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How to Invest In Mutual Funds

21 Jun 2023

Just a decade ago, no one had even heard of mutual funds, as this investment avenue was just getting its footing. However, these days, knowing how to invest in mutual funds is at the top of the list of things to do for many individuals, from new investors to senior citizens. Moreover, mutual funds are a popular way to diversify investment, and as of 2022, the number of total mutual fund folios stood at some 14.11 crore. In view of this, it is important to get a good grasp of how to invest in mutual funds. 

Mutual Fund Basics

Before getting down to the ways of how to invest in mutual funds, it is crucial to understand what a mutual fund is. Put simply, a mutual fund is an avenue of investment in which several investors allocate capital to a pool of capital. The money that is collected in this pool is then invested in a number of securities. Therefore, rather than a mutual fund being called an instrument of investment, it is actually a vehicle to invest in securities like stocks. Via a mutual fund, it is possible to invest in various securities, namely, stocks, gold, bonds and certain instruments in the money market. The best mutual funds to invest in India are available through fund houses and asset management companies, besides reputed brokerages. 

How to Start Investing in Mutual Funds

When an investor buys a single unit in a mutual fund, it can be said that they own a stake in all the investments that the fund includes. Knowing how stock investments work is easy after you open a Demat account. But how does a mutual fund work? Thinking of a mutual fund resembling a trust is an excellent way to start. The trust gathers capital from many investors who share the same investment goals. Typically, an AMC, or an asset management company, operates and manages a mutual fund, and a fund manager is assigned to run a particular fund. Every mutual fund has a unique set of securities invested in, matching the distinctive needs of a group of investors. 

Knowing how to invest in mutual funds online will get you into mutual fund investment quickly and conveniently. Once you sign up, the fund manager manages your funds according to your aims. The fund manager is a professional whose sole objective is to earn the best returns on the investments made in the fund. The income which is generated through any fund is then proportionately distributed among the investors who have invested in it. Knowing how to invest in mutual funds in India is not a challenge. A financial advisor can help, or any investment portal gives you a plethora of information online. 

How to Invest Money in Mutual Funds

Today, every service and process, from applying for an Aadhaar card to shopping for groceries, is conducted online. Mutual funds can be invested online too. The first thing to do is decide on a mutual fund based on your temperament as an investor and your financial aims. If you are not the risk taker among investors, for instance, then you may think of less of an investment in stocks and more in debt instruments through a mutual fund. Once a decision is made on which mutual fund suits you and your horizon and goals, you can actively go through the process of online investment. How to invest in mutual funds online in India is far from a challenge as you have user-friendly portals to do so. 

These are the general steps to go through to sign up for a mutual fund investment through any AMC or good brokerage: 

  • Visit the particular website of the AMC, brokerage or bank that is offering the mutual fund. You may also visit the site on an app of the particular fund house.
  • You can click on any tab that leads you to “investments”, “mutual funds”, or “mutual fund investments”. 
  • You will likely find a tab in which you have to undergo an e-KYC verification process. 
  • Once you complete this procedure, after you have done your homework on the mutual fund you want, you can enter details of the fund, units to purchase and the tenure. 
  • After all your details are submitted online, you can easily get a confirmation and view how your fund is performing from time to time.
  • Once you set up a mutual fund account, this will be linked to your bank account to debit the initial funds (that you have to pay as a lump sum for invested securities), and credit any profits you get from the fund. 

Good Investments for All

How to invest in mutual funds these days is as simple as how to open a Demat account and buy stocks. However, while you do your investing, do consider any upcoming IPO to diversify your portfolio further to grow your wealth. 


Related Blogs: 5 reasons for the sharp growth in SIPs in India | Tax implications on a Mutual Fund and SIPs | SIP and the power of compounding | If you're investing in SIP, make Mutual Funds SIP calculator your best friend

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