10 tips for Online Mutual Fund Investing | Motilal Oswal

Guidelines for Buying Mutual Funds

In India, mutual funds are considered one of the most sought-after investment options today. It seems like everyone has invested in one and only has good things to say about mutual funds. When you invest in mutual funds online in India, you could be investing in an amalgamation of stocks, money market instruments, bonds and other securities. The popularity of mutual funds can be credited to the many advantages that they bring. For instance, all investors want diversification of financial portfolios, and mutual funds provide that. Furthermore, investments are managed by proficient and expert fund managers. So, investors can rely on the fact that funds are being allocated in the best way. 

Anyone Can Invest

From the smallest investor in India, to the largest, mutual funds hold an appeal that not many other investment avenues offer. Firstly, those with limited amounts of capital can invest. Through different investment methods like a SIP, investors are permitted to invest as little as Rs. 500 initially to gain returns. Additionally, knowing how to invest in mutual funds online in India has become very easy. You may have learned how to open a demat account online, and starting a mutual fund is not hard either. However, as any good investor knows, it's essential to know about markets and tricks and tips related to markets. 

Once you have knowledge on your side, you have the potential for significant returns from any mutual fund investment. There are ways to make mutual funds work for you, and it's essential that you follow a few hints before you make a head start. There are ten tips that you can pay heed to as you forge ahead with mutual funds. 

Tip # 1 - Know the Advantages of Mutual Funds

It is the contention of the new generation of India that everyone must make their idle money work for them. But, even if you don’t have idle money parked somewhere, there are ways to make what you do have, even in a small way, work so that it earns and builds more wealth. When you buy stocks, you know the pros of investing, but you should also know the benefits you get when you buy mutual funds online. Here are some clear advantages of mutual fund investments done online:

  • Mutual funds are comprehensive enough to understand, and so more people are willing to invest through accessible, user-friendly portals by comparing funds. 
  • The nitty-gritty of the markets is in the hands of capable fund managers who do all the investing work.
  • Mutual funds offer diversification by investing in a range of asset classes, mitigating risk and enhancing rewards. 

If you invest in an upcoming IPO, you would think of the benefits first, and so you should with mutual funds. 

Tip # 2 - Know About Mutual Fund Types

When you want to buy mutual funds online, you can easily compare various types and decide on funds that suit you. Mutual funds have categories according to assets like bonds, stocks and cash, and they are grouped further according to their strategy, style and objectives. Broadly speaking, you can choose equity mutual funds, debt mutual funds, or hybrid/balanced mutual funds. Equity funds give you high risks but potentially high rewards. Debt funds are for less risky investments. Hybrid funds give you a mix of both. 

Tip # 3 - Educate Yourself About Risk

If you think you can get any investment scheme with potentially high rewards without risk, you’d be looking for a needle in a haystack. However, no investment can be entirely free from market risk in this segment. Therefore, it’s worth assessing the risk with each kind of fund so that you can align a fund with your risk tolerance:

  • Risks in Markets - These influence a decrease in the value of any funds due to unavoidable circumstances in the markets overall.
  • Risk of Liquidity - This affects all fund types when you wish to sell mutual funds, but there are hardly any buyers.
  • Risks in Interest Rates - This mainly affects debt funds when fund managers fail to take correct calls when interest rates change.
  • Credit Risks - The risk of the fund house or fund manager defaulting by investing in debt funds of a low standard must be paid attention to. Only mutual fund houses with a satisfactory and authorised credit rating must be chosen. 

Tip # 4 - Consider Your Own Risk Appetite

When you buy mutual funds online, your ability to handle any associated risks enters the picture. Each investor approaches investment with a different risk appetite. In the scenario of mutual fund investments, the more the returns promised, the greater the risks. However, you can choose between high, medium or low-risk funds, in case the risk factor plays on your mind (and it should be thought about). 

Tip # 5 - Allocate Assets Well

You can maximise returns by allocating your wealth appropriately. Have a balanced combination of stocks, for instance, even though large-cap stocks may entice you with expectations of high returns. In addition, consider the time you have for investment and your risk capacity while allocating capital. 

Tip # 6 - Select the Pick of the Bunch

While looking for mutual funds, you should choose the best to invest in mutual funds online. You can do this by checking the mutual fund’s record of performance, the mutual fund’s age, any related risks, the expense ratio, the credibility of the asset management company or fund house, and other factors. Mutual funds also have a rating which can be checked, and you can compare ratings online easily. 

Tip # 7 - Be Aware of Taxation

You should know about taxation as it applies to your mutual fund investment. Based on your time of holding, you will have to pay short-term or long-term taxes, and you must make sure you don’t end up paying taxes, so your returns become redundant. 

Tip # 8 - Practice How to Rebalance Mutual Funds Regularly

It is imperative that you track your fund’s performance frequently. By doing this, you can monitor and decide whether your fund is working for your benefit. If it is not, you may want to rebalance it, in terms of changing your investments in the fund. Again, all this is easily done online. 

Tip # 9 - Remain Updated

If you invest in mutual funds online, it is very easy to manage your funds and be alert about any new trends or updates. The markets are volatile and dynamic places. There is always a buzz about new trends in investments, policies, and the like. You should be in sync with these so you can take advantage of certain fresh news. 

Tip # 10 - Remember the Terrific Trio

The habit of investors is to think only of returns while investing. However, there are crucial points, three to be exact, that you must consider. First, think of the right time horizon, and your own financial standing, and make sure you review your financial portfolio. These are vital if you wish to have significant returns from mutual funds. 

No Stress, Just Invest

Mutual funds are effective ways to invest. You may have had to open a demat account for equity investment, but you do not have to for mutual funds. You can choose a fund online and start investing with any proficient brokerage. Don’t miss out on any upcoming IPO, which you can also evaluate online for a sound investment. 

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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