A Guide On Investing In Mutual Funds

There are many financial investment products available in the market that suit different investors holding different appetite. But there is one instrument that has remained a favourite for both conservative and aggressive investors. It is mutual funds. Available in different types – equity funds, debt funds, hybrid funds, and more, these fulfil the short, medium, and long-term financial goals of varied investors.

Mutual fund investment is regarded as a financial instrument that assists in wealth creation if done systematically and often. They help you achieve your financial goals, save taxes, and build a corpus. If you are a new investor, unsure of how to invest, this guide will help you.

Completing KYC formalities

Before you start to invest in mutual fund, you must complete some formalities, without which you cannot begin investments. Open a bank account and complete KYC compliance. This is a one-time mandatory process where the investor’s identity gets verified. Complete your KYC compliance by registering with Registrar and Transfer agencies or through the mutual fund house directly.

Provide self-attested copies of the ID and address proofs along with passport-sized photos. Have your Aadhaar and PAN for starting the investments.

Create the investment portfolio

This is where you begin choosing the funds to invest in. It can get overwhelming for new investors because there are too many types of funds, and they have sub-types under them. You can start by shortlisting a few of them who have demonstrated decent returns in the past.

The analysis process is essential, and you should check the fund performance based on the investment tenure. The thumb rule is to make sure you select funds that align with your goals and risk appetite.

Purchasing the funds

You can do offline or online mutual fund investment through the mutual fund house directly or with the help of an intermediary. If doing via mutual fund house, submit filled forms and cheques at any fund house investor service centre or opt for online service. If considering the intermediaries like banks, distribution companies, individual financial advisors, brokers, etc., you could do it at their branch or portal.

This is an essential step as here you decide how much you wish to invest and how frequently. Either go for lump sum investment or a Systematic Investment Plan. While lump sum requires you to invest in one go, SIP enables you to make investments at fixed frequencies.

Reviewing the funds

While it is essential to allocate the funds and choose an investment plan wisely that works for you, stay updated with the performance of your funds frequently. Fund review is crucial. You should take stock of your fund performance, upgrade, and adjust the portfolio whenever you feel change is required. Revisit the investment portfolio at least twice a year.

Selling the funds

If you have met your goals or if the fund is not performing as to your expectation, you can sell the funds.

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