Mutual funds guide for starter

Mutual funds guide for starter

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Mutual funds guide for starter

Mutual funds are popular investment options that pool reserve funds from various investors under a specific plan overseen by an asset management company (AMC). The pooled money is then invested in securities like bonds and equity shares as per plan's investment objective. 

The AMC selects the fund manager, who is then responsible for dealing with the investment portfolio, making moves according to the market developments to — all of it to secure your interests and grow the invested money. There is a yearly charge put out by the fund house for its service and the whole task of managing your investment portfolio.

Why invest in a mutual fund scheme

Mutual funds have grown to be a popular investment choice as there is much transparency around the process. You always have access to your investment portfolio — often at the tip of your fingertips — so that you can know how your funds are performing in the market.

Here are some of the reasons why you should start to consider investing in mutual funds:

Accessibility, transparency, and convenience

Investing in mutual funds is hassle-free. There is, but minimal paper-work and market monitoring. Based on your investment goals and your expectations, you can get an introduction to a broad market and investment options. Also, there is an option to switch between portfolio and funds and balance them well, so that you can make the best out of every purchase.

Low initial investment

Another great benefit of a mutual fund is that you have the option to start low. The minimum amount that you can put in to invest stands at Rs 500 every month. You get access to such a diversified mutual fund portfolio at such a low price. Additionally, you get the option to invest regularly through a Systematic Investment Plan (SIP). When contrasted with a lump sum deposit, a SIP is an excellent method to bring down the general expense of investment and also get into the habit of regular and disciplined savings — a practice which with reaps plenty fruits in due time.

Tax-saving benefits

Section 80C of the Income Tax Act allows you to claim tax benefits on some financial instruments, and mutual funds schemes happen to be one of them. Out of the several schemes, Equity Linked Savings Scheme (ELSS) has turned into a popular option for Indians to save tax since it promises higher returns and has a lock-in period of 3 years.

Funds managed by professionals

When you invest in mutual funds, you get a sheer measure of security. Since not everyone is good with overseeing the market — and you might be one of such people — the Asset Management Company appoints a fund manager who is specialized to manage the firm. The entire process is backed by a team of researchers who have a keen eye on how the funds are performing in the market. If a sudden shift in the market calls for the tuning of your investment portfolio, then it is the responsibility of fund managers to do that.

Good fund managers always make sure that your investment is in safe hands, and that they are always updated with time and shifts in market trends.

How to select your first mutual fund

If you are investing in a mutual fund for the first time, you should pick a plan which resonates with your age, your investment goals, and the kind of savings that you are willing to put in your funds on a regular basis. You can use free online fund managing calculators to figure out how a particular plan or a specific course of investment will turn out to be in the coming years. On FInserv MARKETS, all such information is provided to you beforehand. With maximum transparency, you can always check how your first few funds are doing.

You should go with arbitrage or debt funds if you are looking to invest for a short period — say, from one-day to a maximum of three years. If you want your mutual fund investment to last for anytime between three to five years, you should look at hybrid funds that are a combination of equity and debt funds.

If you want your investment period to be even longer — say for five to seven years — you should consider equity mutual funds so that you can get a well-balanced output for your investment over the course of these years.

If you do not have the significant market experience, then you can start with how the fund has performed over time — say in the last few months, or over the last few years. Looking at the data and trends will give you a better picture of what to spend. You should keep an eye for funds that have been continuously beating their own benchmarks. If a fund has a habit of performing well through time, then it indicates that the fund is under proper management and the risks associated with it are quite less.

The best way to approach investing is to have a diverse set of assets and investments in your portfolio so that your gains are well-balanced, and not negatively affected by the ups and downs of the market. Your fund manager, for most of the part, takes care of these things and ensures that your investments never stale out in a fund that is not performing. Again, online calculators are always handy as they take manual inputs from you and tell you precisely how much your investment will amount to in a given period and interest.

Mutual funds on Finserv MARKETS come with zero percent commission. Besides, opening an account is hassle-free and quick, and requires minimal documentation — just get ready for the KYC part. Here, your portfolio gets better over time as you are provided with several recommendations based on your risk profile and how your investments have turned out to be. With Finserv MARKETS, you also get to choose between regular and direct mutual funds — a complete exercise over how and where you want your money to be invested.

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