3 Best Practices to Amplify Mutual Fund Returns

3 Best Practices to Amplify Mutual Fund Returns

By Capital Markets CIO Outlook | Monday, September 07, 2020

Mutual FundReturns in mutual fund investment can be amplified via expense cutting strategies coupled with fund diversification policies.

FREMONT, CA: A mutual fund comprises a pool of money collected from several investors to invest in securities such as bonds, stocks, money market instruments, and various other assets. The primary cause of the popularity of a mutual fund investment is that it gives access to individual investors into professionally 

managed portfolios of bonds, equities, and other securities. Further, it enables the investors to diversify their investments as the fund managers invest in a number of companies with promising growth expectancy. Getting returns from mutual funds is not just about finding and buying the best funds. There are various investing tips and best practices that can assist in maximizing the overall returns on investments. Here is an insight into those best practices.

Preferring No-Load Funds 

A no-load fund refers to a mutual fund where shares are sold without a sales charge or commission. The shares are offered directly by the investment company resulting in the absence of fee. A no-load fund can directly impact the returns from investments. A fund that doesn’t charge commission fees will provide better returns to the investors that the ones that charge a fee.

Using Index Funds 

The use of index funds allows the investors to boost their returns primarily due to the low operating expense involved with the index funds. Further, the advantages of index funds are not limited to the lower costs. The passively managed index funds also remove the factor of manager risk, which refers to the risk of obtaining poor returns resulting from poor management decisions. Although index funds do not always outperform their actively-managed counterparts, their lower relative market risk and low cost make them a better option for long-term performance.

Diversifying Mutual Fund Investments

It’s a common belief that the investors aiming for higher returns need to invest in high-risk funds. While the above statement may be partially true, it can also expose the investors to significant market vulnerabilities. However, investors can smartly invest in high-risk funds by diversifying their investments across the best types of funds. 

While it’s true that the best mutual funds are the ones that are within an individual’s risk tolerance, the above factors can significantly impact the overall returns on mutual funds investments.

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