Mutual fund investments are becoming increasingly popular in the country. Irrespective of the investor’s age, investing experience and knowledge, portfolio size, asset allocation strategy, and financial goals, it’s easy to find a scheme that aligns with their needs as there are so many types of mutual fund schemes out there. Hence, it’s common for everyone to have an opinion or offer advice when it comes to mutual fund investments and how to invest in mutual funds. However, despite the readily available advice, you have to stop and ask yourself – are you getting the right mutual fund advice?

Sources of mutual fund advice

There are several sources of mutual fund advice. The most common is friends, family, and co-workers. Talking about which scheme to invest in and which New Fund Offer (NFO) is out is quite common. Another popular source of mutual fund advice is mutual fund forums and sites. Here investors online discuss their investments and help answer doubts and questions of other investors. Both these sources, while helpful and well-intentioned, are not always safe simply because no one here is a professional and everybody’s risk tolerance and goals are vastly different.

For instance, if your co-worker who has no dependents or loans to repay invests primarily in equity mutual funds, advises you to do the same, it might not work out for you if your risk appetite is not as high as theirs. Or say, someone on a mutual fund forum earned high returns from a sectoral mutual fund and is urging other investors to invest in it as well. The thing about sectoral or thematic funds is that they are high-risk as the underlying securities are concentrated in only one sector. Hence, unless you are not knowledgeable about the way that sector works or its business cycle, then it might not be the most prudent to invest in such a fund.

If you do your own research by increasing your general financial knowledge and understanding the way the markets work, it is more helpful. Also, reading financial news from trusted financial publications is useful as well. However, to really get financial advice that is specific to you and is also reliable, the best source of mutual fund advice is a financial expert or advisor.

Mutual fund advice from experts

Any financial expert that you speak with will first take time to fully understand your financial needs. Everything from your current investments and debt, if any, to your goals and risk appetite will be explored before they make any investment suggestions to you. Hence, be wary of instant advice from people who claim to be experts. Consider seeking guidance from a financial planner. They can help you set the foundation for your investment portfolio and devise an asset allocation strategy that works best for you. This, however, does not mean that you play a passive role in building your investment portfolio. You should be well-informed about the mutual fund investment decisions you are making even if you have an expert guiding you on the same.