By The BuyT Desk
Mutual Funds(MF) helps you to start your investment with as low as Rs 500. When you want your investment to earn a higher return than a bank FD or any small saving scheme, one should look at mutual funds. They are an investment product which is run by an asset management company(AMC). The investment pools in funds from individuals and investors with common investment objectives. AMC’s fund manager purchases securities or bonds from the pooled money, ensuring that the investment mandate is met.
Keep in mind, the following things while choosing a mutual fund:
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Firstly, determine your financial goals, budget for investment, and investment horizon. This process will help you evaluate your risk profile.
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After that, choose the appropriate mutual fund type according to your risk capacity. Most experts recommend debt or balanced mutual funds for first-time investors.
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Consider investing in more than one mutual fund type because it will be less risky. For that, choose the portfolio of funds that will help you diversify across investment styles. For example, choose a mix of equity and debt funds.
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You can invest via Systematic Investment Plan (SIP), which is more suitable for those investing in equity instruments for the first time. It allows you to invest a fixed sum of money automatically from the bank account into a mutual fund at pre-specified intervals by giving a one-time instruction. SIPs are flexible with respect to how long, how much and how frequently you want to invest. You can begin investing with a small sum of money, and thereby, reduce the risk of loss.
Now, the question is how you can invest in mutual funds.
In recent times, investing in mutual funds has become quite easy. You can invest in mutual funds even while sitting at home with the help of a mobile app or a website. The most important step is to provide the required documents to fulfil KYC (Know Your Customer) requirements. These documents include your PAN card, proof of address, age proof, etc., as mentioned by the fund house.
There are two options to invest in mutual funds:
Direct plan: You may directly deal with an Asset Management Company (AMC) without an intermediary. You may choose to visit the office of the AMC or register for investment in a mutual fund scheme online, through their website, or the mobile app. The expense ratio is lower for a direct plan.
Regular plan: In this plan, you pay a fee to an intermediary such as a broker or banker to facilitate transactions with the AMC. As a result, the expense ratio of the regular plan is higher.
You can also invest in mutual funds through SIP (Systematic Investment Plan). Registering for a SIP is like creating a social media account.
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Visit the website of the AMC through which you want to invest in mutual funds.
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Sign up and create your account.
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After registration, provide the details of the bank account from which the SIP amount will be deducted.
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In the end, choose the right SIP according to your risk capacity.
To invest in mutual funds through the mobile app of the AMC, follow the steps below:
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Download the mobile app of the AMC.
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Register yourself on the mobile app.
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Verify KYC after registration.
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Choose the mutual fund scheme according to your financial goal and risk appetite.
