Mutual fund investing: These five simple rules will keep you in good stead

While investing in mutual funds follow these five rules all all times to make the most of your investments.Know yourself: Know the kind of risk you are willing to take with an investment and choose a Mutual Fund scheme accordingly from among high risk equities, medium risk funds and lower risk debt funds. Also know your financial goals and whether you want to be invested in a scheme for short, medium or long term.Regular investments: While it’s good to make lump sum investments, not all can do it. So instead invest regularly even if it is a small amount via the Systematic Investment Plan (SIP) route. Keep in mind, SIPs give you a rupee cost averaging benefit. And when you invest via the SIP route you don’t really have to worry about market movements.[caption id="attachment_2290954" align="alignleft" width="380"] It is better to invest regularly even if it is a small amount[/caption]Don’t be hyper-reactive: As a lay investor it’s possible that you get into the hyper-reactive mode, after all there is a lot of financial information that you are receiving from various sources daily including magazines, newspapers, Facebook, Twitter and the internet. So, instead of reacting to the news and trying to time the market, it’s best to stay invested as long as possible for you. This gives you the benefit of compounding when you hold the investments for a longer time.Don’t put all your eggs in the same basket: Let the rule of diversification rule your investments. In fact, you can make the most of diversification when you invest via the mutual fund route. You can put your money in funds which invest in diverse equities, sector funds, international funds, debt funds and other kinds to offset risk.Monitor investments regularly: While it is important that you don’t react to every financial, and economic news item it’s also important that you don’t ignore your investments totally. It’s important to monitor your investments. Also monitor the funds, its objectives, and any changes in the fund objectives regularly. This will allow you to take an informed decision about staying with the fund or exiting.