Ten years ago, mutual funds were relatively unheard of. But nowadays, it is a priority for many people to learn how to invest in this particular investment vehicle. This is due to the fact that mutual funds are now an extremely popular way of diversifying one’s portfolio. Therefore, understanding the fundamentals of investing in mutual funds is essential.
Mutual Fund Basics
Before one can make an informed decision about investing in mutual funds, it is vital to comprehend what a mutual fund is. In essence, a mutual fund constitutes capital pooled from multiple investors, which are then invested into various securities. Rather than being a financial instrument itself, a mutual fund serves as a vehicle to invest in other assets such as stocks, gold or bonds. The capital collected through the pool is then invested into these various securities and instruments found within the money market. India provides an abundant selection of mutual funds through asset management companies and brokerages of repute.
How to Start Investing in Mutual Funds
When an investor buys a single unit in a mutual fund, they acquire a portion of the diversified investments that it includes. Understanding how stock investments function is straightforward once you open a Demat account. But how does a mutual fund work? It can be beneficial to consider a mutual fund akin to a trust. This trust collects capital from multiple investors who have similar investment objectives. Typically, an asset management company (AMC) controls and oversees the mutual fund, and assigns a fund manager to oversee it. Each mutual fund consists of its own set of securities which are tailored specifically to the needs of one particular group of investors.
Knowing how to invest in mutual funds online is a quick and convenient way to start investing. Fund managers, who are professional experts, take care of your investments with the specific goals you have in mind. The revenue generated from funds is shared among its investors, so it’s not hard to invest in mutual funds in India. With the help of a financial advisor or excess of information available on investment portals, you can easily be on your way.
How to Invest Money in Mutual Funds
Today, applying for an Aadhaar card and even shopping for groceries can be done online. When it comes to investing in mutual funds, the first step is to decide on a fund that best suits your temperament and financial objectives. If you are not someone who likes to take risks then most likely you would focus more on debt instruments than stocks through a mutual fund. Once the decision has been made about which mutual fund is right for you and your goals, you can move ahead with the investment over user-friendly portals. Investing in mutual funds online in India is no longer challenging!
To sign up for a mutual fund investment through an AMC or good brokerage, follow these steps:
- You can visit the website of the AMC, brokerage or bank that offers the mutual fund, or you can access the site via the app of the fund house.
- Click on any tab that leads you to “investments”, “mutual funds”, or “mutual funds investments”.
- An e-KYC verification tab is likely to appear.
- When you have completed this procedure and done your homework on the mutual fund you want, you can enter the details of the fund, units to purchase, and tenure.
- When all your details have been submitted online, you can easily get a confirmation and track the performance of your fund.
- A mutual fund account will be linked to your bank account, debiting any initial funds (that you pay as a lump sum for invested securities), and crediting any profits.