Mutual funds are professionally managed investment programs undertaken by several Asset Management companies (AMCs). People have adopted this mode of investment recently to grow their money. Moreover, investing in mutual funds has become easier as one may opt for online investment without even stepping out of his house. Though there are several risks involved in mutual funds, one may study about it to be aware of every aspect of how to invest in mutual funds.
Types of Mutual Funds
Every mutual fund is registered by SEBI and can be broadly classified into the following on the basis of nature.
- Growth/Equity mutual funds: These are high-risk mutual funds that can fetch good returns in the long run.
- Debt funds: These ensure regular, steady and risk-free income. Debt funds are low-risk funds that fetch better returns than fixed deposits.
- Balanced fund: These are ideal for those looking for moderate-risk funds. These can give steady returns as well as ensure good growth in the medium to long run.
- Tax-saving fund: Under section 80 of the Income Tax Act, investors of these funds receive the tax exemption.
- Exchange-traded funds (ETFs): These deals with stock exchanges and assets like gold bars, foreign currencies, etc. It is the most flexible plan of investment one can invest in.
Things to Consider before investing in mutual funds
When you are interested to invest in mutual funds, there are certain aspects that you need to think about before investing in any mutual fund so that you can accumulate wealth over time.
- Purpose: Generally, when people decide to invest in mutual funds, they have investment goals such as weddings, retirement, children’s education, etc. This is essential before any investment as clarity of how much returns you want and within what period stands as the main parameter for choosing the scheme. A clear investment objective helps to choose the right option among thousands of investment choices.
- Risk profile: Mutual funds are subject to market risks. Calculating how much risk you can afford to take also influences your investment plans. If you have an appetite for high risk, you can invest on equity funds. If you want a steady return without losing your money, you can opt for debt funds. For no or low risk with returns better than the fixed deposit, you may opt for tax saving funds.
- Compare schemes: There are several schemes in the market that promises to make you a billionaire. This is where you need to do your homework so that you don’t lose your hard-earned money. The task of comparing schemes has become easier due to online investment. One can now compare SBI Mutual Fund investment with HDFC Mutual fund online One can find every minute detail of mutual funds online. For instance, you can get details such as NAV, returns in the last 2,3 or 5yrs and other related information through different investment sites or mobile apps.
- Possess a bank account: For any offline or online investment, one must possess an active bank account. One has to provide his bank account number and IFSC code to the fund house (for offline investment) or site or app (for online investment).
Now that you’re aware of all the components and prerequisites of investing in mutual funds, you’re just one step away to know how to invest in mutual funds online.
Steps to invest in mutual funds online
In this digital age, almost every fund house have developed their official website or mobile app to help people buy mutual funds directly. Moreover, there are mobile applications that allow comparison and investment in different mutual fund houses on a single platform. One needs to follow a few quick steps to be investment-ready online.
- Choose an official website/ mobile app: As there are more than thousands of options for online investment, one should choose an official website/ mobile app to use it for investing in mutual funds.
- Fill up personal details: The first step to start investing in mutual funds online is to fill up your personal details which include name, date of birth, age, address, contact number, email address, etc.
- Complete Know Your Customer (KYC): In order to invest in mutual funds, every investor should abide by KYC guidelines. Online proof of PAN card, Adhaar Card, identity proof, proof of residence, etc. should be submitted for verification.
- Choose risk profile: One should be clear about the risk he can afford to take. The risk profile is the best parameter to help you narrow down your choice in a mutual plan and choose the best investment scheme.
- Compare mutual funds: One can compare different aspects such as NAV value, return rates, etc. of multiple fund houses online and find the best mutual funds to invest on. One should make multiple small investments in different fund houses to fetch greater returns than investing the whole amount in a single fund house.
- Choose the best mutual fund for yourself: The sole purpose of investing in mutual funds is to fulfill individual investment goals. Thus one should consider all his personal factors while choosing the mutual fund to invest in.
- Make the payment: When you have chosen the mutual fund to invest in, you need to make payment via online transactions. It can be done by NEFT or UPI. After the payment, you receive a confirmation from the fund house with all necessary details such as amount invested, NAV value on the day of purchase and number of units allotted.
- Monitor the status regularly: As Mutual funds are risky, it is advisable to keep a check on the investment regularly.
After the completion of allotted days of your investment plan, you can finally withdraw the accumulated wealth directly into your bank account.
Investing in mutual funds has become simple, quick and hassle-free due to its digital presence. This low-cost investment option instills the habit of disciplined savings through its Systematic Investment Plan (SIP) and accumulates wealth with higher return rates.
(Views expressed here are the author’s own. Janta Ka Reporter doesn’t subscribe to them. )