How to Invest in Mutual funds ?
Investing in mutual funds is a popular way to grow your wealth over time. Here’s a step-by-step guide on how to invest in mutual funds.
1) Set your financial goals
Determine your investment objectives and the purpose for which you are investing.
Are you saving for retirement, a down payment on a house, or any other financial goal?
This will help you choose the right mutual funds that align with your goals.
2) Research and select mutual funds
There are numerous mutual funds available, each with its investment strategy and risk profile. Consider factors such as fund performance, expense ratio, fund manager’s track record, and investment style.
You can research and compare mutual funds on financial websites, read prospectuses, and seek advice from financial professionals.
Websites – moneycontrol.com , Economictimes.com etc can help you with all the details related to the particular mutual fund
Advisorkhoj.com is one site where you can compare and do complete research on mutual funds
3) Open an investment account
To invest in mutual funds, you’ll need to open an investment account with a brokerage firm, mutual fund company, or an online investment platform.
You can either go Direct meaning investing on your own in any of the mutual fund with proper analysis. Any Registered Investment Advisor(RIA) may also guide you in choosing the right mutual fund. You may need to pay a fees for RIA.
You can also approach a Mutual fund distributor who can help you in investing in any of the mutual fund which is suitable for you.
Example – Brokers like ICICI, HDFC etc or Online apps like Coin, Groww etc or Mutual fund companies directly like SBI, HDFC, ICICI etc
4) Complete the necessary paperwork
Once you’ve chosen the provider, you’ll need to fill out the required application forms. This may include personal information, investment objectives, and your bank account details for transactions.
Major thing is KYC. If your KYC is registered means you can invest directly through online apps.
If KYC is not done means, you need to have Pan card and driving license or passport or voter id, then cheque leaf along with photo. You can submit these proofs along with KYC form in CAMS or KARVY office or by visiting any mutual fund office.
5) Determine your investment amount
Decide how much money you want to invest in mutual funds. Some funds have minimum investment requirements, so ensure you meet those criteria. You can choose to invest a lump sum or set up automatic monthly contributions, which is known as rupee-cost averaging
Minimum investment required in most of the mutual fund is 100 Rs.
Invest an amount which will help you to achieve your financial goal. There are people who invest in lakhs every month by means of SIP.
6) Choose your investment strategy
You have two main options when investing in mutual funds: lump-sum investing or systematic investment plan (SIP).
Lump-sum investing involves investing a significant amount all at once, while SIP allows you to invest a fixed amount at regular intervals, such as monthly
Minimum mandatory tenor to invest via SIP is 6 months. Investing in equity mutual fund should be done for long term and generally for 5+ years.
Hybrid mutual funds can be for a period between 3-5 years. Hybrid mutual fund is a mix of equity and debt funds.
Debt mutual funds and especially ultra short term mutual fund can be used for requirements less than 2 years. These funds doesn’t invest in equities and provides on par with RBI interest rates prevailing at that time.
7) Review the fund's prospectus
The prospectus provides essential information about the mutual fund, including its investment objective, fees and expenses, past performance, and risk factors. Read the prospectus carefully to understand the fund’s details before investing
Every fund follows a particular strategy of investing in stocks or other mutual funds or Gold or Real estate and this can be analysed in websites like moneycontrol or economic time while doing the initial research itself.
8) Make your investment
Once your account is set up and you’ve chosen the mutual fund(s), you can proceed to invest your money. You can typically do this by transferring funds from your bank account or through electronic funds transfer
9) Monitor your investments
Keep track of your investments and review their performance periodically. While it’s important to stay informed, avoid making impulsive investment decisions based on short-term market fluctuations. Mutual fund investments are generally meant for the long term.
10) Rebalance your portfolio
Over time, the value of your investments may change, causing your portfolio to deviate from your intended asset allocation. Periodically reassess your portfolio and rebalance it if necessary. This involves buying or selling mutual funds to maintain your desired mix of investments.
Remember, investing in mutual funds carries risks, and it’s important to diversify your portfolio and consult with a financial advisor if needed. Also, past performance is not indicative of future results, so make informed decisions based on your financial goals and risk tolerance.