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  • Category: Mutual Funds

    What should I do? How should I invest?


    Are you a novice in financial investment? Looking out for guidance for planning your financial investment? Check out this page for advice from experts.

    I want to invest in mutual funds but don't know how to start and what to do? Where to go and how to start investing? How much money can I start this investment with small amounts? Please make the procedure clear to me? With all steps involving in it and how many ways there are to invest?
  • #147751
    Investment of money in various schemes right from Govt securities to equity market are governed by risk and return. The risk in Govt deposits is minimum but return is small or limited. On the other hand the risk in equity (shares of companies) investment in stock market is very high but gains are also commensurate.
    A prudent investor divides his money in parts and invests them in various schemes like bank FD, mutual funds, share market, land or building etc depending on his capacity.
    This division is necessary as the old saying goes - do not keep all the eggs in one basket.
    Now coming to the mutual funds, this has emerged one of the most popular investment avenue as it is something in between the bank FDs and share market. One of the most common way to invest in mutual fund is through SIP route in which you have to invest in mutual fund a fixed amount every month and units will be purchased in your name depending upon the market rate or NAV of that particular mutual fund scheme on that particular date.
    The advantage of SIP mode is to average out the purchasing of these units in a rising or falling market to avoid extreme loss in case the market dips.
    There are many mutual fund companies issuing mutual funds units - hdfc, icici, birla, reliance, axis, principle, idbi etc are to name a few. Every one of these fund houses have different mutual fund schemes again depending upon risk and reward mechanism and range from debt (bonds etc) to equity investment. Some funds are balanced funds which invest a part of their kitty in equity and another in debt instruments.
    Now these mutual fund schemes are performing differently depending upon their portfolio means in which companies they have invested. If those companies are performing good in the share market these mutual fund schemes will also give good return.
    So if you want to have a feel of all this please go to any site such as www.moneycontrol.com or similar one and find out under mutual fund section what are the various schemes and what is their return to the investor. Everything is given their in charts or figures and you can see their portfolio composition also. For example some of them will be more invested in banking sector while others are towards pharma.
    It is not an easy thing to analyze it but you can see the past performance of the scheme and accordingly take a decision to invest in that.
    You will require a demat account to buy and hold these units in demat form. Of course you can have them in physical form also by applying through an agent.
    Please remember, today share market is in good shape and people are aggressively investing in equity and mutual funds but if due to some reason this growth stops and market remains stagnant for some time (say 2-3 years) then your investment will remain like that and there may not be any substantial gain.
    So these investments many times require people to remain invested for quite some time before they can reap the real gains.

    Thoughts exchanged is knowledge gained.

  • #147752
    In the simplest of terms, we can consider Mutual Funds in two ways

    A.Equity vs Balanced vs Debt MF

    High-risk Mutual funds: the returns are good and the best but the risk of a fall is high if the market goes down. This has high volatility. High-risk mutual funds are equity funds or a group of stocks(companies)

    Balanced (Hybrid) funds: This group of mutual funds has a mixture of stocks and bonds in a ratio of 60:40. In the event the market goes down, the extent of fall of the MF value is lesser when compared to the pure equity funds.

    Debt Mutual Funds: These are MFs wherein investment is made in high-interest bonds, corporate deposits etc. These are highly liquid ( can be encashed in a day if money is needed urgently) and the safest among the lot.

    B. Large Cap Vs Mid Cap vs Small Cap MF

    Large Cap MF predominantly invest in company stocks that have a high market capitalisation (usually 2000 crores and above). It will have companies like Infosys which has a market cap of 237,463 crores. Large-cap equity MFs typically invest >75% in Large-cap stocks for 6 out 9 months over a 3 year period.

    Mid Cap and Small cap MF: Here the fund managers invest less in large cap companies and the ratio differs from fund to fund. Typically the large-cap part is <45% in these types of MFs.

    C.Key points about MFs
    These are nothing but a group of stocks in which money is invested. It acts like holding shares of individual companies but the earning and the loss risk is lessened by the group of stocks.

    MFs do have a risk of loss, high the earning chances, higher are the risk of losing our money if the market crashes.

    Previous excellent performance is not a guarantee of future performance.

    The performance of the MF apart from the stocks also depends on the fund manager.

    Timing the market or the best time to invest in MFs is difficult to predict. The market at present is at a record high, will it sustain, can it drop by 5-10%, these are the questions that we cannot answer.

    D.The amount you invest is not that important when we consider your risk appetite and the time that you can park your money.
    For instance, if you have to invest Rs 1 lakh and you don't need to withdraw it for 7-10 years, then you can choose a low risk or a safe MF with a long-term slow steady growth.

    E. Again, invest in small amount over a regular period, once a month based on how much you can spare each month. You can set up a fixed date every month and link it with your salary account form which automatically the money will be invested in the funds you choose.

    Any certified financial planner, D mat account from a bank or online Demat account can be used to start the investments. Once you invest, you need to follow the performance regularly so that you can understand how your money is growing and is it time to change/switch to a different fund.

  • #147757
    Mutual funds invest their money collection from investors in equity and debt market. Due to rise in equity and return from debt instrument they get gain in the net asset value of the mutual fund units and investor can sell back their units at this value.

    Different mutual funds depending on their type in terms of percentage of debt and equity and portfolio composition in terms of different companies give different returns to their investors. So selecting a mutual fund is a difficult exercise as we have to see it's past performance, portfolio, investment types etc.

    To protect oneself from volatile market conditions one can choose to invest systematically by investing a fixed amount in SIP mode by purchasing mutual fund units regularly on a monthly basis.

    Mutual fund value is dependent on market and almost tracks the market sensitive share index. In a rising market the return is maximum. Please note that in a falling market the value will be eroded but one has to wait patiently for some time when it again goes up with improved market conditions.

    So investment in mutual fund is to be done with a perspective of at least 3-5 years.

    Knowledge is power.

  • #147771
    These days investing in mutual funds is a very good option. There are short term and long term plans in this field. There are options to invest small amounts monthly and also huge amount in a single go also you can invest. If you want to avail income tax benefit for the investment you can choose such programme which will have some lock-in period. If you are not interested in It benefits you can go for open-ended funds which can be stopped and withdrawn anytime you want.
    When you invest in MF, they will manage the fund on your behalf. Basing on the options given by you they will invest in shares. In this case, the returns are fast and high but the risk of share market variations is always there. You may get a huge benefit in this scheme and that depends on your age and affordability. But there are some Debt funds where the risk factor is less and returns are reasonable and chances of losing are very remote. I prefer another type where you can choose for a mixed type wherein some portion of your investment will go for a bond which is fairly stable and the remaining of shares. A 60&40 ratio or 70&30 ratio can be selected where the risk will be less and returns are good.
    Before investing study the complete details of the fund and take a decision. Otherwise, there are some financial advisers who are in full understanding about the various options. You can take the suggestion from one such good person preferably a known person.

    drrao
    always confident

  • #147787
    Investment tips are regularly updates on Business India channel as well as Zee Business channel. And the investment tips are also published in the daily Economic Times. There are multiple investment options available in the market. However, the best investment in current scenario is SIP. SIP means Systematic Investment Plan which are launched by various Funding companies in India. SIP is useful in terms of long term investment planning. SIP is carrying less risk factor as SIP depends up on the various investment avenues among economy generation sectors in India like Banking, Share market/Public Issue, Infrastructure bond, etc.

    Various SIP schemes are launched by funding companies like Birla Sun life, Relaince Mutual Fund, UTI Mututal Fund, SBI Mutual Fund, etc. Investment in SIP scheme are of various types depends up on the choice of investor like market risk, standard growth, etc. The SIP can be started with investment of minimum 1000 and maximum is unlimited which locking period of invested amount is minimum 3 years and the amount can be redeemed after 3 years is totally tax free after 5 years. SIP is based on NAV value which depends up on the systematic investment by funding company on behalf of the investor as per choice option selected by investor like growth plan, standard growth in infrastructure bond etc. The investment in SIP can be regularly watched online as well as statement in hard copy provided by funding company. The SIP investment comprises of monthly investment or specific interval of investment on regular basis as per regulation of funding company. The return of investment in SIP is also depends up on the option selected by the investor like growth plan, standard growth like infrastructure bond, etc. The return of SIP investment varies from average 7 % to 40% or above time to time depends up on the market trend, economy condition and especially on investment plan selected by investor. That is how much percentage of total investment is selected for investing in share market and other options of investment. The amount of return can be optimum upon investment in SIP for long term duration like 5 years and more.
    Apart from SIP, there are another investment options available like Life Insurance, Unit Linked Insurance Plan, Fixed Deposit, Infrastructure bonds, Recurring account with Bank and LIC, Monthly Interest Scheme with Post office, KVP with Post office,etc.
    All the best for best result of investment !

  • #147868
    (1)I want to invest in mutual funds but don't know how to start and what to do?

    Mutual funds are precisely for people who do not have even basic knowledge of investment in stock markets. Hence even the procedures are also kept easy and convenient.

    First short list a few established and reputed Mutual Funds-Fund Houses.( Eg: UTI Mutual Fund,SBI Mutual Fund,HDFC mutual fund, Franklin Templeton Mutual Fund, DSP BlackRock Mutual Fund, LIC Mutual Fund,L&T Mutual Fund ,Sundaram Mutual Fund etc..etc.).

    Just choose one which has its branch office in you place. If not the one which has a franchisee or service agent in your place. This I suggest because if any problem arises, it will be easy to follow up and rectify the same easily and faster. For future also proximity will help.

    Visit the office, taking your identity documents like Aadhhar card, PAN card, photos,bank cheque book with your name,bank passbook(preferably with your photo) or bank statement properly authenticated by your bank to prove your bank account.

    You may have to fill up the forms with necessary details, and sign and also give them the cheque leaf for debiting the needed amount you want to invest. It may take a couple of days for the opening of 'Folio number' in your name. Once the folio is opened the cheque will be debited to your account, and after realisation the amount will be used to purchase the fund you selected and credit the number of units to your folio.

    (2)How much money can I start this investment with small amounts?

    The convenience of Mutual funds is that you can start investing with very small amounts as low as Rs500/-. However it is for you to decide how much money you can spare comfortably and keep it invested for a reasonable period of time say from three years to five years.

    (3)How many ways there are to invest? .

    You can invest through agents and investment houses. You can invest directly either remitting at the branch offices or you can invest by online.
    Once you have started with a particular fund you can get experience and then can open and invest with other funds as per your needs and choice. You can also have demat account for MFs also though that is not compulsory.
    There are various types of funds also to select. For a beginner it will be better to start with a Tax Saver (ELSS),to save income tax for the permitted amount. Then pure equity funds cn be chosen.
    You may also open Systematic Investment Plan-SIP- whereby you can invest a regular amount every month in the selected fund.

  • #147951
    You have asked some questions which require detailed discussion. Let me give you preliminary information:-

    I want to invest in mutual funds but don't know how to start and what to do? : Mutual funds collect money from the investors as invest money in equities, bonds or both equities and bonds as per the mandate. So, there are three types of mutual funds, equity mutual fund, debt mutual fund and hybrid mutual fund.

    Now how to invest. First, fix a target. If it is a long-term target, put money through SIP route in a good equity mutual fund. If the target 5 years away, put money through SIP in a good hybrid fund. If the target is 3 years away (or less), put a lump sum amount in a debt mutual fund.

    You will get the list of good mutual funds in each category from some websites which deal with mutual funds. These are Value Research, Morningstar India, and Moneycontrol.

    For investment in a mutual fund, you have to visit a mutual fund company office, register yourself, give a bank mandate and start SIP. You can also invest lumpsum through net banking.

    I would suggest you not to fall in the trap of middlemen and agent. Instead think carefully, choose fund as per your target and risk appetite and invest in Direct mode (not in Regular mode).

    You have to acquire in-depth knowledge of mutual funds. You can study articles and check various fund information from the three sites mentioned above. These three websites would help you not to depend upon agents blindly for investment.

    You can also read various articles on mutual funds which have been available in ISC. I have also tried to help the investors in this regard. Some of my articles on mutual funds are:-
    (a) Top 7 reasons why you should invest in mutual funds
    (b) Know the differences between Debt Mutual Fund and Bank Fixed Deposit
    (c) Top five tips to pick good mutual funds
    (d) PPF rates are falling: What should the common investors do?
    (e) Tax treatment of mutual funds in India
    (f) Hybrid mutual funds - why to invest
    (g) Debt Mutual Funds-Types and Investment Philosophies
    (h) How to measure mutual fund risks – five statistical tools
    (i) Different Types of Equity Mutual Funds

    I hope the above information helps you during your initial days of investing. You are welcome to seek further information.

    Happy investing!

    Caution: Explosive. Handle with care.


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