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Things to Consider Before Investing In Mutual Funds as the First Time Investor

In the past couple of years, investors have shown huge interest in mutual fund investment.  Many people may also have suggested you consider investing in the mutual fund once in a while. And perhaps, this is why you are here today. So, what exactly is a mutual fund, how does it work, and what are the things to consider before investing in the mutual fund as a beginner. In this handy guide, we will enlighten you with all basics of mutual funds, so you can wisely invest in mutual funds and earn higher returns with negligible risk.

Mutual fund

A mutual fund is a type of investment in which many investors invest their funds. The fund is then further invested in different groups of assets to meet its investment objectives. There are hundreds of different types of mutual funds available online, attracting investors by offering good returns.

There are many advantages mutual funds offer. One of the biggest advantages of mutual funds is you can start with any amount as low as 500. Mutual Fund allows people from all walks of life to invest and get benefits. Plus, you don’t DMAT account to start investing in mutual funds like you need investing in share markets.

How do mutual funds work?

Mutual Fund Investment Company, or Asset management Company, pools investments from various investors or individuals. A fund manager manages the pooled investment in capital assets to generate maximum returns for the investors. Fund managers are professionals who hold expertise in managing investments and thorough understanding of the share markets, allowing the investors make money through regular interests and capital gains. Here the investors also can either reinvest the capital gains or earn a steady income. However, there are many things the investors should keep in mind while investing in a mutual fund.

Why should you consider investing in mutual funds?

  • Convenience– Mutual fund is a simple and paperless process. Being an investor, you don’t need to be an expert before investing in mutual funds. The asset management company will take care of everything. You simply need to monitor the market and invest in the right asset management company.
  • Low initial investment– One of the best things about mutual funds is that anyone can invest in mutual funds by investing from 500. Also, you have the option to invest either in SIP or lump sum investments. The first time investors usually prefer to invest in SIP.
  • The Funds are managed by professionals– Your investment is managed by professionals or professional fund managers in mutual funds. The fund managers have a team of researchers who closely monitors the markets and deeply understand the market. They have real-time access to the financial market and manage your mutual fund portfolio accordingly.
  • Tax-saving– Mutual Fund has become one of the best tax saving options in the last few years due to higher returns and shortest lock-in periods, allowing you to withdraw anytime from the mutual fund investment. Section 80c provides you relief in tax on specific financial investments.

Here are top things to consider before investing in a mutual fund as a beginner;

  • Fix an investment goal– Before investing in any mutual fund; determine your budget and investment tenure. It will help you decide the right amount to invest in the mutual fund by calculating the risk. Remember, the investment works when it is rightly invested.
  • Select the right mutual fund investment type– There is a plethora of mutual fund types available for you. Experts recommend always choosing a balanced mutual fund company with minimal risks, providing higher returns.
  • Shortlist and select one right mutual fund– As plethora of mutual fund investment types available, shortlist a few, analyze and compare them. Finally, pick the right one considering the fund manager’s credentials, portfolio components, expense ratio, and asset under management.
  • Diversify your portfolio– Always consider investing in various mutual funds. In short, diversify your fund in different mutual fund investments. It will keep you out of risks when your fund underperforms. In that case, mutual funds will make up for the loss without lowering down the value of your investment.
  • Update your KYC– You cannot invest in a mutual fund until your KYC is not updated. KYC or know your customer is a government process in which you need a PAN card and valid address proof.
  • Choose Sip– Mutual fund experts always suggest choosing SIP instead of lump-sum investment for the first time investors. Lump-sum investment can put on risk, whereas SIP enables you to spread your investment and invest at different market levels. SIP will help you earn higher returns over the long-term.
  • Have a Net Banking account– For investing in a mutual fund; you will need a Net Banking account on your bank account for a trouble-free investment. Net banking is a simple process to make investments.
  • Get advice from an expert– As hundreds of mutual funds to choose from, it gets confusing to choose the right one. Before choosing the one, monitoring the mutual fund performed is extremely important. As a beginner, you may not be able to do this. Instead, seek advice from the mutual fund experts who will help you invest in the right mutual fund and guide you in the future on where to invest and where not to invest.

 

Takeaways

To invest in a mutual fund, the only thing you have to do is seek the right mutual fund experts who will invest your money on your behalf. On the other hand, if you want to invest online, you need to visit the desired mutual fund website. Then you will have to create an investment account, where you will be asked to provide basic details. After that, get your KYC done; the entire process to get started will finish in a maximum of 10 minutes.

A mutual fund is indeed a smart investment option with negligible risk. This is why more and more people are inclined towards the mutual fund instead of the share market or any other investment. Eventually, you are now well-versed with mutual funds. Hopefully, you will start well in a mutual fund and earn higher returns.

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