What should you know before buying your first mutual fund
Mutual funds are fast replacing the traditional avenues of investing such as fixed deposits. The rise in the asset under management of the domestic mutual fund stands testimony to that. They have increased multi-fold in last few years. Despite such increase there is lot of potential in increasing the base of mutual fund investors. We do have an investor base of around three crore that means less than three per cent of the population invests in mutual fund.
One of the reasons for such lower penetration is fear of taking that first step towards investing in MF. In the following paragraph you will come to know on how to invest in your first mutual fund scheme.
Buying the fund: If you are buying the fund on your own (without the help of a financial advisor or planner), you can directly invest through the fund house AMC. You can go to respective website of AMCs chose the fund and within few clicks you can invest, if you are already KYC compliant. There are two types of plans for every fund that is “regular” and “direct”. It is always better to invest in direct plan of the MF schemes.
Lump Sum or Systematic Invest Plan (SIP): The choice of whether to invest a lump sum all at once or set up what is known as a systematic investment plan can depend in part on your liquidity condition and part if you are investing through a financial advisor or broker. If you are buying your own and are confident about the fund, you can always go for SIP. Under such plans, the fund house will automatically deduct a set amount from your savings account every month. It is an convenient method of investing and you can invest small amounts at a time, allowing you to invest without having to lay out a large sum of money
Your first fund: The investment experience of buying your first fund will have a great influence on your entire investment journey. Hence, it is important to select your first fund with utmost caution. The exact choice will depend upon individual; however, it is good to start investing with small amount and depending upon your risk taking ability you can invest in aggressive hybrid funds or large cap dedicated funds.