Mutual funds really help us to achieve our long-term goals. Everyone says that mutual fund investments are better when done over a longer period of time. But the question is: how long does the long run last? In this article today, we’re going to discuss the long-term strategy. Fixed Term Mutual Fund Investments: Mutual funds operate on the compound effect principle, which means that money generates money and it usually does so over a period of time. The longer you keep your money invested, the more benefits you can expect. Well, we think it not only takes time, but also a little homework and a good strategy.
What do we mean by “long-term”?
The word long term refers to something that lasts longer, but nobody tells us how long long term is. According to investors, investors generally refer to any investment of more than 3 to 5 years as long-term. However, this can vary as a person who is now in their thirties wants to keep their money invested for the next 30 years until retirement. Annuals to take advantage of this investment as you will be making money with the money. If you give your investment time, your wealth will be valued and grow over time.
Why are long-term mutual fund investments better?
Let’s take a quick example: A mutual fund that has a historic 10-year return of 12%. A person who invested 10,000 in this mutual fund ten years ago now has 22,000 (which is more than double) as a return on investment. To say about past accomplishments we should get carried away with it as the future cannot be predicted, but at the same time history gives us a clear idea of what the future holds. So the math here shows us why long-term mutual fund investing is good.
Strategy for Building a Long Term Portfolio
DEFINE YOUR LONG TERM PERIOD
The first and foremost strategy is to set your goal. Mutual funds work best for you when you decide on a goal that you want to achieve. There may be a different portfolio for a different need, and you can use several of them depending on what you want from your investments. For example, if you want to create a pension corpus. It depends on how many years there are until retirement. You can also create a separate portfolio for your children’s education that will help you streamline your investments and strategically build a secure future, say 15 years later. Investing in long-term mutual funds can be a great option.
FIND YOUR INVESTMENT OPPORTUNITIES
Not only can we invest in long-term mutual funds, we also need to research which investment best suits our needs. When it comes to mutual funds, we have several categories like equity, debt, etc. We all know that equity funds are riskier than debt funds, but there are more than 10 different funds that fall under the top fund category. With equity funds, for example, small-cap funds are riskier. as a large-cap fund. Similarly, when it comes to bond funds, credit risk funds are riskier than most other fund categories.