How to Invest in Mutual Funds for Beginners

how to invest in mutual funds

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For those who are fed up of getting minimal returns on their investments, there is a solution for your needs. Mutual Funds can help you earn high returns on your investments. Investing in Mutual funds is easy today.

You can choose either online mode or offline mode for investment.

  • Online Mode: By this way, you can become an investor by investing your money via the official portal of a mutual fund house or by investing via the websites of recognized registrar like Karvy, Franklin Templeton, CAMS and so. You can also invest via apps like ET Money or Groww.
  • Offline Mode: Well, in most cases beginners prefer offline mode after seeking advice from an adviser and approach the registrar in person. Many nationalized banks can assist you on mutual funds investment.

Here in this article, I am going to elaborate on investing money on mutual funds and what are all the factors to know before getting started.

If we list out the most financial based searches conducted by young adults in most parts of India, it would end up in the phrase “how to invest in mutual funds online?”

Before stepping deeper, let’s starts with the basics of mutual fund investments.

What are Mutual Funds?

In techie mode of conveying, Mutual fund can define as the program made by professionals where shareholders earn money by trading in online.

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However, in simple words, it can determine as one type of investment that allows investors to invest their money on stocks, bonds or shares, and other assets.

The money invested by the investors makes them earn just like the Goose That Laid Golden Eggs!

However, the invested money handled only by the professional money experts who deliberately paid for their financial management expertness.

Investors allowed buying or selling their assets by through professional money managers.

How does it work?

New to finance world! Then you will surely scratch your head on how do mutual funds work? How investors earn money?

The investors who invest on the assets literally become those assets owner and shareholders. The shares owned by the investors earns them money.

The money flow of the assets owned by the investors can be judged based upon the interest rate/dividends rate of the assets as per the market values.

Before start investing in mutual funds, one should build a proper investment portfolio depending upon the current market values.

Generally, Investment portfolio are created and managed by the professional fund managers who are appointed by the AMC (Asset Management Company).

Nothing comes for free in the current business world. Yes! That implies in mutual funds investment too, for creating and managing investment portfolio the fund house AMC will collect annual fee. But if you get a direct plan, the fee is minimal.

Why Mutual Funds Investment?

Are you the person who wants to pinpoint each and every node before start acting? Then this part will illustrate why you should start investing in mutual funds.

  • When compared with all other investment option, a mutual fund investment is the most convenient and requires less effort to manage your returns along with your investment portfolio.
  • You can start investing in mutual funds with a low initial value starting from Rs. 500. With the aid of SIP (Systematic Investment Plan), you can avail the benefit of the flexible investment.
  • Professionals will manage your investment in mutual funds, in addition, you can avail exemption for the invested money from taxation.

Who can Invest and How?

Worried about the eligibility factors to start investing in mutual funds?

Well, mutual fund investments do not require any legal documents or any eligible criteria.

To be frank, anyone irrespective to their financial status can start investing in the direct plans of mutual funds.

But, it is highly advisable for the newbie who looks to invest in mutual funds to seek advice from advisor/distributors over the risk factors, investor’s goal, and other aspects before entering.

Mutual Funds Working Mantra Secret

Are you serious about stepping into mutual fund investment?

Here are the secret mantras which are vital for you to get succeed in mutual fund investment.

  • Always have clear thoughts on your investment goals
  • Shortlist the suitable mutual fund scheme which you feel comfortable and not risky
  • Consider about investing more than one scheme it will lead to portfolio diversification and reduces the market risk
  • For beginners, it’s better to prefer SIP (Systematic Investment Plan) rather than opting lump sum investments.
  • Always have up-to-date KYC (Know Your Customer) documents on your portfolio
  • Never hesitate to seek advice from expertise marketers

Investment Options

If you are pretty sure on investing money but don’t know how to invest in mutual funds directly?

Here are the investment options you do have when it comes to mutual fund investments.

You should prefer investing in mutual fund DIRECT PLANS, where you do not need to worry about finding an adviser. You can simply fill the desired application by mentioning DIRECT and start trading once it approved.

For applying, you can choose either online mode or offline mode for investment as mentioned in the introduction to this article.

Beginner’s Guidelines

  • For beginners, its better to start investing with low amount Rs. 500
  • Diversifying the portfolio is highly beneficial for beginners to reduce market risk
  • Start your mutual fund investments in automated SIP mode as it will bring a discipline.

MF Jargons for Beginners

TermsDescription
AMCAsset Management Company – It refers the company that runs your mutual fund
AUMAsset Under Management – Collective Investment funds of a mutual fund scheme
Credit RatingDebt fixed by rating agencies based upon the payback capacity of companies or government
Direct FundsFunds brought directly from AMC without any interference of distributors
Debt FundsInvestment carried on debt instruments
Dividend SchemesScheme that offers regular dividends to investors
ELSSEquity Linked Savings Scheme (Tax saving funds)
ETFExchange Traded Funds (Stock Exchange)
Index FundUsed to track the components in market
NAVNet Asset Value
NFONew Fund Offer
PSUPublic Sector Undertaking
RTARegistrar and Transfer Agent

Bottom Line

As the Father of Value Investing Benjamin Graham once said, “Money Making via Investment purely depends upon the amount of intelligence and effort”.

Mutual funds investments are not an exception to that.

One should always be aware of the market risks and never shows laziness on doing researches on assets before buying.

If all the investments done with proper management then money making will be as easy as many think in mutual funds.

If you need a rough idea on how much mutual funds can help you earn, here you can try our mutual fund investment calculator in the SIP mode.

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