No tags yet.
Investing in the best mutual funds is certainly not as easy as it appears to be. A considerable amount of research and dedicated efforts are always required to choose the appropriate kind of fund, manage it, and reap high returns. This becomes even more challenging when the funds that you choose are easily influenced by the market conditions. This is precisely what occurs with the Small-Caps. They have a tendency to be unstable in nature, and thus could trouble the investors with their constant variations. But worry not, in this article we are going to talk about some of the golden rules that you should commit to your memory, and follow them religiously whenever you are planning an investment in the Small Cap Mutual Funds.
What You Should Do?
Homework Before Choosing a Small Cap Fund : If you want to get ahead in earning lucrative returns from Small-Cap Mutual Funds, you will have to spend a good amount of time in researching about the best plan attuned to your needs. Those having a remarkable track record over a given period of time are the ones that are recommended to be on your watchlist.
Plan to Invest for Long-Term : As discussed above, Small-Cap Funds get easily affected by market fluctuations. They tend to oscillate on a regular basis with every movement in the market. Thus, to determine whether a Small-Cap is actually performing well, you should analyse its performance at least of the last 5 years.
Diversification of Your Portfolio : It’s quite obvious that diversifying the investments helps in reducing the risks and losses at an acceptably low level, and reduces it at even more when the market hits lower. Investing in only one type of fund that involves buying only Small Cap Funds online could land you in a difficulty if it doesn’t perform well.
Study the Tax Implications : When it comes to investment, we easily tend to forget about the tax implications. If you do not plan cleverly, it may even reduce your annual returns by a substantial amount as you may have to spend a good money in discharging the tax liabilities.
What You Shouldn’t Do?
Timing the Market : Keeping a track of the market is not only traumatic, but is also quite dicey for both your monetary and emotional health. The market as a whole, or a specific division, can have many factors that move it either up or down. Plotting every movement is practically not doable, and could also lead to losses if you don’t map it right.
Focusing on Short-Term Gains : You shouldn’t get tempted by the sudden hike in the value of your funds and shouldn’t buy more of it. First, ensure that you analyse its performance over a longer period to get an impartial view of the performance. This would save you from getting distracted by these temporary gains and will help to focus on good returns in the long run.
Indulging into Short-Term Bets : As explained in the beginning, Small-Cap Mutual Funds may witness considerable fluctuations depending upon the market performance. Having said that, don’t hurry to sell them when the market dives deep. There is a good chance that this is just a momentary phase and it may rise again.
Investing in Small Cap Funds if You Can’t Bear High Risk : By now, you must have got the point that Small-Caps are extremely sensitive to the market movements and thus, can certainly impact your investments. Thus, before investing, make sure that you are ready to face high volatility.
Though you can’t predict the behavior of Small Cap Mutual Funds in every situation accurately, following these tips will certainly ensure that you are prepared for sudden jerks of the market. MySIPonline is an online platform through which you can invest in Small Caps India.