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How To Invest In Mutual Funds For Beginners in India
How to invest in mutual funds? When to invest and which funds to invest is the often asked question. We have tried to address the questions of mutual fund investors, who are just beginning their mutual fund investments. In short, it is a beginners guide on how to invest in mutual funds in India. Let us take a look:
First Let’s Understand What Is Mutual Funds And How It Works:
A mutual fund gathers money from investors and parks this money into investments that an investor wants. So, if SBI Mutual Fund initially comes-up with an open ended equity scheme, then the money that it gathers from investors for this scheme is automatically invested in equity shares. So, the units which were issued at Rs 10, would start going up if shares prices rally. As this happens the net asset value of the units, which started at near Rs 10, start rising. So, it goes up from Rs 10 to say Rs 11. The investor who bought the units at Rs 10 can sell it back to the mutual fund at Rs 11. Now, since this is an open ended scheme the mutual fund can sell units continuously at the ...
... net asset value. So, a new investor who did not originally buy at Rs 10, can now buy at Rs 11. How To Invest In Mutual Funds For Beginners in India
Investing In Mutual Funds
What you need to begin investing in mutual funds? To begin investing, the first thing you need to do is to be "KYC compliant". This is nothing but a submission of your address proof, photographs, date of birth proof and definitely your PAN card. You can directly approach brokers for investing in mutual funds or can directly approach the mutual fund house. We have given you a list of mutual funds below to choose from. As mentioned earlier, you can either consider an equity mutual fund or a debt mutual fund. We will tell you the type of mutual funds that you can invest in. It is important to remember that you have to update your KYC each time you change your address. This is important to stay updated.
Important Terms That You Should Know In A Mutual Fund
As an investor you should know some of the popular mutual fund terms that are used. Some of these include expense ratio, NAV and exit load.
• Expense ratio: This ratio is nothing but the expenses that a mutual fund house incurs on advertising and selling, administrative costs to manage the fund etc. This is deducted from the investors returns.
• Exit load: This is nothing but the amount that charges that are levied if you sell the units of a fund before the stipulated time. It is generally 1% of the NAV if you sell before six months.
• NAV The net asset value is the rate at which an investor, buys and sell the units of a mutual fund.
• SIP and SWP These two terms are the systematic investment plan and the systematic withdrawal plan, which we have explained later in the article.
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