How to Invest in Mutual Funds?

Mutual Funds
1

How can I invest in mutual funds in India? What things should I consider?

2

Investing in mutual funds in India is actually very simple. You can do it online completely. To invest in mutual funds, you need to prepare a few things first.

  • Understand the mutual funds first. There are mainly 4 types of mutual funds, equity, debt, hybrid and index funds or ETFs. The risk involved for each varies, you must read up on it before anything.
  • Once you have decided where you want to invest, choose a platform. You can directly invest on Asset management company’s website or go via a third party broking platform. Another option is to invest in mutual funds through your bank.
  • Decide the platform and then complete your KYC details using PAN card, Aadhaar, your photo and bank account details.
  • Based on your investment option (lump sum or SIP), select the fund and start investing.

Note that investing in mutual funds should be based on your goals. Assess if you want a long-term investment approach, balance your portfolio or have short term investment goals. Do not be scared of the market volatility. Review your portfolio quarterly or half-yearly to further balance your investments.

3

Adding to what Ajeeta ji has mentioned, investing in mutual funds is way simpler than most people think.
At first, I did it myself and here is the process I followed. Hope this will help you too:

Step 1: Set Clear Goals

First, you have to understand the purpose of investing. I am currently investing in 3 mutual funds. The first one is for my bike, the second one is for my retirement and the third one is for my child’s higher studies.

According to your goals, you can choose any one of these types of mutual funds:

  1. Equity Funds: I pick these for long-term growth (high risk, high return).
  2. Debt Funds: I use these for stability or short-term needs.
  3. Hybrid Funds: Perfect when I want a balance of both.

** Step 2: Open an Investment Account**

I usually invest either through the AMC’s official website or via trusted stock brokers. The key here is to always go for direct mutual funds as they have lower expense ratios and no distributor commissions.

Step 3: Choose Where and How Much to Invest

First, try to pick the best fund in the category by checking the performance, expense ratio, tracking error and other ratios. I prefer SIP, which allows me to invest a small amount every month. Thus, I can maintain discipline in my investment journey.

Finally, you should keep track of the fund’s performance.