How to invest in Mutual Fund?

Mutual funds are the best way to invest for those investors who do not have a good knowledge of stock market but before investing in mutual fund schemes you need to get some basic information.

It is subject to market risk so it is your responsibility to ensure that your investments are well-invested. For this, you should get basic and initial information about mutual funds.

There are many types of mutual funds such as equity funds, hybrid funds and debt funds. These funds are also divided into multiple schemes, so choosing a good scheme and investing in the right fund is quite difficult for most new investors.

Things to keep in mind for mutual fund investment

There are various funds available in the mutual fund industry such as low-cap, medium-cap, high-cap, high-risk and low-risk. In mutual funds, you are given the opportunity to invest according to your investment capacity. You can choose to invest or plan according to your budget by getting information from the internet.

Set your investment goal

You should make investment goals before investing your money. This will help you in selecting the plans as per your budget. Budget and tenure play an important role in your investments so you should plan your savings on a monthly or yearly basis. It will help you invest in mutual funds without any burden and stress and provide good returns after a specific period of time.

Choose the Right Fund or Scheme

There are many types of mutual funds in the market, so it is a bit difficult for new investors to choose the right fund. You should get basic information about it from internet and invest with basic knowledge because there are lot of people in market who can confuse for their own interest and result will be negative.

Shortlist a Mutual Fund Scheme

You should choose a mutual fund that interests you. You should not ignore factors like fund manager’s credentials, expense ratio, portfolio components and assets under management. Choose the right fund scheme for good returns and keep positive thoughts about mutual funds in your mind.

Invest in a diverse fund portfolio

You should always invest in a diversified mutual fund portfolio ie different stocks and securities. It lowers your investment risk and increases returns. You should do research before investing, for this you can take help of fund manager or internet and select some funds as per your investment capability.

Choose Investment Plan

You can choose SIP or lump sum plan as per your convenience. SIP Plan – It gives you an opportunity to invest as per your investment capacity i.e. on monthly basis you can start investing with minimum amount. There are different types of SIP plans available in the market.

Lump-Sum Plan – You can invest money in lump sum i.e. together, when you feel that the money is not needed for some time i.e. for a long period, then you can choose this plan. It can give good returns after a few years.

open net banking account

To invest in Mutual Funds, you need to have Internet Banking activated in your bank account. Mutual funds also allow investing through debit cards and checks but linking it through net banking is a more simple, secure and time-saving process to invest.

Keep your KYC documents updated

Know Your Customer (KYC) means information about you ie who you are, where you live and other basic information. You cannot invest in Mutual Funds if you have not completed the Know Your Customer (KYC) process. KYC is a government regulation for most financial transactions.

You must have these documents for KYC –

• Proof of your address.
• Proof of your identity.
• Bank details and canceled cheques.
• Passport size photo.
• Other documents as asked by the fund house.

Check this before investing in mutual funds

• Track record of that mutual fund and fund management company.
• Expense ratio which is commission should be minimum.
• Last 3 to 5 years performance of that fund, invest only if it has done well.
• Market trend and NAV of that mutual fund.
• Information about fund scheme and investment plan.
• How and where will your money be invested.
• Entry and Exit Load – Entry load is the fee charged at the time of joining the fund and exit load is charged when you sell your units. Entry and exit loads are a fraction of the NAV. This should be the minimum.

You can invest in mutual funds through offline and online mode.

offline You can invest in mutual fund schemes by visiting the nearest branch office of the fund house with the required documents.

Agent – Can invest through intermediaries or agents. These include stock brokers, banks, persons providing investment services, distribution companies with national and regional presence, etc.

independent financial advisor Through independent financial advisors who act as agents to facilitate mutual fund investments.

Online You can apply online by visiting the website of Asset Management Companies (AMC) or Mutual Fund House. Some AMCs also have apps to invest in their mutual funds.

Mutual funds are managed by Asset Management Companies. These AMCs collect money from people who are willing to invest and that money is invested in various securities.

After investment you will get units equal to the shares. You can buy and sell these units at any time. Each investor gets units like shares in return for the investment, which gives ownership rights to the investors in that mutual fund scheme.

Mutual funds are based on your risk appetite so it is up to you to decide which funds are suitable and which are not. If you choose high risk funds, your returns can be high which is 15% or more.

If you choose low or medium risk funds, your investment risk is low and you can earn returns of 3-15% per annum.

Note – Your money is your hard earned money so it is your responsibility to invest in the right market place. Investing in Mutual Funds is subject to market risk i.e. depends on the ups and downs in the stock market so you should get some basic information before investing your money and don’t invest on someone’s behest or saying.