Ideas to get you started with mutual funds!

To be successful, you must first lay a solid foundation. The same can be said for mutual funds. Continue reading to learn more.

When it comes to mutual funds, Do It Yourself (DIY) investors prefer funds with better trailing returns or those with five-star ratings. However, investors in mutual funds are sometimes unable to thrive due to shaky basics. As a result, having a solid foundation is critical since it will allow you to make smarter investment selections when markets turn sour. In this post, we will look at how to invest in mutual funds.  

Mutual funds are one of the finest strategies to establish a diverse portfolio that allows for long-term wealth building. Most retail investors would struggle to diversify by investing directly in stocks. Mutual funds can diversify across numerous stocks because they pool money.  

An equity mutual fund typically contains 50 stocks, which aids in diversification. As a result, investors can gain exposure to stock markets by investing as little as Rs 100 per month. Mutual funds also provide exposure to the fixed income market through their debt mutual fund offerings. 

 
Here are a few ideas to get you started with mutual funds.  

Determine your mutual fund investment objective  

Even before you begin considering mutual funds, you must first determine why you are investing. Having an investment goal can frequently help you choose mutual funds that are a good fit for you. Assume you have two children and want to provide higher education for each of them. However, for the elder child, it's three years away, while for the younger child it's ten years away.  

Even if your financial goals are the same, you would need separate portfolios. This is due to their distinct investment horizons. For the older child, a more conservative portfolio is required, whilst for the younger child, you can have a more aggressive strategy.  

Picking the appropriate mutual funds  

As you may have observed, we used the term 'appropriate' rather than 'best' mutual funds. In the case of mutual funds, the term 'best' is highly subjective. This is because various investors have varying investment objectives and risk tolerance levels. As a result, instead of looking for the best mutual funds, look for funds that align with your investment objectives and do not overburden you with excessive risk.  

How to invest in mutual funds?  

To invest in mutual funds, submit a duly filled application form and a cheque or bank draft to the branch office or designated Investor Service Centres (ISC) of Mutual Funds or Registrar & Transfer Agents of the respective Mutual Funds. This is a full-fledged physical process. 

Image Source: mutualfundssahihai.com 

On the contrary, you can invest online through several websites that offer mutual fund services, or you can just visit the websites of the respective Mutual Funds in which you intend to invest. If you require advice, you can also invest through a financial intermediary such as a Mutual Fund Distributor (MFD) registered with the Association of Mutual Funds in India (AMFI) or an Investment Advisers (IA) registered with the Securities and Exchange Board of India (SEBI).