Mutual funds are necessarily investment vehicles comprising the assets of various investors sharing a mutual economic objective. A fund manager manages the credit pool gathered from different investors and invests the savings in a multitude of investment alternatives such as corporate stocks, bonds, and shares. The Indian Securities and Exchange Board (SEBI) regulate mutual funds in India, and investment in mutual funds is regarded as the simplest way to boost your wealth.
Mutual funds are quite advanced products and becoming nervous is very prevalent for a first-time investor. However, by getting a basic understanding of how mutual funds operate, you can readily begin your investment journey. The following is covered in this article.
It is essential to maintain in mind the following points before you decide to invest in a mutual fund. It will assist you to select the correct type of funds to invest in and help you accumulate wealth over time.
- Identify your investment objective-
This is the first step towards direct mutual fund investment. You need to identify what your investment objectives can be-purchasing a home, education for children, marriage, pension, etc. If you have no particular objective, you should at least be clear about how much riches you want to accumulate and how much time you want to spend. Identifying an investment goal enables investor zero in investment choices depending on risk level, payment method, duration of lock-in, etc.
- Complete the Know Your Customer (KYC) requirements
Investors must comply with the KYC rules to invest in a mutual fund. The shareholder must send copies of the Permanent Account Number (PAN) card, residence proof, age proof, etc. as stipulated by the fund house.
- Knowledge of accessible schemes
Alternatives are flooding the mutual fund market. Some schemes meet nearly every investor’s needs. Before investing, make sure that by exploring the industry, you have completed your homework to know the various kinds of systems available. Align it with your investment goal, your risk appetite, your affordability and see what suits you best after you have achieved that. If you are not sure which scheme to invest in, seek the assistance of a financial advisor. It’s your cash at the end. You have to make sure it’s used to get maximum yields.
- Deem the risk factors
Remember that there is a set of hazards involved in investing in mutual funds. High hazards often follow schemes offering high yields. You can invest in equity schemes if you have a high-risk appetite and want to achieve high returns. On the other hand, you can go for debt schemes if you don’t want to risk your investment and are all right with mild returns.
You can begin investing in mutual funds after you have established your investment goals, fulfilled the KYC criteria and explored the multiple schemes. Also, a bank account is a necessity while investing in a mutual fund. Most mutual fund houses will request a physical or online copy of an IFSC (Indian Financial System Code) and MICR (Magnetic Ink Character Recognition) canceled check leaf.