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What Is a Mutual Fund and How Do I Invest in One
20 Jun 2023

Mutual funds represent investment instruments that pool wealth from an investor group to buy a range of securities. Mutual fund investment offers an avenue to invest in several financial securities. When you purchase a single unit contained within any mutual fund, you in fact own a stake in each of the investments that are composed of the whole fund. Several mutual funds are perfect investment choices  given the ease of their use, plus the perks they offer.

By means of mutual fund investment, you can invest in a diversified range of assets like commodities, cash, debt, equity and more. Allocating part of your wealth to a mutual fund is a good way to promote financial diversification of your investment portfolio, as mutual funds pool together a collection of assets and give you returns according to the performance of the whole pool. Hence, you may well gain returns with a lesser degree of risk as, among a fund of, say, five different stocks, a few may underperform, but the rest perform well and make up for loss. 

Mutual Funds in India

Several kinds of mutual funds are available for investment in India, and if you are considering mutual fund investment, it is prudent to have the following aspects in mind which will shed some more light on what these investment products are: 

  • Different Funds, Varied Goals - Based on your financial objectives, you get several types of funds. As far as the structure of any given fund is concerned, you may get open-ended, interval and closed-ended funds. Regarding portfolio management, you can opt for actively managed funds and passively managed funds. Furthermore, asset classes that you can invest in with mutual funds include debt, equity, gold, fixed income and a lot more. 
  • Planning Ahead - Mutual funds can be picked to match distinctive planning requirements. For instance, funds which are based on debt, like Liquid Mutual Funds,  help you to grow a robust emergency fund. Likewise, equity-based funds help beat inflation and construct a solid corpus for retirement. 
  • Regularity in Investment - In any given mutual fund investment, you are able to regularly invest through a Systematic Investment Plan, or SIP. The best mutual funds for SIP aid in building compounded returns/gains for the long term. Another way that regularity comes into the picture regarding mutual fund investment is by the ability to invest lump sums. You can also invest in instalments, based on your own financial convenience. 

How to Invest in Mutual Funds

Whether you invest in debt mutual funds or any other, the way to invest is the same for any mutual fund. You can either choose to invest in a mutual fund product through any bank that has an investment division, or better yet, opt for investment with a great brokerage firm like Motilal Oswal. It is also possible to invest in mutual funds online. In case you are investing in person, you may have to meet a fund manager who will make you fill out an application form with relevant details and discuss the funds available to invest in. You will have to submit your KYC details too, as this is a mandatory requirement for any investment. However, most mutual funds to invest in are sought online and the process of investing is done online too. Here are the general steps: 

  1. Sign up for an account that gives you access to choose mutual funds online.
  2. Go through the process of completing your KYC formalities.
  3. Identify any funds you wish to invest in and fill in an application form.
  4. Select any given fund and transfer any amount to invest to the fund account.
  5. In case you wish to invest through a SIP on a monthly basis, you can give your brokerage or bank standing instructions to do so. 

Invest with Care

If you wish to invest in mutual funds, you should first find out what funds are available with the broker you wish to invest these funds with. Doing a bit of homework regarding the companies of the stocks in a fund can help. While you are exploring mutual funds for investment, you can open a Demat account and consider other fruitful ways to allocate your wealth too. 

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 | LIC IPO

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