A beginner’s guide to investing in mutual funds
Mutual funds investment is easier to manage than stocks since investors can buy and sell their shares as and when they need. To make your mutual funds investment journey easier, you should have a proper understanding of how to invest in mutual funds in India.
Here are some handy guidelines for mutual funds investment:
- Mutual funds investment tips
Investors normally associate mutual funds with market timing because the actual amount of money they make ultimately depends on when they buy or sell. While this is an important factor, it is not the only one you should consider. As an investor, you also need to decide the type of a portfolio you want to build or decide the asset allocation. Asset allocation means investing your money in different places with the proper mix of various asset classes, be it stocks or fixed income.
You need to opt for the right type of funds best suited for your requirement. To do this, you first need to be sure of your reason for investing in mutual funds. Are you investing for your child’s education or a wedding in the family? Are you saving it for your parents so that you may provide for them in their old age? Do you need the money to plan for your retirement? Are you doing it for the tax benefit?
You also need to decide the tenure for which you would be investing the amount. Ask yourself whether you require the returns on your investment at the earliest possible time or if you willing to wait for a few years. The more the amount of time you can invest the money for, the more is the amount of risk you can take and thus the more returns you may expect.
These are some factors you should take into consideration before you start investing in mutual funds in India.
- Start investing in mutual funds
Now you’ve understood how to go about investing in mutual funds and the risks you are willing to undertake. Before you start investing in mutual funds in India, choose the types of mutual funds you want to invest in. These include equity funds, balanced funds, income funds, sectoral funds and so on. Mutual funds vary on the risk level and investment time. You can also make your investment decision based on the mutual funds performance over time and invest in mutual funds through SIP (or Systematic Investment Plan, which means investing the same amount of money in a particular fund at periodic intervals), equity mutual funds, and so on.
- How to invest in mutual funds in India
You have several ways to invest in mutual funds. If you want to manage it on your own, register and create an account on any online mutual fund website catered to by a bank or non-banking finance company. Here, once you have set up your account with the required details, you can look up stocks, manage your funds and buy and sell on your own—without paying a commission to a third person. Another way you can invest is with the help of a broker. A broker may have insights on which funds may increase or drop in value and so on. Since brokers are able to guide beginners with the best investments to make, people often choose to invest in mutual funds this way.
To know more about mutual fund schemes available, click here: