A mutual fund is a simplified mode of investment that is a popular choice for beginners, as well as seasoned investors. You can start investing in mutual funds with a small amount and with the help of the expertise of fund managers.
What are mutual funds?
Asset Management Companies (AMC) pool individual and institutional investments with common goals and invests the funds keeping the goals as the primary driver. Expert fund managers manage the AMC funds and aim to maximize the earnings from such investments. As per the investment goal of the particular mutual fund, an investment may be made in equities, debts, gold, commodities, or their sub-types, and in different proportions.
How do you earn from mutual funds?
Your mutual fund investment grows from the capital appreciation of the investment, and the dividend or interest earned thereon. You can reinvest the capital gain earned in a growth mutual fund or cash in on the income by investing in dividend mutual funds. However, there are expenses involved in mutual fund investments. For example, the AMC charges an annual fee for managing the funds, which is known as the expense ratio.
How to start investing:
Determine your investment goal – You have to ascertain your goal for your mutual fund investment. For instance, you might want to make this investment for a financial milestone that is likely to take place 10 years from now. This will decide your investment tenure and the corpus you wish to have. If you wish to invest through Systematic Investment Plans (SIP), you have to find the type of scheme that can deliver the required return.
Choose the fund type and AMC – Not all mutual funds deliver the same rate of return. Depending on your goal, you will have to decide whether to invest in equities, debt, hybrid, or other types of fund. For your preferred mutual fund type, you have to compare the various AMCs and their schemes. Consider factors such as assets under management, expense ratio, and the fund manager’s credentials before you make this decision. This will help you to finalize the mutual fund ideal for you.
Complete documentation and formalities – To start a mutual fund account, you will need a KYC-compliant bank account, proof of address and residence, PAN and Aadhaar, and a passport-size photo.
Monitor and adjust your goals – Once you start investing, you have to regularly monitor the performance of your selected scheme(s) and make changes if required. It could mean increasing the SIP contribution, switching between schemes, or selecting a different AMC. You also need to diversify your mutual fund portfolio to manage the market risk better.
The benefits of mutual fund investment
You can invest in mutual funds online at your convenience in a paperless form. A mutual fund investment can be started with any budget. SIPs can be started with as low as Rs. 500 per month. On the other hand, investors with a larger amount at their disposal can opt for a lump sum mutual fund investment. Mutual funds are ideal for investors who prefer expert management of their investments.
You can begin your investment journey with a mutual fund online with Tata Capital Moneyfy app. Featuring valuable market and mutual fund information, they can guide beginners to achieve growth and success from mutual funds.