When to book profit from mutual funds?

K. ARAVIND

Do you need to make a profit from mutual funds just like you make a profit from stocks? As mutual funds are a relatively safer way to invest than investing directly in stocks, it is natural for investors to wonder whether mutual funds should not be as profitable as those who invest in stocks.

The answer to this question can also be found by understanding the difference between equities and mutual funds. Investing in stocks requires research on your own and learning about companies. Only then can the best stocks be found and invested. And wait for the opportunity to receive the shares at a fair price. Investors tend to make a profit in stages when stocks bought at a fair price become expensive.

At the same time, those who do not have the ability or time to do their own research to invest directly in equities go in for mutual funds as a choice of investment. Mutual funds operate by building the best equity portfolio with the skills of a fund manager.

Unlike equity investing, mutual funds are best suited for investing through a systematic investment plan (SIP). Investors are able to grow their investment in the long run by constantly investing a fixed amount regardless of the market climate. At the same time, investors in mutual funds through SIPs do not have to worry about making a profit like investors in stocks. The reason is that the two are different investment methods. Mutual fund investors who follow the path of the manager who manages the fund by holding the best stocks and selling the weakest stocks should continue to invest according to their investment term.

In order to reduce risks investors reinvest in low cost stocks from high cost stocks. It is also common for low-cost stocks to be given high weightage in the portfolio, as long-term gains are more likely to be corrected by more expensive stocks. The fund manager does all this when it comes to investing in mutual funds. The fund manager decides which stocks to profit from and which stocks to buy more. In fact, mutual fund investors are entrusted with the job of investing and making profits.

Those who invest through SIPs may have certain goals. All they have to do is withdraw the investment when it is time to achieve these goals. Therefore, mutual fund investors do not have to think about making a profit as they do from time to time in stocks.