How to Start Investing in Mutual Funds

How to Start Investing in Mutual Funds

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If any of the document images are unclear, then you will receive a communication to upload a clear picture. 7 companies that hire virtual assistants 3– To begin the KYC process, first enter your PAN card number and scan it. Here are some considerations you should make when selecting a Mutual Fund. Stamp duty is applicable on the issuance and transfer of Mutual Funds irrespective of whether units are held in Demat or physical mode. You can also wish to invest offline with the AMCs as most of them continue to provide this feature. Fill in the amount you plan to invest in the ELSS and the mode as either One Time or Monthly SIP.

These funds are primarily invested in equity shares of various companies. If you are looking for long term gains, generating high returns, and are comfortable with moderate to high market risks, then you should invest in these funds. You can buy and sell ETFs throughout the day with real-time pricing. By contrast, mutual funds can only be bought or sold at the end of the day after the market closes. Again, for long-term investors this distinction may not be significant as you aren’t generally trying to time the market for particular prices.

Before investing in Mutual Funds, you must assess the level of risk you can take and your financial goals, whether it is for the short term, mid-term or long term, and invest accordingly. Taxable accounts at an online broker lack the tax benefits of 401 plans or IRAs, but you can make withdrawals at any time without paying penalties. This makes them particularly well suited for goals you’d like to achieve before 59 ½, the federal retirement age. They typically charge lower fees than actively managed funds. Historically, passively managed index funds have outperformed actively managed funds over the long term. These are sales commissions charged by the broker who sells you a mutual fund.

Why should you invest in mutual funds?

Mutual funds are often classified as “load” or “no-load” funds. Given the wide range of funds available, you should be able to find comparable investments without fees. When researching potential mutual funds to invest in, use tools like the Mutual Fund Observer and Maxfunds. These sites provide detailed information on different mutual funds in multiple categories. Most brokerages’ websites also include mutual fund research tools and screeners for clients.

In non-equity funds, short term capital gains are taxed at as per your income tax rate and long term capital gains are taxed at 20% after allowing indexation benefits. Interest income from most traditional fixed income investment is taxed as per the income tax rate of the investors. For investors in the higher tax brackets, mutual funds enjoy a significant tax advantage compared to traditional fixed income investments.

By Visiting Office of Registrar and Transfer Agents – Registrar and transfer agent manages the back-end operation of multiple mutual fund companies. For instance, they manage day-to-day operations like purchase and redemption requests, KYC, etc. Since multiple fund houses tie up with one RTA for their back-end operations, it reduces their cost significantly. Now, different mutual fund categories take different levels of risk, aim for different rates of returns, and are suitable for different investment horizons. Therefore, your first step should be to be clear on specific aspects such as how long you want to invest, how much risk you want to take, and what kind of returns you want. Once you are clear about these aspects, it will help you zero in on the appropriate Mutual Fund scheme category.

As such, it’s a passive way to invest as there’s no outside help. You wouldn’t build a house without laying a proper foundation — and the same goes with your finances. Having an emergency fund and manageable debt are important if you want to invest.

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We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. While a fund’s past performance is no guarantee of its future success, how a fund has historically performed can be a good indication of how well the fund is meeting its stated goals. Compare past performance to similar mutual funds or benchmark indices. Since its inception, the Mutual Fund industry has constantly tried to become more investor-friendly.

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For example, there may be mutual fund distributions that you need to report and pay taxes on. When you invest in mutual funds, you can get capital gains distributions as well as dividend payments. This could be a good thing, but there may also be tax implications. You can start investing in mutual funds and choose between active or passive investing strategy. Portfolio is collection of mutual funds designed to meet your investment goals.


Mutual funds are typically actively managed, but there are passive mutual funds like index funds. You need to create your Mutual Fund portfolio and analyze the performance of various schemes, and zero in on those which are in sync with your investment horizon and risk appetite. As a result, completing KYC online has become a far more hassle-free experience than offline KYC. One, you can do it through the website of KYC Registration Agencies , where you have to do all the paperwork on your own.

  • Since multiple fund houses tie up with one RTA for their back-end operations, it reduces their cost significantly.
  • The fund houses charge an expense ratio, which is the annual fee to manage the mutual fund.
  • One move would be to rebalance your portfolio once a year, with the goal of keeping it in line with your diversification plan.
  • When you are certain of these basic points, it will be easier for you to choose the category of mutual fund scheme that is best for you.
  • Typically, if they wish to invest for a time horizon of one day to less than three years, they could go with debt funds or arbitrage funds.

You may invest a lump sum amount in mutual funds or even through the SIP route. You can invest just Rs 500 per instalment in the mutual fund scheme of your choice through the SIP. Consider using ClearTax Mutual Fund Returns Calculator to determine how much to invest to get Rs 3,00,000 in 3 years.

Asset Management Companies allow investors to invest in Mutual Funds through mobile applications in a quick and hassle-free way. The AMCs have their mobile applications, and third-party mutual fund aggregators provide a platform to invest in Mutual Funds. The KYC process can also be completed online (e-KYC), for which only the Aadhar Number and PAN are needed. The information provided by you is verified at the backend, and you can start investing upon successful verification. Select the amount you plan to invest in the mutual fund scheme and the mode as either One Time or Monthly SIP.

How to Invest in mutual funds – Mutual Funds Investment Guide for Beginners

One advantage of investing online through RTA portals is that you can view your portfolio of mutual fund schemes of the AMCs serviced by the RTA in one place. You can also view your capital gains statement on the RTA portals. If you’re investing for a long-term goal, like retirement or your child’s college education, stock mutual funds are a great choice. You’ve got plenty of time to ride out the inevitable ups and downs of the stock market. While no investment guarantees a return, mutual funds are safer than some other options because you’re invested in a broad range of companies or debts. The majority of options for investing in mutual funds in offline mode only offer regular plans of the schemes.

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To in mutual funds, you must activate internet banking on your bank account. Mutual funds also allow investments to be made through debit cards and cheques, but doing it via net banking is a more straightforward, fast and secure process to make investments. Consider investing in more than one mutual fund to diversify your portfolio and earn risk-adjusted returns. A portfolio of funds will help you diversify across asset classes and investment styles. It will also even out risks – when one mutual fund underperforms, as the other funds makes up for the loss maintaining the value of your portfolio. Arbitrage Funds are particular types of mutual funds that invest in equity securities but at the same time take an equal and opposite position in derivatives of these equity securities.

Things You Should Know About Mutual Funds

You can also approach a mutual fund distributor and invest in the regular plan of the mutual fund. This signifies that you can put in a considerable amount to invest in a mutual fund. For instance, you can opt for SIP or Systematic Investment Plan if you are a salaried individual. With the help of SIP, a fixed amount is invested periodically depending on your budget and convenience. It is a debt instrument in which the investor lends some money to an entity that borrows the funds for a defined period at a variable or fixed interest rate. Split of holding of mutual funds in various sectors like Financial Services, IT, etc.


In the offline mode, most avenues for investing in Mutual Funds give you only Regular plans of the schemes. These Regular Plans are expensive as the intermediaries through which you are investing are paid a commission by the Mutual Fund company. One of the main advantages is that your money will be professionally managed by fund managers who have done extensive market research. Not to mention, one of the key advantages of investing in Mutual Funds is the diversification of your portfolio.

Pick the Right Mutual Fund Strategy

Mutual funds allow investors to own a diversified selection of assets within a single investment. She specializes in the areas of retirement and estate planning, having obtained a certificate in retirement planning from the Wharton School at the University of Pennsylvania. She helps them feel empowered to move forward towards a brighter future.

A portion of your gains is removed from your investments in a mutual fund’s Regular Plan and paid to the agent. After selecting the Mutual Fund schemes, the next step is to go ahead with the execution part and start investing. But how do you start your investment journey with Mutual Funds? Mutual funds are run by investment professionals who allocate these funds to generate revenue or capital gains for the investors. Small or individual investors have access to professionally managed portfolios of stocks, bonds, and other securities through mutual funds. As a result, each shareholder participates evenly in the fund’s profit or loss.


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A new fund offer occurs when a mutual fund is launched, allowing the firm to raise capital for purchasing securities. Investors may purchase units of a closed-end mutual fund in an NFO. Fund manager is a person who decides where to invest your money in the mutual fund.

Typically, if they wish to invest for a time horizon of one day to less than three years, they could go with debt funds or arbitrage funds. For three-to-five years, they could consider hybrid funds which are a mix of debt and equity. If their goal is 5-7 years away, then they can consider higher-risk products like equity oriented mutual funds. Depending on their cash flows they can choose SIPs or lump sum investments. Typically, first-time investors could choose a hybrid fund or a flexicap fund if they have a long-term horizon and want to build wealth through SIPs.

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