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How To Invest In Mutual Funds?

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August 29, 2022
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Mutual funds are one of the most sought-after financial instruments in the market, as they help investors grow their wealth exponentially. Such schemes invest all funds pooled in by multiple investors in different assets such as bonds, stocks, gold, and so on. The profits are then distributed amongst the investors in the form of interest, and this is what helps you grow your wealth. 

Now, the idea of making your first mutual fund investment can be a little daunting. After all, there’s a lot of jargon, investment know-hows, and financial savvy that’s involved in the process, and it's enough to make any budding investor feel a little overwhelmed.

Don’t worry, though! We’re here to help you understand exactly how you can invest in mutual funds, pick the right schemes, and make sure you have a positive investing experience. 

How to pick the right mutual funds?

Before you sign the dotted line, you must evaluate the following factors to pick the right mutual funds for your needs. 

  1. Types of mutual funds: As is the case with many financial instruments, mutual funds are available in different variants to suit different investors. 
    1. Equity funds: Also known as growth funds, these schemes pool wealth in equity assets such as the stocks of different companies As a result, they offer a high yield over a medium or long term period. However, they are also associated with higher risks as they are linked to assets that are typically volatile in nature. 
    2. Debt funds: These invest money in debt securities (such as government securities, corporate bonds, debentures, and so on). They offer a fixed income to investors, and are therefore a good option for those who want to create an additional income stream over time. As a result, they are also known as fixed income funds. 
    3. Tax savings funds: Such funds are designed to help investors save money on their taxes, as per Section 80C of the Income Tax Act, 1961. These are also known as Equity Linked Savings Schemes (ELSS). 
  2. Risk appetite: The term risk appetite refers to the level of volatility you are comfortable with. If you’re someone who cannot stomach the thought of dips in the market, then you should choose funds that have a lower risk profile. Typically, debt mutual funds have a lower risk profile, while equity mutual funds have a higher one. 
  3. Investment goals: While investing your money is a great start, it’s only a half-step towards financial freedom. The truth is that investing money once you’ve established set goals is always a more fruitful endeavor. Your financial goals don’t just help you determine the investment amount, but also the term period. For instance, if you want to put in the downpayment for a home in 5 years, selecting a mutual fund with a maturity period of 10 years won’t make sense. 
  4. Associated costs: Mutual funds are offered by Asset Management Companies (AMCs). Naturally, these companies have teams of working professionals who help investors manage their funds. In order to make ends meet, these companies charge fund management fees and administration fees. It’s important to know exactly what these fees are so that you’re aware of your total spending. 
  5. Scheme offerings: It is essential to compare mutual funds from different AMCs to get the best possible policy for your needs. Have a look at interest rates, the assets the pools funds in, the Net Asset Value of the funds (NAV), and term to determine which policy is apt for you. 

How to invest in mutual funds?

The process of investing in mutual funds is rather simple - you can either do so online or offline. 

To invest in mutual funds online, you must:

  1. Visit the AMC’s website, or visit the website of scheme aggregators or online brokerages, as per your preference.
  2. Select the desired mutual fund
  3. Submit your documents for KYC
  4. Pay your premium (and set up a recurring payment from your bank to avoid missing out on timely payments)

To invest in mutual funds offline, you must:

  1. Visit the nearest office of the AMC or fund house you’ve chosen
  2. Submit your KYC documents
  3. Fill the application form with the required details
  4. Pay your premium (and set up a recurring payment from your bank to avoid missing out on timely payments)

Regardless of the chosen method, your KYC documents would include:

  1. Identity proof - Aadhar card/ passport/ driver’s license
  2. Address proof - Aadhar card/ passport/ driver’s license
  3. PAN Card
  4. 2 Passport size photographs
  5. Canceled cheque 

Do make sure that you only work with a SEBI registered financial advisor or planner to make sure you can prevent any mishaps while investing. Such advisors can help you understand the schemes as well as identify the right schemes for your investment goals. 

Take care of your short-term goals with Hubble Money

Mutual funds can take care of all your long-term goals, but what about those super short-term cravings? Well, the answer lies in Hubble Money. Hubble Money helps you save for specific future purchases by partnering with your favourite brands. Download the app today to get the best lifestyle products without financial strain. 

Steps to create a saving plan on Hubble 

Komal Chawla

Writer-by-chance and overthinker-by-choice, raging a war against the Pineapple-on-pizza brigade

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