Sat. Mar 21st, 2020

How to invest in mutual funds?

How to invest in mutual funds?

Do you invest in Mutual Fund schemes? It is very important to know the Mutual Fund before investing. This will help you in making investment decisions. invest in mutual funds

Let’s know what is a Mutual Fund? We are also telling you how you can invest in Mutual Fund? Mutual fund companies raise money from investors. She invests this money in shares. Mutual funds also charge investors in return.

For those who do not know much about investing in the stock market, Mutual Fund is a good option for investment. Investors can choose Mutual Fund Scheme according to their financial goal.

How to Invest in Mutual Fund?

You can invest directly from the website of a mutual fund. If you wish, you can also use the service of a Mutual Fund Advisor.

If you invest directly, you can invest in the direct plan of the Mutual Fund scheme. If you are investing with the help of an advisor, then you invest in a regular plan of a Mutual Fund scheme.

If you want to invest directly, then you have to go to the website of that mutual fund. You can also go to his office with your documents.

The advantage of investing in a direct plan of Mutual Fund is that you do not have to pay commission. Hence, your returns are greatly increased in long-term investment. One problem in investing in Mutual Fund in this way is that you have to do the research yourself.

What is the type of mutual fund:

Equity Mutual Fund:

These schemes invest investors’ money directly into investment shares. In the short term, these schemes can be risky, but in the long term it helps you earn the best returns. Your return from investing in this type of Mutual Fund scheme depends on how the stock performs.

Investors whose financial goal is to be completed after 10 years, they can invest in this kind of Mutual Fund Scheme. There are also 10 different types of Equity Mutual Fund schemes.

Debt Mutual Fund:

These Mutual Fund schemes invest in debt securities. Investors can invest in them to meet short-term financial goals. It is okay to invest in them for a period of less than five years. These Mutual Fund schemes are less risky than stocks and offer better returns than bank fixed deposits.

Hybrid Mutual Fund:

These Mutual Fund schemes invest in both equity and debt. While choosing these schemes, it is important for investors to take care of their risk-taking ability. The Hybrid Mutual Fund Scheme is divided into six categories.

Solution-Oriented Mutual Fund:

Solution-Oriented Mutual Fund schemes are made according to a specific goal or solution. These may have goals such as retirement schemes or education of the child. You are required to invest in these schemes for at least five years.

Charges of Mutual Fund

All the expenses incurred in the Mutual Fund scheme are called expense ratios. From the expense ratio, you get to know what is the cost per unit in managing a Mutual Fund. Generally, the expense ratio is 1.5-2.5 percent of the average of the weekly net asset of a Mutual Fund scheme.

These 5 things must be known before investing in mutual funds:

So when you have made up your mind to invest in a mutual fund, then the next question comes that how to choose a mutual fund? This question is the most important because choosing the right mutual fund for investment is not less than choosing the right life partner for yourself because there are thousands of mutual fund schemes of dozens of companies in the market.

1. First step of mutual fund election:

First of all, you have to decide what is the purpose of your investment, how much you can invest and how long you can stay in it. If you have to invest for a year or two, then there will be separate mutual funds for that. If you have to invest for 5, 7, 10 years or even longer, then there will be other mutual funds for that.

For example, if you are investing for a short period, then you can choose debt funds or liquid funds. On the other hand, if you are investing for a long period, then equity mutual funds will be right for you.

2. The second step is to determine the risk-taking ability:

Once you have decided on the period of investment, then you have to ask yourself this question of how much risk you can take for this investment. Remember that for higher returns, more risk has to be taken, but in investment not only returns are important, capital protection means that the security of your capital is also important.

Suppose you have made up your mind to invest in equity mutual funds for a long period, but you cannot take the risk that the value of your investment will fall, then you have to choose the funds in which returns and risks are balanced.

mutual funds

3. Do check the past performance of the fund:

Well, there is no guarantee that if a fund has performed well so far, its performance will remain the same in the future. But from the past performance of different funds, you can do a comparative study of which fund has consistency in performance, and its performance fluctuations are not very different from market and economy. This will help you choose your favorite fund scheme,

Also, you will get an idea of ​​the average returns so far from different funds. You can also see the ratings given to these funds from different rating agencies.

4. Look at expenses:

While choosing any mutual fund, be sure to see what are the expenses associated with investing in it, because your net return can be reduced due to these expenses. The expenses that you have to look at our entry and exit load, asset management charge, expense ratio.

Although mutual fund schemes do not charge entry load, many companies charge an exit load when withdrawing money from the scheme before a specified limit, which can be up to 3%. So invest in schemes where the exit load is low or not.

5. See also the record of the fund house and manager:

It is also important to check the records of the company which is bringing the scheme and the manager who manages it, in the mutual fund scheme in which you are going to invest money. See how long the fund house has been working, how the performance of its other schemes has been and how the company’s reputation is in the market. Also, find out how much the fund manager’s experience of your scheme is and how long he has been managing this scheme.

It is important to know that an experienced and capable fund manager has gone through the ups and downs of the market and he knows the tricks of putting your money in a better way.

Check out our previous post – How to become a Mutual fund agent

4 thoughts on “How to invest in mutual funds?

  1. Mutual funds are an easy way of investing in the markets as the fund manager manages the portfolio of stocks and fixed income securities to invest in. However, the first step of picking the fund that is suitable to the investor s needs has to be done by the investor himself. It can be an overwhelming task as there are over 2,500 mutual fund schemes under two broad categories equity and debt. Equity funds are further categorised as small, mid, multi and large cap. So, how do you choose?

    1. As I do not want much risk, I choose large-cap schemes only. If I can take some risk, I would like to bet on multicap schemes. And you can invest in midcap or smallcap depending on your risk appetite.

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