How To Invest In A Mutual Fund?

by Shashank Bhaskar Finance Adviser

People accumulate lots of savings in their lifetime. They keep it in bank lockers and other accounts so that they can be used when in need. They stay away from daily or regular expenses and are useful for commodities and necessities that require immediate funding. Life is extremely unpredictable, and nobody can perceive threats of the future.

Therefore, remain prepared for any emergency that may occur and save wisely. Invest in mutual fund to make the best use of all the savings and earn interest on them. There are mainly seven types of funds in this category, namely:

Growth funds
Fixed income funds
Tax saving funds
Money market funds
Balanced funds
Gilt funds
Exchange-traded funds (ETFs)

How to start investing?

Before investing in these funds, it is essential to remember some tips so that it helps in choosing the right options and accumulates funds over time.

Identifying the purpose of the investment:

It is the first step towards a mutual fund investment. Every investor has to define their investment goals which may include – buying a house, educating children, wedding, retirement, etc. Without a specific purpose, these funds will not be used when they are needed the most. Have clarity on how much to invest in how much time. It will help in making decisions for investment options based on risk, payment method, lock-in period, etc.

Fulfil the KYC requirements:

All mutual fund investors have to obey and fulfil all the Know Your Customer (KYC) guidelines like submitting documents such as PAN Card, Residence Proof, Age Proof, etc., as specified by the funding house.

Know the schemes:

There are various schemes available for mutual funds in India that suit every need of the fund investor. Explore the plans available, align them with the investment objective, analyse the risk and affordability, and then make a final decision. Also, seek help from financial advisors for assistance in schemes and how to gain high returns.

Consider the risk factors:

Remember that these investments also include risks. Often, schemes with high returns bring along high risks. As an investor, if there is a capacity to take risks, then you could consider debt fund. There are various options to earn high returns, depending upon the risk levels.

After the identification of the investment objectives, KYC requirements, and gaining knowledge of the schemes that are being offered, it becomes easier to invest in these funds. Ensure the availability of a bank account. Most of the funding houses require a cancelled cheque that must be delivered physically or online through digital banking apps.