real profit.
Another thing to note is that since most people begin their careers in their 20s, it can be hard to invest a lot of money at once. Firstly, in your 20s, you could likely be in a relatively lower income bracket. Secondly, you may have expenses such as your credit card bills, monthly OTT subscriptions, etc. For these reasons and more, young adults must look for a flexible investment option that allows investing even with a small amount. A mutual fund investment can be a viable option in this case.