Sat. Nov 27th, 2021
Beginners Guide To Investing In Mutual Funds

Beginners Guide To Investing In Mutual Funds

Saving money for the future is always a wise move. If you are looking for ways to grow your money, you may consider putting it in mutual funds. But for many of us, understanding the mechanics of mutual funds seems tricky. But with thorough research and informed decisions, it can be one of the best options for you to grow your very hard-earned money.

Beginners Guide To Investing In Mutual Funds

Beginners Guide To Investing In Mutual Funds
Beginners Guide To Investing In Mutual Funds


What is a mutual fund?

A Mutual Fund is a trust that collects money from investors who share a common financial goal, and invest the proceeds in different asset classes, as defined by the investment objective. To state it very simply, a mutual fund is a financial intermediary, set up to be managed by professionals. The money is combined from the investors at large. They collect money from institutional and individual investors and put it in different securities.

The purchase of stock and bonds through mutual funds happen at a much lesser cost than other investment intermediaries. The other advantages are diversification, stock and bond selection by experts, low costs, convenience and flexibility. A mutual fund is one of the best investment products in India to beat inflation.


But before you decide to invest in a mutual fund, it is important to keep a few points in mind. This will help you choose the right kind of funds to invest in, in order to grow your money over time.


Recognize your purpose for investing:

This is the first step towards investing in a mutual fund. You need to define your investment goals which can be – buying a house, child’s education, wedding, retirement, etc. If you do not have a specific goal, you should at least have clarity on how much wealth you wish to accumulate and in how much time. Identifying an investment objective helps the investor zero in on the investment options based on level of risk, payment method, lock-in period, etc.

Fulfil the KYC requirements: To invest in a mutual fund, investors need to comply with the KYC guidelines. For this, the investor needs to submit copies of the Permanent Account Number (PAN) card, Proof of Residence, age proof, etc. as specified by the fund house.


Know about the available schemes:

The mutual fund market is flooded with options. There are schemes to suit almost every need of the investor. Before investing, make sure you have done your homework by exploring the market to understand the different types of schemes available. After you have done that, align it with your investment objective, your risk appetite, your affordability and see what suits you best. Seek the help of a financial advisor if you are not sure about which scheme to invest in. In the end, it is your money. You need to ensure that it is used to fetch maximum returns.


Consider the risk factors:

Remember that investing in mutual funds comes with a set of risks. Schemes that offer high returns are often accompanied by high risks. If you have a high appetite for risk and wish to accomplish high returns, you can invest in equity schemes. On the other hand, if you do not want to risk your investment and are okay with moderate returns, you can go for debt schemes.


Subhangee Guha

Break the Newz

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