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Into the World of Mutual Funds

Build Your Financial Future with Confidence

19 Mar '24
5 min read



It's always a difficult and risky task for any first timers to invest in a whole new different world and can be confusing at times. There are many mutual funds with the same investment objectives and risk as your profile. 

Let us learn about this in detail-

What are Mutual Funds?

Before investing in Mutual Funds and where to invest, let's know what Mutual Fund is. AMC, Asset Management Company pools investment forms a mutual fund from various institutional investors and many people with common objectives in the investment. By using strategic investing in securities, the pooled investment will be professionally managed by a fund manager to build maximum returns to the investors with the investment objective. 

Fund managers professionally have a track record in managing investments and know about understanding the market. These fund houses charge a ratio as a fee for a year to manage the mutual fund.


Why is investing in mutual funds a pro?

  • Convenience: You don't have lengthy procedures like other investment options. There is no paperwork to invest in Mutual Funds, and it is a straightforward process. They can check on the market and make investments according to their requirements.
  • Initial investment: The initial investment in mutual funds is as low as Rs. 500 per month through SIP (Systematic Investment Plan) in the schemes of your own choice. You have an option where you can either invest a lump sum amount or make a SIP which is the investment option. SIP gets a lower outcome or the compounding benefit than lump sum investments when compared.
  • Professional management of funds: There will be a team of researchers backing the experienced fund manager who manages your investments. The fund manager formulated the investment strategy for asset allocation, and the research team will pick the suitable securities as per the fund investment objectives. 


Things to look out for as a first-time investor

  • Investment Goal: One must have a clear investment goal as it can play a significant role in your investments. You can decide to set aside your investment by having the plan; you will have an idea of investing based on your risk profile. When invested with a purpose, investment works at its best.
  • Type of mutual fund: Mutual F
  • und is a risky place to invest if you don't choose the correct category. It takes a lot more than reading these different mutual fund types to decide. Experts recommend the debt fund or a balanced fund for first-time investors as it causes a minimal risk with steady returns.
  • Choosing the best mutual fund: There is many fish in the sea, so choose the suitable one for your profile. There are many mutual fund schemes in every category; analysing and comparing them is necessary before picking an appropriate investment. Some key points that one must know as a first-time investor are the expense ratio, portfolio components, credentials of the fund manager, and management assets. 
  • SIP over lump sum investments: It's better to choose SIP or the Systematic Investment Plans, where you need to invest small amounts in regular intervals. Though it pays less return than investing in a lump sum, it will be less risky. But as you are new to investing in mutual funds, you might choose a lesser threat than a secondary dividend. 
  • Get advice from a financial advisor: There is an overwhelming and tedious environment while investing in mutual funds as the entire process is complicated. When there are thousands of mutual funds to choose from, regular observations can only monitor the performance and the best ones. So it's better to seek advice from a mutual fund expert or a distributor while choosing the right mutual fund.

How can you invest in Mutual Funds in India?

With AMC (Asset Management Company), you can invest directly through the direct plan in Mutual funds. KYC at a KRA (KYC Registration Agency) is a must to complete. It is available online where you just need to fill out the KYC registration form and upload the self-attested identity proof like a PAN card and address proof such as Voter ID, Driving License, or Passport with a passport size photograph. In-Person Verification (IPV) by SEBI-approved agencies is also a must complete. 


Investing in mutual funds in India as a first timer

If you are a beginner, you must plan and choose the appropriate mutual fund scheme according to the objectives and risk tolerance. You can invest either in online or offline modes at your convenience. 


Investing through an online mode

Many mutual fund houses are available to help you with the investment option in mutual funds offline in a direct plan of your chosen scheme. Seeking a mutual fund distributor, you can invest in a regular schedule with better benefits. 

By visiting the fund house's website, you can directly invest in the plans of a mutual fund online. Just complete the e-KYC by submitting PAN or AADHAR details, and then you can invest in the scheme of your plan.


Investing through an offline mode

By visiting the branch or AMC, you can also invest in mutual funds directly with the mutual fund houses where you can invest without a Demat account. Filling out the application form and submitting the self-attested identity proof for KYC compliance will work. You will be given a PIN and folio number when you submit the initial amount through cheque. Regular checking and guidance from a mutual fund distributor will help you get the best plan according to your objective. Choosing the best strategy will give you great returns with lesser risk. The AMC will verify your account details, letting you invest through your online bank account. Many portals or websites allow you to invest in these mutual funds through plans and applications. There is a minimum requirement of just a Rs. 500 investment, and there won’t be much confusion and risk even if you have less experience in mutual funds.

Category : Finance and Investing


Written by Prathap CA