Mutual Funds for Beginners| How common Indians make Money?

a guide to mutual funds for beginners

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Roll your money

You got some money? Roll it. Do not keep it idle. A question will definitely come to your mind. Where can I roll it? There are many options where you can keep your money and your money will make more money. You can keep it in your bank. But Bank will give you 3 to 4 per cent interest for your money kept there. There are Term deposits like Fixed deposit and Recurring Deposits where you will get 6 to 7 percent which will somewhat defeat inflation as inflation rate is 4.96 percent in 2018. Mutual funds for beginners is a good option for investment if you want better returns.

Mutual Funds

If you have money and want it to work for itself, I will recommend you to invest in mutual funds. These are investment schemes which are managed professionally by Financial experts. As a layman, you might not have knowledge of share markets, Government bonds, etc. For you it could be intimidating. So Mutual funds are a good option for investment. They are far profitable than FDs as the power of compounding over a long period of time can give 2 to 3 times more than FD.

Types of Mutual Funds for beginners

There are various types of Mutual Funds for beginners in India, but for a beginner I would suggest:

  • Equity funds.
  • Debt funds.
  • Money market funds.
  • Hybrid funds
  • ELSS

If you are my kind of person who likes to take risks, I suggest investing in Equity Mutual Funds as the returns are high and some mutual fund schemes can quadruple your money within 5 years. But they can be a bummer too as risk is high. Experts suggest keeping the money for a long period of time.

If you are a person who likes to play safe, I suggest you go for Debt Mutual funds or Money market funds, where the returns are enough to beat inflation and also if kept for a longer period of time can build wealth for you.

The Hybrid one is for those who are ready to take moderate risk as the funds are invested in Equity as well as debt.

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I have covered ELSS in this article – What is ELSS?

If you want to begin investing, you can go for the above four.

Don’t keep all eggs in one basket

Now remember that not to keep all your money in one fund only. A wise investor will diversify his portfolio. You can invest some part of your money in Equity funds, and some in debt funds. If you are a young person, I suggest put more in Equity as even if you go in red, you can still recover.

Set a Goal

Now how to make an investment plan? First set a goal. A goal could be to buy a motorcycle, or a car, or a house, or for your marriage, or for your child’s education. This will help you in targeting the amount required and the number of years to get that amount. For example, Motorcycle worth 1 Lac Rupees after 3 years.

Lump Sum or SIP?

Then you can either chose to invest in the above mentioned funds. If you do not have money to invest at once, there is an option of periodical payments called as Systematic Investment Plans or simply SIP. You can invest weekly, monthly or quarterly for reaching your goal.

Subjected to Market Risks

All Mutual Funds come with a caveat, that is they are subjected to market risks. So one must properly read the policy documents before investing even a single paisa.

OK Got It! Now where to start?

Well, gone are the days you had to go through all the paper work necessary for investing. That is one of the barriers to mutual funds penetration. But with the presence of various apps like the Times Group’s ET Money or Nextbillion’s Groww, all the necessary paperwork is done by the app. If you do not want to go through their apps, you can directly invest in individual mutual fund house schemes by complying with KYC. Once you invest, you can keep a track on you mutual funds as to how it is performing. If it is not performing well, you can always invest in another one.

Watch the Video

For further reading:

New to Mutual Funds? Tips for a beginner

Top 10 Mutual Funds

How did you like this guide on ‘Mutual Funds for Beginners’? IF you have any questions, you can freely ask via comments section.

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