Mutual funds are suitable for anyone who wants to save for the long term. Whether you're dreaming of a holiday home in Spain, a cabin in the mountains or a secure retirement, over time you're likely to get a higher return than if you leave your money in a bank account. Equity funds also ensure that you limit the risk of your investment. You get a better spread of risk than if you trade in individual shares, for example. In addition, equity funds are managed by people with solid experience and expertise in the stock market.
1. Think long-term
Saving and investing in equity funds is all about the long term. You should have a time horizon of at least five years. The longer your investment horizon, the better you can withstand fluctuations in the stock market. The stock market will always fluctuate, but historically the ups have lasted longer than the downs. That's why it pays to take a long-term view.
If you intend to spend your savings in the near future, equity funds are not for you.
If you take a long-term view, you will also maximise the effect of the compound interest effect. This is an effect that kicks in when the interest rate is added to the original savings amount so that the added interest will also earn interest. If you think long term and don't touch your investment and return, the compound interest effect will become stronger with each passing year.
2. Have ice in your stomach
As we've already mentioned, there will always be corrections and the stock market will fall. When this happens, many people become stressed and think it's urgent to sell their fund units. Nobody knows where the peaks and troughs in the stock market are. That's why it's very difficult to sell at the top and then buy in at a lower price. Very often, people end up selling out when the stock market has almost bottomed out and not buying back in until the market has been rising for a while. That's why it's important to stay calm and cool in a downturn. If you take a long-term view of your investment, you will probably get a good return over time.
3. Small savers should save monthly in equity funds.
With a savings agreement, you save a fixed amount each month. This means there's less need to worry about the peaks and troughs of the stock market. Long-term and predictable investments with a savings agreement mean that you buy both when prices are high and when they are low. So you avoid buying at the wrong time. This will benefit you over time.
4. Don't have too much faith in your bank
Surveys show that more than 60 per cent of Norwegians who save in equity funds choose to do so through a bank. Many believe that this indicates an excessive trust in banks. Those who buy equity funds through banks often end up with the banks' own equity funds. This often happens after the banks have run campaigns for their equity funds and recommended them to customers. These equity funds are not necessarily the best and history has shown us that many of these equity funds underperform. In addition, the banks' earnings can vary from mutual fund to mutual fund, so it's not always the case that everything recommended is objectively assessed. So you might want to think twice the next time your bank recommends an equity fund.
5. Yesterday's winner is not necessarily tomorrow's
Which equity fund should you invest or save in? It's easy to check the lists and see which equity funds have done well recently.
If you choose one of these equity funds, the return may not be long in coming. Historical returns are no guarantee of future returns. If you invest in an equity fund that has done extremely well, you may well be investing in the next bubble. It may therefore be a good idea to look behind the numbers. The reason why the equity fund tops the list of the current year's returns may well be because it fell sharply last year.
That's why it's important not to be blinded by yesterday's winners, but to always have a long-term perspective on your investments.
As a final step in your own internal control, you can ask yourself some control questions.
- Have you thought about which equity funds are right for you? It should depend on the time horizon of your savings.
- Do you have high return requirements? Then you should prepare yourself for major fluctuations.
- How much do you want to save each month? Before you ask yourself that question, you should first think about how much you want to withdraw when you're done.
We wish you good luck with your investment!
If you want to invest or save in the Kraft Global equity fund or the Kraft Høyrente high-yield fund. Then you can press here!
