By – Mr. Kamlesh Vadilal Shah- Managing Director – Share India
A mutual fund is a pool of investments by different investors who share a common objective. This pool is managed by a fund manager who then invests these collective funds in different securities and shares in the market.
Distinctive in nature, mutual funds come with market risks but also with a wide scope to enhance finances with less expenditure.
Mutual funds are one of the easiest ways to enter and participate in the financial market. There are various customized mutual funds available for specific investment goals and purposes. However, investors can create their own mutual fund portfolio based on the goal and its tenure. It is important to understand how a mutual fund works right from the time it is rolled on in the market.
For a new investor in mutual funds, it’s better to go through a beginner guide that can help provide answers to some of the basic queries before investing.
A few points to keep in mind are as follows:
1. Why to Invest in Mutual Funds?
– To stop yourself from making wrong decisions, before you invest in mutual funds sit back and scrutinizes the purpose of investing, the timeline and why investing in the mutual funds is important to you.
2. Spot Your Target
– Once you have the targets in mind – it gives you the clarity to pick the right asset to invest in. The choice will depend on the duration of your goals. For short term goals, pick debt funds that are less understandable and for long term goals, the equity funds fit the bill. A new investor must assess his risk potential before investing.
3. Standards to Select Mutual Funds:
– This is the most important part of choosing the right fund. This can be done with the help of an expert on through in -depth analysis of different MF. For beginners, going for an index fund could be one way. And over period as they understand the market a little better, adding an actively traded large-cap or mid-cap fund may be done.
4. One-time prerequisites to investing in a mutual fund:
– You need to have a bank account and you must be KYC compliant. Self attested copied of address proof, identity proof, and recent passport sized photographs are also required. For small investors, the facility of e-KYC is now available in which you do not need to submit any physical forms. Lastly, you need to have a PAN and Aadhaar Number.
5. Benefits of Investing in MF:
– MF can lead to good returns in comparison to the market share. You are also free to choose your investment amount. There is nothing less or more when comes to investing in mutual funds, they provide you with financial freedom.
These are a few basic points one shall remember while investing in mutual funds, a few benefits of it and how to initially start the process.