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Invest in Mutual Funds
17 Jul 2023

Just a decade ago, mutual funds seemed complicated to most individuals, but now mutual fund investment has taken the investment community by storm. With a gradual rise in these investments, Indians have discovered that mutual funds generate stable returns over time, plus they are convenient to invest in. Although, as an investor, you may not have to do much of the actual work of investing in any good mutual fund today, you should be aware of how to invest in this mode, and understand some variables so that you make educated choices. 

Understanding Mutual Fund Investment

When a group of investors pools their capital together, with the aim of purchasing different securities, a mutual fund is formed. Hence, with a mutual fund investment, you do not have to open a demat account. Your invested amount is part of a fund that other investors invest in as well, and with all the accumulated capital, a dedicated fund manager invests in securities to match your financial goals. Typically, mutual funds are instruments to invest in equity, debt or a blend of these. Through mutual funds, you can also invest in gold. Mutual funds can be picked according to the customised needs of investors. 

The Way Mutual Funds Work

You could just put aside the idea of mutual funds and invest in any upcoming IPO, as you may find the concept easier to understand. However, you should take a serious look at mutual funds as  a great option for its versatility and because this  investment fund gives you custom-built investment. Mutual funds can be invested with any financial company like an asset management company (AMC), a brokerage, or even your bank. These are the financial institutions that help you to invest in mutual funds suited to your goals and risk appetite. 

Typically, mutual funds are managed by financial institutions and each fund is run by a mutual fund manager. In any given fund, there will be capital collected to invest in securities, from like-minded investors. For instance, if your risk appetite is not too high, you may wish to invest in combinations of equity and debt instruments, and will choose your fund accordingly. The fund manager then invests your money, and oversees the mutual fund, managing it in such a way that your investment yields returns. The returns of the fund you invest in is the income/profit generated by the funds, and this is proportionately distributed among fund investors, depending on each one’s investment. 

Steps to Invest

The technical aspects of how to invest in mutual funds are easy to grasp. All you are required to do is to research for a good fund online. There are many different factors to consider when investing in mutual funds, such as the fund's investment objective, risk profile, expense ratio, and performance history. You can use a mutual fund calculator to help you compare different funds and to find the right one for you. You can do this at brokerages and asset management companies, and even approach your bank for guidance. Signing up is not a challenge. However, the way to go about selecting a mutual fund investment that suits you is actually paramount in how to invest in a mutual fund. Before you invest, you should consider the following: 

  • Do your research well and select a fund (as there are many categories) that matches your investment goals and time horizon.
  • The way you will invest in a mutual fund will depend on your risk appetite for investment. 
  • When viewing different funds to invest in, look for an investment fund that has shown a good performance in the past. This is certainly no guarantee of returns in the future, as market risks can affect investment, but you get a rough idea of your potential returns. 
  • Keep in mind that saving tax is not the investment purpose, and think of investments as long-term holdings which have been well-thought out. 

Patient Investment

When you think of any investment, whether it is in stocks with you having to open a demat account, or a mutual fund investment, you must exert patience before you invest. Even while investing in any upcoming IPO, investors should do their background work well before they actually invest. These are the crucial ways of how to invest wisely. 

Patience and research are two of the most important ingredients for successful investing. By doing your homework and being patient, you can increase your chances of achieving your financial goals. You can also use a CAGR calculator to track the performance of your investments and see how they are progressing towards your goals.

Related Articles: Investing in Mutual Funds is Now Easy with MO Investor App | Invest In Mutual Funds Online In 5 Simple Steps |  How to Analyse Mutual Funds for Big Returns | Tax Benefits of Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | Upcoming IPO 

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