How to Become Rich by Investing in Mutual Fund?

Without beating around the bush, I am jumping into the pool of wealth creation opportunity for investors in the mutual fund. It is the truth that the mutual fund has made many investors rich and you can be the one as well by making a smart move. Becoming rich is the biggest dream of many investors, but how to crack it down is known by very few. This reason creates a difference in their earning potential as well. I would like to mention the important parameters of mutual fund investment to become rich, which are:

Stay Invested for a Long-Term

The investor must be confident in mutual fund investment for a long-term horizon in order to get benefit of compounding power. Short-term benefits may seem early approachable to you, but it couldn’t beat the benefit of long-term investment. The long-term should be 15-years and more to achieve your goal of big corpus. However, the tenure decision based on the invested amount and risk appetite to make proper financial planning is more relevant. 

The instruments in the portfolio of the mutual fund can be highly volatile considering fluctuations in the short-term but can be stable and growth-oriented in long-term patterns. Considering the past performance of the mutual fund to generate higher returns, the investors are advised to invest for long to average out the lower performance of the fund in the market volatility. So, the long-term horizon helps the fund to exhaust in space to provide risk-adjusted returns.

Choose SIP as a Preferable Route

You may have heard the proverb reading “Little Drops Of Water Make A Mighty Ocean.” This proverb is also sensible in the context of mutual fund investment through SIP as the little investment at a regular period over the time has the power to yield bigger fruits in future. To become rich, it doesn’t require you to become impatient and put all your money in the mutual fund. 

Although investment through lump sum also has the potential to generate higher returns, you have to invest at the right time to make it sensible. So, the better approach is to invest through SIP over a long-term as it will also help you to sustain the market volatility. A SIP investor buys more units when the market is down and lesser units when the market is up and enjoys the benefits of rupee cost averaging. 

Reasonable Mid-Cap and Small-Cap Exposure

To generate higher returns over a long-term horizon, the investors are required to maintain a diversified portfolio of equity instruments. The investor should invest in small-cap and mid-cap fund ranging between 20% and 60% (based on their risk-appetite) to get the advantage of emerging opportunities. Apart from this, the remaining corpus should be invested in large-cap and hybrid funds. The investment in large-cap brings stability along with moderate returns to the investor.

Track Your Investment Regularly

Re-balancing is a disciplined approach to get the required benefits from the investment. Tracking your investment once a year is necessary to acknowledge the performance of funds. Re-balancing is an essential approach as all the funds couldn't outperform the benchmark and category for a lifetime and you have to do re-balancing timely to enusre that you get the true worth of your investments. 

Annual Step-Up

When you get your salary increased, you should increase your investment amount accordingly to give more power to your investment. It will help you in wealth creation effectively and systematically according to your comfort. 

Grab the Benefits of Additional Purchase Opportunity

During the market downturn, the investors can take advantage of lower NAV and make an additional purchase to get more units of the fund. As your investment goal is to become rich over a long-term horizon, by purchasing the units at cheaper value and taking advantage in long-run will surely assist your investment in a broad way.

I have explained all the parameters to become rich by investing in mutual funds. You can start investing in the mutual fund now with more power and confidence to generate huge returns over a longer time horizon.