How to Invest in Mutual Fund? Investing in Mutual Funds for Beginners

Mutual Funds

Mutual Funds are very hot topic today. Here we will discuss how to invest in Mutual Funds or investing in Mutual Funds for beginners.

Introduction

A mutual fund is a type of portfolios in which a collection of stocks, bonds and other securities are mixed and bought into portfolios. Mutual Funds, by definition, are different from exchange traded funds in that they aren’t actively traded on the stock exchanges like stocks. Instead, investors buy shares of companies and other securities and sell them on to themselves. Here at Mutual Fund, Fund Houses offer their clients a wide range of investment options for their retirement savings goals etc. For example, if you want to save money for your children’s college education, consider investing in a diversified portfolio of company shares such as American Airlines, Apple, Amazon etc. you can easily invest without much risk involved. Here’s how Mutual Funds can help you achieve financial freedom and build wealth.

What is Mutual Fund?

As per wikipedia “A mutual fund is a professionally managed investment funds that pools money from many investors to purchase securities”. So simply you can say in mutual funds the fund manager collects funds from many investors and then buy securities in the market. There are professional fund manager who decide where to invest, why to invest and for how much time to invest. Beyond this they also do the deep research in the market before taking any financial decisions. This helps the investors to go with low risk investment.

How Investment in Mutual Fund is Different from Traditional Investment Options?

In traditional investment individuals invest in fixed deposits, Recurring deposits, bonds etc. these are not much attractive in terms of returns. Some people buy and sell the securities and fully bear all the risks, but in mutual funds risk is diversified and the same is managed by full time professional.

Here in mutual funds not all stocks are created equal. There are definitely times when owning individual stocks will cost more than other types of investments. However, there are times when buying and selling stocks is the way to go. With mutual funds, the process of building wealth is much easier as compare to directly dealing with the stock. This is because of low risk involved as compare to direct trading.

What is maximum and minimum limit to Invest in Mutual Funds?

You can easily start investing in SIP (systematic investment plans) with minimum INR 500/- and in lump sum minimum INR 5000/-. There is no such limit on maximum amount. Limit for cash it is limited up to 5000/- only.

Types of Mutual Funds

Here are some types of mutual funds to know:

  • Equity Mutual Funds
  • Debt Mutual Fund
  • Fixed-Income Funds
  • Index Funds
  • Balanced Funds
  • Money Market Funds
  • Income Funds
  • International Mutual Funds
  • Exchange Traded Funds (ETFs)

hOW TO Invest in Mutual Funds in India : FOR BEGINNERS

If you have decided to invest in Mutual fund then follow the below mentioned steps to start investing.

Prerequisites for Investing in Mutual Funds

  • 01. Decide your goal of investing: Before investing decide your goal that why you are investing? This will encourage you to hold the fund for longer time.
  • 02. Choose your fund manager: Now study the market and choose the Fund Hose/Manger who suits to you.
  • 03. Must have a bank account: Open a bank account where you want to transact.
  • 05. Study the various mutual fund Schemes: Study all schemes and related documents before investing.
  • 06. Understand the risk involved: understand risk involved in the process because mutual funds are also subject to market risk.
  • 07. Go with the process of Happy Investing: Now you are all set to start investing.

Process to Invest in Mutual Funds

How to Invest in mutual Funds Offline?

Here you can invest directly with your fund manger or with broker.

01. Investing Directly with Fund Manager

You can visit directly to your fund manager with the following documents;

  • Valid Address proof e.g. Adhaar Card, Voter Card, Passport, Driving License etc.
  • Identity Card
  • PAN (Permanent Account Number) in case of investing More than INR 50000/-
  • Cancelled Bank Cheque
  • Passport Size Photograph.

The official of you fund manager will get all formalities done to start investing.

02. Investing Offline through with Broker

You can visit brokers of your fund manager with the above mentioned documents and start investing.

How to Invest in mutual Funds Online?

You invest in two ways in this method;

 Official websites of the fund manager

You can log on to the official website of your fund manager and complete the required KYC (Know Your Client) formalities. Submit the asked documents and start your first investment.

 Official Applications

You can also invest through official application available on play store. You just need to download the application of your selected fund manager and complete all the formalities to initiate the investment.

Why to invest in Mutual Fund?

These are plus points of investing in mutual funds;

  • Diversification of Risk
  • Mutual Funds Managed by Professionals
  • Mutual Fund Investment with Increased Return
  • Flexibility in Investing in Mutual Funds
  • Low Cost of Purchasing
  • Low Risk in Investing in Mutual Funds
  • Freedom to Choose Your Own Fund
  • High Growth on Long Term Investments
  • Transparency in Operations Free from routine vigilance

What are the Precautions before investing in mutual Funds?

If you are thinking to invest in mutual funds, you must know these things;

  • You are a good candidate for an investment: before thinking of investing you must know yourself. You must know you are good for investing in mutual funds or not. For instance if you are habitual of withdraw invested money prematurely then obviously must not opt this way. Because growing wealth in mutual funds need time. So invest that much amount which you can hold for a period of time.
  • Understand why you are investing in Mutual Funds: understand your financial goal that why you are investing. What is purpose behind investing? Once you know the goal then give the time and let the fund grow till its maturity period.
  • Investing is something you enjoy: Investing must not bring stress for you rather enjoyment. So invest only that much amount which is best for you. You must not be in discomfort of insecurity like feelings for invested value.
  • Choose the best fit: It’s important that you choose only that best fit to you. Choose the right fund manager, right amount, right timing with right mindset.

Conclusion

So on the above mentioned discussions you can study the mutual funds and try to invest there. before investing read all the scheme related documents carefully.

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11 thoughts on “How to Invest in Mutual Fund? Investing in Mutual Funds for Beginners”

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  5. Thank you for providing this knowledge. I know very little about mutual funds. Now that I know that a mutual fund is a form of portfolio that consists of a collection of stocks, I learned about how investing in mutual funds differs from traditional investment options. What is the maximum and lowest investment limit in mutual funds? It will assist me in reducing my risk diversification.

    1. SIP Minimum Limit is Rs. 500 INR, and Lumpsum 5000/- no such limit on investment but mutual funds itself haves some limitations. but no such limits on personal investments.

  6. So, based on the preceding conversations, you can research mutual funds and try to invest in them. Before you invest, make sure you read all of the scheme’s papers thoroughly.

    1. its just about mutual funds my dear. if you are not comfortable in one specific instrument then look for another. there are many mutual funds to invest.

  7. This is the perfect blog for anybody who wants to find out about this topic. You know a whole lot its almost hard to argue with you (not that I actually would want toÖHaHa). You certainly put a fresh spin on a topic thats been written about for a long time. Excellent stuff, just wonderful!

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