Remember that it is better to invest in a fund with a consistent track record than in a fund with no track record. Steps must be taken to restructure your business with Mutual Fund Software, for a certain period of time switch between funds for better performance, realign the funds according to asset allocation strategies or switch to a fund based on risk taking.
Understand the Fund
The distributor should understand the objective of client’s investment in a particular fund. It is essential to choose a fund that is suitable for client’s profile. Your investor must have adequate knowledge about the fund as well as the performance, commission charges, expenses and tax benefits of the funds. While choosing a mutual fund, the make sure that your investor he or she is comfortable with the fund.
Analyze the Funds
See whether a particular fund is on track to beat the returns of its category. It is easy to be carried away by market indices, and you should look at the underlying strategies to understand how well a fund is performing. Consider risk factors before investing.
Know Clients Risk Tolerance
In managing risk tolerance, you need to adapt allocation strategy to rebalance between equity and debt in response to market volatility or swings. Remember the five-year return is one of the best predictors of investment performance. If returns are substantially below clients cost of investment, it means you have made some mistakes in asset allocation, for example if funds are heavily invested in equities and now yield is way below expenses. Invest in index funds Index funds are the cheapest fund structure that allows investing in a diversified portfolio of mutual funds, since it includes a basket of all the stocks in a particular industry.
Take a break
A lot of mutual fund distributors are tempted by funds, whether they are in a market or sectoral category, and they tend to invest heavily into this category, thinking this will be a good investment. As a result, if they do not invest into another fund they are away from, they get discouraged by the lack of performance. Investing in mutual fund schemes should be based on the objectives your client have.
Diversifying mutual fund portfolio is a key investment strategy. The decision to opt for diversification is primarily based on the need for different risk variables across mutual fund schemes. Understanding risk profile is must to make the decision based on the various parameters mentioned below: Duration of investments, Wealth management objectives, Personal financial goals, Family goals, Earnings goals, Alignment of funds with a particular strategy.