Selecting mutual funds and defining an appropriate strategy is the foundation of any successful investment. This article is not an accurate guide. However, answers to these 5 questions can be an inspiration for you or your intermediary in choosing mutual funds and setting up tailor-made investment.
1. Will I invest in mutual funds on a one-off or regular basis?
If you decide to invest regularly, the ideal frequency is once a month. Usually on the same day to get a habit. In the case of a repeated monthly deposit, the valuation is averaged and therefore you are at a lower risk. Choose funds that have higher volatility. This will give you more interesting profit at the end of the period.
In a one-off option, the most important aspect is the timing and risk distribution. Experienced investors are looking for funds that are declining at a given moment or are expected to increase in the future.
2. I want to invest in mutual funds. But how much?
The difference is whether you want to invest 20 or 100 euros per month. Or if you decide to invest EUR 1,000 or EUR 10,000 in a single investment. Some funds have lower deposits, some higher.
To find out which fund to focus on, first look at the input deposit parameters. In general, the more you invest, the more funds you can choose to invest in your portfolio, minimizing your investment risk.
3. I know how much. But how long do I want to invest?
When investing, nothing is more expensive than time. In order to make a quality and profitable portfolio, you have to answer how long you will not need the money.
For example, if you want to save for a pension and you are 45 years old, count on an investment horizon of 17 to 20 years. Well be careful, not all funds are suitable for a short period.
For example, in a short period of up to 5 years, it is good to think conservatively. If you are thinking about the mid-term horizon of 5- to 10-year-olds, you can already count on a larger share of stocks and thus balance the portfolio. Dynamic strategy with equity funds is suitable for over 10 years.
Of course, the performance and the subsequent return of the portfolio also depend on this. Simply, the longer you invest with higher dynamics, you can expect higher appreciation.
4. What temporary decline am I able to accept?
Follow your own intuition and feelings by default. If you are a person who can withstand a maximum of 5% temporary decline, set your portfolio very conservatively. If, on the contrary, you do not have cold-shakes with a temporary drop of 10% or more, choose a more dynamic option.
Much also depends on the investment horizon, ie how long you want to invest in mutual funds and portfolio settings.
5. How much do I want to earn in my investment?
The answer to this question is most interesting to us. Anyway, set a real goal! If it is to be 5% a year, well. If you want more, it’s possible, but always customize the portfolio.
The higher expectations you have since first investing in mutual funds, the more rational you are. Learn how to understand how the market works, its specificities and possibilities. And gradually attack higher counts.
Finally, the Council:
Investing in mutual funds is a great opportunity to get interesting funds from the market. However, if you are a cautious person, have a financial advisor create a portfolio to keep you comfortable and stress free for the entire investment period.