Maximizing Your Returns with Mutual Funds
As a trader in Singapore investing in mutual funds, getting the best returns is dependent on the types of funds you invest in. By finding and buying the best mutual funds, you increase your chances of maximizing the profit margins based on the securities being traded through your fund.
Before you can maximize the performance of your mutual fund, you need to pick the right one. The best way to ensure you get the best mutual fund options is by registering with the best investment brokers in Singapore. With a good broker like Saxo capital markets pte, you can be sure that your money will be placed in the hands of reliable mutual fund managers for maximum profitability.
Here are effective ways to boost the performance of your mutual fund.
Make use of no-load funds
Cost is an important factor when it comes to enjoying better returns on your investment. If you are looking to keep the cost of investment low, no-load funds are better options than load funds. With all other matters remaining constant, a mutual fund that charges no load ensures you are left with more money in your pocket than one that charges a load.
For instance, if a fund has more than one share class with one having a front-load of 5% and the other has no-load, investing $10,000 will be charged $500 to invest in a load-paying fund. This means that you will begin investing $9,500 as opposed to $10,000 had you chosen the no-load fund.
Make use of index funds
With index funds, you enjoy more returns on your investment. This is because index funds keep the cost of investment low, thus ensuring you retain most of your money and boost the total returns in the long run. Apart from low management costs, index funds are also passively managed, which eliminates the manager risk. This risk comes with actively managed mutual funds due to poor investment decisions.
While index funds may not always beat actively managed funds, the low cost and low risk make them a smarter investment option for long-term performance.
Use the dollar-cost average strategy in your mutual funds
DCA (Dollar Cost Average) is an investment strategy that uses regular and periodic buying of investment shares. The value of DCA is to reduce the overall cost of investment per share strategically. DCA strategies can also be used with an automatic purchasing schedule. A good example is the 401(K) mutual funds plans. This automation strategy reduces the chances of making poor decisions based on an emotional reaction to the fluctuations in the market.
In simpler terms, a Dollar Cost Average strategy ensures your money keeps flowing into your mutual funds and keeps buying securities regardless of the market conditions. This ensures you continue to buy when the rates are low to take advantage of possible future rises. You can come up with your own DCA by creating a SIP (systematic investment plan) at your preferred brokerage company in Singapore.
Invest in sector funds or Aggressive Mutual Funds
Most investors assume that the only way they can enjoy high returns on an investment is by buying high-risk funds. While you may need to take on more risk as an investor, you can ensure you do so in a smart way that includes diversifying your investment across the best types of aggressive investment funds.
Good examples of aggressive mutual funds include large-cap growth stock funds, small-cap stock funds, and mid-cap stock funds. When you diversify your investment across these three finds, sticking to low cost, no-load options, you increase the odds of beating the market in the long run. This is the best plan if you have a long-term investment plan for at least 10 years.
The best mutual fund for your needs is one that combines appropriate allocation of funds to suit your tolerance to risk and your long-term investment goals. Once you identify your investment objective, your money can perform better in low expense mutual funds.