Mutual fund investment is subject to market risks because if you are investing Rs 100 in an equity mutual fund scheme, then that Rs 100 is being used to buy shares of 50 different companies. If you grow, your money will also grow.
Despite the market investment, Mutual Fund Investment is a more secure, diversified and high return scheme. There is an option here for those investors who do not want to take any risk and also for those investors who want high risk and high return.
If you step into mutual fund investment with better planning then you will make big money from here, the formula of 7-5-3-1 is given below which you can include in your investment plan to get better returns.
What is 7-5-3-1 in mutual fund investing?
In this formula, 7 means investment target for more than 7 years, long term investment in equity funds gives very good results, hence for better returns invest in Mutual Funds for more than 7 years.
What does 5 mean in the formula? Consider these 5 important points –
Choose better quality funds
Pay special attention to value
There is more potential for growth in midcap and small cap companies, investment in these can be beneficial.
There are more possibilities by investing in global stocks i.e. funds from India and abroad.
Emerging stocks that are small now have great potential to get big
The next step 3 of the formula represents disappointment and irritation, in a situation where your fund gives returns of 7 to 10 percent, it will be disappointing, after this the fund may give returns of 7 to 0 percent, finally it may even generate negative returns. In all these circumstances, keep yourself in control and continue investing. Ups and downs in investment are common.
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