Make mutual funds earn money for you in 2020! Formula cracked!

In the long-term time horizon, a mutual fund investor should remain invested in small-cap and mid-cap funds, says the expert.

The stock market rise has failed to bring benefit to the small-cap and mid-cap mutual fund investors in the year 2019. Photo: Reuters

They are there to make money for you! Yes, mutual funds existence is based on nothing else, but to give you a handsome profit over and above your invested amount. To do that, there are a few things investors must do first - taking uninformed money decisions is a strict no-no. How to do that? Either do your own research or listen to what experts are saying. Preferably, do both and benefit the most. Anyway, investors need not worry as here are some money tips that can help them make money at a faster rate in the new year. So, here are the tips that investors must pay heed to.

According to tax and investment experts, one should invest in large-cap, mid-cap and small-cap funds as the stock market is on the rise. Notably, in the year 2019, large-cap funds have outperformed mid-cap and small-cap mutual funds.

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Speaking on the investment tips for a mutual fund investor in 2020, Hemant Rustagi, CEO at Wiseinvest Advisors said, "The stock market rise has failed to bring benefit to the small-cap and mid-cap mutual fund investors in the year 2019. However, I would advise investors to remain invested in mid-cap and small-cap funds as in the year 2020, the market will become broad-based. So, an investor can expect a better performance by small-cap and mid-cap funds too in the year 2020." He advised mutual fund investors to remain invested in small-cap and mid-cap mutual funds without decreasing the exposure.

Rustagi said that in 2020, diversified invested is advisable means an investor should invest in small-caps, mid-caps and large-caps. Those who find it difficult to manage their portfolio due to investments in various mutual funds categories can pick one mutual fund category — multi-cap mutual funds. By investing in multi-cap funds, one will get the benefit of each category's performance. Rustagi said, "In the long-term, I would suggest mutual fund investors remain invested in small-cap and mid-cap funds and if there is a plan for investing in a new fund, then a small-cap fund would be a good choice, if the time horizon is long-term."

He said that ELSS mutual funds can also be chosen instead of multi-cap funds as it would give income tax exemption under Section 80C on investment up to Rs 1.5 lakh in a year.

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