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7 Questions You Must Ask Your Wealth Custodian Before Investing in a Mutual Fund

In the era where we perform in-depth research while buying a simple smartphone, it’s vital to get some clearance before investing your hard-earned money. This is the reason why before investing in a mutual fund, you should gather as many details as possible.

Mutual funds are one of the most common, safe, and if done correctly, profitable investments for long-term wealth creation. But before you decide to put your money out on the table, here are 7 questions that you must ask your wealth custodian before investing in a mutual fund. Let’s explore.

1. Does the mutual fund’s portfolio align with my investment objective?

After letting your wealth custodian know your end goal and risk preference, it’s time to find out and ensure that the portfolio of the fund you are targeting aligns with your investment objective. Just looking at the name of the mutual fund won’t tell you about its portfolio. You need to go deeper and ask your wealth custodian to give you as many details as possible about the mutual fund.

2. How much will it cost?

It’s no secret that maximizing returns on investment is the key. You will also want minimum expenditure as fund management and other related charges can add up. Later, this can cause a massive difference in your investment portfolio. Also, compare the rising performance of the mutual fund you are targeting against similar or competitive ones. This will help you determine the value for money spent and whether you can find another better investment option. Also, assess the level of services and suggestions you are going to receive as per the amount you decide to invest.

3. What is the minimum amount I have to invest?

Let’s talk numbers! With the rising popularity of SIP mutual funds, investors usually don’t have to worry about a hefty minimum amount. However, there are some mutual funds that require some upfront minimum amount. If you are selecting that kind of a mutual fund, ask your wealth custodian to give you a clear idea of how much you have to initially spend.

4. How did the mutual fund previously perform?

Even though past performances of a mutual fund don’t guarantee the same statistics in the future, it can ease out comparisons. Many mutual fund options align with the same objective for investment. When you put them together and review their performance for a few years, it becomes easier to determine how they shared in volatile market conditions. Note that this step requires the utmost research and efforts on the investors’ end. This is where knowledgeable-experience professional advice can save a lot of time and provide accurate insights.

5. Who is responsible for managing and running the fund?

After narrowing down potential mutual funds that you might invest in, it’s time to know who is in the driver’s seat. The portfolio manager running the mutual funds has a big responsibility. In fact, in most cases, the success of a mutual fund depends on the manager’s skill. Therefore it’s important that you dig deeper into your managers’ history and track record before handing them over your wealth-building portfolio. Keep in mind that you need to check at least a few consecutive years of a track record to check the credibility and build trust.

6. What are the risks associated with my shortlisted mutual funds?

In most cases, when potential returns are high the risk runs higher. That makes risk tolerance-based investments a must. A good financial advisor or an investment expert assesses a client’s risk appetite before recommending appropriate mutual funds. The key here is to strike a profitable compromise between risk, affordability, quality, and the performance of a mutual fund. These are some intricacies a trustworthy expert can flawlessly tour you through.

7. How does this decision impact my taxes?

Everyone wants their investments to be tax efficient. Usually, index-based funds tend to exercise better efficiency than actively managed ones. Before making any investment, you should have a detailed idea of any tax consequences that come along with it. It prevents potential surprises that may startle you down the investment road.

Final Words

The bottom line, you don’t need to restrict yourself in any way when it comes to asking questions about investments to your wealth custodian. Now that you know the seven essential questions you must ask your wealth custodian before investing in mutual funds. At some point, you have to take action and reach out to the experts for correct insights.

If you are about to invest in mutual funds, a knowledgeable investment advisor will be able to help you to get your portfolio to a point where it can perform at its peak depending on market conditions. When you ask the right questions you will get productive answers. This process will also save you from vagueness which can create a lot of confusion while investing.

Whether you are aiming for short-term or long-term growth with their investment, it’s paramount to get the prerequisite information sorted out. Buying mutual funds is different from going for a spontaneous shopping spree at a mall. Considering the sheer amount of offerings along with their nuances and quirks, investing in mutual funds can be overwhelming.

Investment experts at RURASH can help you get clarity on your risk preferences and perform a detailed analysis of your portfolio. Depending on your risk appetite they can help you choose mutual funds that maximize your gains.