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Investing in mutual funds to realise long-term goals is certainly recommended by investment experts. Keeping a longer investment horizon will benefit you in balancing market volatility and losses.
Choose the funds scheme to invest in based on five major factors, i.e. time horizon for investment, risk appetite, past performance of the scheme, investment strategy, and the current and predicted future transitions of the market.
Staying invested in mutual funds to achieve long-term goals means that you have to stay invested in ‘mutual funds’ and this need not be staying invested in the same fund scheme until the end of the five or seven-year term.
Investment advisors often suggest that you keep track of the performance of the fund scheme you have invested in as well as in other fund schemes that are performing well. So, focus on returns.
Initially, you will do your research on the mutual fund scheme, its investment strategy, and the kinds of companies it invests in. However, the investment strategy or the companies it invests in may change with time or with the change in the fund manager. In this case, you may have to re-align your goals or re-invest in another fund scheme that aligns well with your goal.
The former may not usually be the case. Therefore, you need to quit from the initial fund scheme choice and reinvest in a different scheme option. You can follow this even if the returns from the initial fund scheme have not been consistent or satisfactory.
Switching between funds is a normal practice for long-term investments. It is recommended that you check the performance of the fund schemes you have invested in and rebalance the allocations once or twice a year. This way you can still reach your long-term goals as per the planned schedule.
Also, market conditions play a key role in realising your long-term goals. Do watch out for any probable economic issue or government policy change that can shake the market. If you are not well-off in reading the signals, approach your investment advisor every now and then to stay informed and alert.