Planning to Invest in Mutual Funds? Here are 6 Things You Need to Know

1. Planning to Invest in Mutual Funds? Here are 6 Things You Need to Know Investment and trading can be a dicey game – and sometimes, even the most experienced traders need to exercise some amount of caution before diving in. In such a scenario, mutual funds investments are often viewed as safer bets – entailing lower risks and promising sufficient returns to investors. But are mutual funds investments really all that risk-free? Are there any measures an investor must exercise before investing in these highly recommended and hugely popular investment schemes? In this blog, we address some aspects that you as an investor should keep in mind before treading the path of mutual funds investment. 1.Chalking Out a Plan Someone rightly said: “Failing to plan is planning to fail.” The same holds good when you’re looking to invest your money. Creating an investment plan helps you systematically document your investment objectives and goals, the amount you are willing to invest, your expected returns, and last but not least, the types of securities you would like to incorporate into your mutual funds investment plan (i.e. only equities, equities and bonds, only bonds, money market instruments and so on). Articulating your objectives and conditions in this manner helps to maintain a record of your investment strategy and then execute it accordingly. 2.Seeking the Right Guidance Wading through precarious terrains is not uncommon when undertaking the investment journey. A helping hand and some sound advice can go a long way in enabling one to traverse these paths without too much hassle. That’s where brokers and investment advisors enter the picture. Investing in mutual funds requires thorough research pertaining to different types of securities and the

2. benefits and risks involved in each. An experienced stock broker can help you select the right securities that yield sufficient returns while also not exceeding your budget limitations. You could also consult a registered investment advisor to seek counselling and advice with regard to investing in the right mutual funds. 3.Knowing When How to Strike Many investors are often unsure about the right time to invest in a particular scheme. Should one invest when the market is at its peak, or when it is going through a low? Well, when it comes to a mutual funds investment, the method of investment holds greater significance as opposed to the time. In other words, if one selects an organized investment scheme – such as an SIP investment plan – as one’s investment strategy, major risks resulting from market fluctuations can be dodged through Rupee Cost Averaging. The right time is always now. 4.Is Net Asset Value an Important Parameter? Simply put, the Net Asset Value or NAV of a mutual fund is the difference between the total number of assets and total number of liabilities, divided by the total number of outstanding units. Ideally, a mutual fund with lower NAV is expected to yield higher returns and vice versa. Of course, NAV is an important metric to decide whether or not one should invest in a particular mutual fund; however, this should not be the only criterion. A decision to invest in mutual funds is the result of a host of other factors besides NAV – including the fund’s track record, possible risks involved basis the securities it invests in etc. 5.“Mutual Funds Investments are Subject to Market Risks…” All of us are familiar with this disclaimer that immediately follows TV and radio advertisements pertaining to mutual funds. And if taken seriously, this piece of advice can stand investors in good stead and help them with understanding the nitty gritties of the mutual funds they are about to invest in. Before investing, be sure to read important scheme-related documents – including the

3. Scheme Information Document, Key Information Memorandum and Statement of Additional Information. These documents help investors derive an idea about key details pertaining to the investment; including portfolio details, fund house information, risks involved, expected returns and so on. 6.Ways and Means to Invest in Mutual Funds Once you have decided on which mutual funds to invest in, it is now time to decide the mode of investment to opt for. Today, thanks to technical advancement, carrying out investment deals is now a matter of few minutes. If you choose to invest in mutual funds online, you would need to open a demat account for the purpose. A number of stock brokerage firms help investors go about with online investment in a hassle-free and efficient manner. At the same time, one can also choose to opt for traditional offline investment methods. In any case, it is always a good idea to coordinate with your share broker and learn about the different investment avenues before taking the plunge. Conclusion Investing in mutual funds can indeed yield many long-term benefits while also helping to off-set the risks involved in “putting all your eggs in one basket”. Mutual funds investments are all about investing in a disciplined and organized manner and hanging in there for some time before reaping the benefits of secure and consistent returns.