Do You Know You Can Earn Extra Returns On Your Mutual Funds?
Mutual funds are a popular investment option for individuals looking to grow their wealth over the long-term. These funds are professionally managed and offer investors a range of investment options, including equity funds, debt funds, balanced funds, and index funds, among others. While mutual funds are a relatively safe investment option, investors can earn extra returns on their investments by following certain strategies. In this blog post, we will discuss some of the ways investors can earn extra returns on their mutual funds.
Systematic Investment Plan (SIP): A systematic investment plan (SIP) is a strategy where investors invest a fixed amount in mutual funds at regular intervals, such as monthly or quarterly. By investing regularly, investors can benefit from the power of compounding, which can significantly increase their returns over the long-term. SIPs also help investors to average out their investment cost, reducing the impact of market fluctuations on their investments.
Systematic Withdrawal Plan (SWP): A systematic withdrawal plan (SWP) is a strategy where investors withdraw a fixed amount from their mutual funds at regular intervals, such as monthly or quarterly. This strategy can be used by investors who require a regular income from their investments. By withdrawing regularly, investors can benefit from the power of compounding and earn extra returns on their investments.
Dividend Reinvestment Plan (DRIP): A dividend reinvestment plan (DRIP) is a strategy where investors reinvest the dividends earned from their mutual funds back into the same fund. This strategy can help investors to increase their investment size and benefit from the power of compounding. DRIPs also help investors to avoid the tax implications of receiving dividends.
Asset Allocation: Asset allocation is a strategy where investors diversify their investments across different asset classes, such as stocks, bonds, and other securities. By diversifying their investments, investors can reduce the impact of market fluctuations on their investments and earn extra returns over the long-term. Investors should choose an asset allocation strategy based on their investment goals and risk appetite.
Investing in Direct Plans: Mutual funds offer two types of plans – regular plans and direct plans. Regular plans are sold through distributors, who charge a commission for their services. Direct plans, on the other hand, are sold directly by the mutual fund companies and do not involve any commission. By investing in direct plans, investors can save on the commission charged by distributors and earn extra returns on their investments.
Holding for the Long-Term: Mutual funds are a long-term investment option, and investors should hold their investments for the long-term to benefit from the power of compounding. By holding their investments for the long-term, investors can earn extra returns on their investments and reduce the impact of market fluctuations on their investments.
In conclusion, investors can earn extra returns on their mutual funds by following certain strategies, such as SIP, SWP, DRIP, asset allocation, investing in direct plans, and holding for the long-term. However, investors should carefully evaluate their investment goals and risk appetite before adopting any of these strategies. It is also important to choose the right mutual fund scheme and regularly monitor the performance of the investments to ensure that they meet their investment objectives. By adopting these strategies, investors can earn extra returns on their mutual funds and achieve their investment goals over the long-term.
